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On The Role Of Complexity In Governments And Business

I don’t recall who said this, but the quote consists of words to the effect of:

Beyond a certain point, complexity is fraud.

Just seven words, one comma, and a period, and there you have the cause of just about every problem we face. People from every political, social, political, economic, political, scientific, and political persuasion are guilty of this and it always stinks. However, given a certain level of complexity, one is not likely to be able to locate the exact source of the stink, not at all unlike milk poured into a classroom heater in the winter, not that I know anything about that sort of behavior.

Luckily, I have an example handy that everyone should be familiar with, The Patient Protection and Affordable Care Act. I happen to have a copy handy- what? No not printed out, what, do you think I’m made of money? If I were to print it out, entire forests would have to be clear cut to make the paper, and therein lies my point.

I have a PDF copy, and I have actually made attempts at reading selections from the law. In fact, though I have no evidence of this, I would bet money that I have read more of it than almost any member of Congress, the Supreme Court and last but not least, the President. If your sharp you might be thinking that length does not automatically equal complexity, and you would be right, but what length does do is make complexity easy to take to the extremes.

How can you be for OR against this law if you have not read it? Going further, how can you be for OR against this law if you have read it, but the complexity is so high that any level of comprehension is almost out of the question? The one cop out for those like myself who are against the law might be that something in it is so abhorrent, that one can fairly say one is against at least that part of the law with a reasonable level of understanding, and it could also be said that if you are for a portion of the law, and in both cases I am referring to the “individual mandate”, that you might know enough to be for that provision. However for those in favor of the law, liking one portion of the law, and supporting the rest of it on that basis alone is just as bad as favoring it and knowing nothing about it.

In the interest of not dragging this out too far, I want to touch on business now. Do you know what a credit default swap is? I do, and they are complex, one might even say that they are complex to the point of being fraudulent, as the law colloquially known as “Obamacare” is. A significant portion of the recent banking crisis has its routes in credit default swaps, and many, many other similarly complex financial instruments. You have to understand that even people who know what a credit default swap is, and how it is supposed to work, even those who trade in these things cannot even begin to fully understand what the hell they are getting into. (I only said I know what they are, not that I fully understand everything about them.)

Within that complexity, it’s easy to hide how risky the debt may actually be, that is, if anyone even knows how risky it is or isn’t. With the glut of sub-prime mortgages out there now, and even more so 3 years ago, it shouldn’t surprise anyone if it were to turn out that no one actually did their homework.

Complexity is not in and of itself a bad thing, but unnecessary complexity, whether intentional or not, is a horrific thing and is one of the principles underlying basic libertarian philosophy. It’s not just that the admittedly somewhat nebulous concept of freedom is held to be important, it’s that libertarians realize that the larger and more complex an entity is, the more likely it is to become tyrannical or at the very least inefficient and rife with waste and fraud. At least within the private sector the association and power, and so the consequences of failure, are entirely voluntary associations and risks.

In closing, when needless complexity is injected into things, be they laws or financial instruments, those things are only a hairs breadth away from fraud. The US Constitution is the shortest written constitution in the world, yet it has underlain the stability of the United States for the last 230 years, and by extension a significant portion of the world for the better part of the last 100 years, all accomplished with only 4400 words or so.

With over 425,000 words in the Obamacare text alone and another 1.1 million words in the regulations written to impose it upon us, fraud is an apt word to use to describe that level of complexity, and the word fraud is also an apt title to pin to any number of other laws and further any number of business practices; practices that are not infrequently undertaken to avoid or comply with the aforementioned laws.

I don’t have any power to peer into the hearts of men and learn their true intentions, but if laws and contracts, etc., are made so complex that understanding is realistically impossible, they are, on their face, fraudulent.

I’m too lazy to hyperlink anything at the moment, so your Google-Fu must be strong.

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