Inside and Outside Perspectives on Institutions: An Economic Theory of the Noble Lie

By Cameron Harwick. From The Journal of Contextual Economics.

"Abstract

If there exist no incentive or selective mechanisms that make cooperation in large groups incentive-compatible under realistic circumstances, functional social institutions will require subjective preferences to diverge from objective payoffs – a “noble lie.” This implies the existence of irreducible and irreconcilable “inside” and “outside” perspectives on social institutions; that is, between foundationalist and functionalist approaches, both of which have a long pedigree in political economy. The conflict between the two, and the inability in practice to dispense with either, has a number of surprising implications for human organizations, including the impossibility of algorithmic governance, the necessity of discretionary rule enforcement in the breach, and the difficulty of an ethical economics of institutions.

Leeson and Suarez argue that “some superstitions, and perhaps many, support self-governing arrangements. The relationship between such scientifically false beliefs and private institutions is symbiotic and socially productive” (2015, 48). This paper stakes out a stronger claim: that something like superstition is essential for any governance arrangement, self- or otherwise.

Specifically, we argue that human social structure both requires and maintains a systematic divergence between subjective preferences and objective payoffs, in a way that usually (though in principle does not necessarily) entails “scientifically false beliefs” for at least a subset of agents. We will refer to the basis of such preferences from the perspective of those holding them as an “inside perspective,” as opposed to a functionalist-evolutionary explanation of their existence, which we will call an “outside perspective.” Drawing on the theory of cooperation, we then show that the two perspectives are in principle irreconcilable, discussing some implications of that fact for political economy and the prospects of social organization."

Cameron Harwick did a good Twitter thread on this. Click here to read it.

I asked Dr. Harwick "Is the Noble Lie like myths or mythology?"

He said "Definitely includes that, among other things."

Impostor scams succeed mainly because of the ability to tell a convincing story

See The Age-Old Secrets of Modern Scams: From medieval forgers to online Elon Musk impersonators, con artists tell stories their victims want to hear by Ariel Sabar. Mr. Sabar is a journalist and the author of “Veritas: A Harvard Professor, a Con Man and the Gospel of Jesus’s Wife,” recently published by Doubleday. Excerpts:

"From the headlines last month, you’d have thought it was a hack for the ages. Scammers infiltrated the Twitter accounts of public figures like Barack Obama, Elon Musk and Kim Kardashian West, then tweeted an offer too good to be true: Send bitcoin and get paid back double. When a 17-year-old from Tampa, Fla., was charged on July 31 with orchestrating the scheme, prosecutors called him the “mastermind” of a “massive fraud…designed to steal money from regular Americans.”

But if the aim was to trick the celebrities’ millions of social media followers out of piles of money, it was something of a flop. The alleged culprits made off with an estimated $118,000, a pittance compared with a similar but less-noticed scam in June in which hackers impersonating Mr. Musk on YouTube took victims for as much as $464,000."

"impostor scams succeed less because of technical skill—like breaking into a high-profile account or imitating an artist’s brush strokes—than because of the ability to tell a convincing story, to plant a lie in an otherwise true tale.

The Twitter hackers got inside the accounts of famous people whose influence they sought to exploit, but posted generic messages that sounded a lot like one another and not particularly like the account holders. In the YouTube scam, on the other hand, channels disguised with the SpaceX logo played real video of Musk speaking at a conference. Framing the footage were captions about a “Special Event” that tied the video to the thrilling launches, days earlier, of SpaceX’s Crew Dragon and Falcon 9 spacecraft.

The videos were live-streamed, as if Musk’s 2-for-1 bitcoin giveaway were unspooling in real time to viewers lucky enough to tune in. A linked website with “SpaceX” in its URL quelled doubt with a thoughtful-sounding message: “We understand the financial uncertainty that some people may be facing right now. SpaceX is here to offer all the help that we can.” Tucked into the alphanumeric bitcoin addresses where victims were asked to send money were the words “Musk” and “Space.” 

Key to this immersive tale was its bogus protagonist. More than any other CEO, Mr. Musk, a tech-world sage with a reputation as an unpredictable iconoclast, seemed like someone who might well give cryptocurrency to strangers for his own inscrutable reasons. “If this was Bill Gates, I would’ve just scrolled past it,” a savvy internet user who nearly fell for the YouTube fraud told the online investigations website Bellingcat."

"The motives of con artists are as various as those of their victims. But whether the come-on is biblical or bitcoin, the best of them gild their stories with details drawn from the real world—to blind us to the one crucial detail that isn’t."

Entrepreneurial Visions as Rhetorical History: A Diegetic Narrative Model of Stakeholder Enrollment

From Academy of Management Review. By Roy Suddaby, Trevor Israelsen, J. Robert Mitchell and Dominic S.K. Lim.

Abstract

"Research suggests that entrepreneurs persuade stakeholders to engage in risky projects in an uncertain future through visions, compelling narratives of the future. A unique challenge for entrepreneurs, however, is how entrepreneurs can construct a narrative that unites stakeholders with different perceptions of the degree of risk or uncertainty posed by the future. We address this question with a diegetic narrative model of stakeholder enrollment. Our primary argument is that to reduce variation in how potential stakeholders view the future, a story must embed a vision of the future in a coherent and collectively held narrative of the past. We introduce rhetorical history as the primary construct through which this occurs. We demonstrate how successful visions employ historical tropes at the intradiegetic level to appeal to individual perceptions of risk or uncertainty and how those historical tropes are combined into meta-narratives or myths drawn from the collective memory of a community to create broad, extradiegetic appeal to all stakeholders regardless of their temporal orientation. Finally we describe three categories of historical reasoning – teleological, presentism, and retro-futurism – that act as bridging mechanisms between past, present and future that provides stakeholders with an enhance sense of agency in the future."  

Trevor Israelsen did a good Twitter thread on this. Click here to read it.