Clay Shirky is a professor at NYU, author, and internet theorist. Notably, he was one of the first to foresee the powerful effects of social media. In 2010 he coined what is now known as the Shirky Principle: “Institutions will try to preserve the problem to which they are the solution.”
“Institutions will try to preserve the problem to which they are the solution.”
An illustrative example concerns how we file our taxes. It is possible for the IRS send us tax forms with much of our information already populated on the forms. The government already knows our names, social security numbers and much of our income information is reported to the IRS by employers, banks and brokerages. Here’s an summation of the potential new system by Pro Publica: “If it’s accurate, you sign it. If it’s not, you fix it or ignore it altogether and prepare your return yourself. It’s your choice. You might not have to pay for an accountant, or fiddle for hours with complex software. It could all be over in minutes.”
One of the reasons we don’t have such simplified system is that H&R Block and TurboTax have spent millions lobbying against it and other ideas that would make filing our taxes easier.
The Shirky Principle is not a universal law but a tendency. It gives recognition to the reality that incentives matter and businesses and institutions are incentivized to not completely solve the problems from which they make money. Institutions and companies aren’t necessarily acting with malice, but rather with rational self-preservation.
“It is difficult to get a man to understand something, when his salary depends on his not understanding it.”― Upton Sinclair
Other potential areas where institutions have incentives to preserve problems:
- Many products, especially in the technology sector, have “planned obsolescence.” If a product lasts too long, demand for new products won’t be as robust.
- Pharmaceutical companies make more money from you taking a pill everyday than a drug that cures you outright. Curing disease may not be a sustainable business model according to Goldman Sachs, and that economic reality may hamper advances in genomic therapies.
- Defense contractors make more money when there is a war than when there is peace.
- Some police officers have their compensation tied to tickets issued or arrests made. If crime drops they have incentive to issue tickets or make arrests for lesser and lesser charges or under more questionable facts. The goal ends up being the issuing of citations, not making society safer.
- Similarly, those who run prisons do better financially if their prisons are full. As such, private prison corporations lobby for longer, stricter prison sentences.
- Private security forces in Afghanistan may have colluded with the Taliban to cause attacks to NATO caravans to create demand for their services.
While there is truth to the Shirky Principle, it is a rather cynical way of looking at the world and this sort of thinking can be a gateway to conspiracy theories. While it is good practice to be aware of an institution’s incentives, it is important not to take the Shirky Principle into conspiracy land – like being convinced that big pharma has cured cancer but hasn’t released the cure because they make money treating cancer.
Be sure to check out the related concept of Goodhart’s Law.