I’ve been thinking a lot recently about information.
I realize that those 8 words couldn’t have been more vague and at the same time dull, but as I’ve been penning my undergraduate thesis recently I’ve come first hand across some interesting (and rather melancholy) examples of just how stark the difference can be between what I’m going to call static information produced by governments or corporations and fed into social systems, and social knowledge or dynamic information which is the result of the changes the original static info goes through within the system(1). This epistemic diversion may seem trivial at first glance, but in digging a bit deeper, one can find that given enough time (generally not all that long), the role of static information in the decision-making of individuals becomes almost nil, and we are left only with the evolved and transformed dynamic info in the end.
Let’s think of some examples.
a) Static info – city bylaws. Dynamic environment – busy city streets with numerous shoppers.
- In Kyoto, the sidewalks are fairly narrow, and in many areas there is a lot of foot and bicycle traffic which can make navigating very difficult. This is compounded when people park their bikes on the sidewalks, naturally. There are signs everywhere stating specifically which laws apply and allow the police to confiscate your bicycle, yet myself included, most everyone parks their chari right there in front of the sign.
b) Static info – policies with regard to responsible investment advisory. Dynamic environment – financial markets.
- The divisions of large banking institutions which handle “structured” products have innumerable policies outlining the by-the-book handling of a client’s requests and the appropriate gauging of said client’s risk appetite as well as their ability to take on risk (let’s pretend that their assumption of exclusively computable risks actually applies to reality). To a sophisticated practitioner, it would then take little time at all to identify what sort of risk the client can and is seeking to handle. Despite this, it is not uncommon to see banks peddling financial instruments to long customers which will only see a gain under an extremely limited risk scenario(2); here limited refers to their making a number of highly limiting assumptions as to what is likely to occur within their risk universe (e.g., some new drug passes its regulatory trials + other competing firms’ don’t carry out threats to go to litigation over intellectual rights conflicts) as they present a model to their clients. Within the limited risk universe shown to the customer, nice returns considering the risks; within the actual risk universe said investor would be exposed to, not even close to acceptable.
c) Static info – insurance laws and indemnity clauses in life insurance contracts. Dynamic environment – Japanese society.
- The law(3) states that firms are released from their legal obligations if the insuree commits suicide. This however is what is referred to as a discretionary provision(4) and can be called upon essentially as “reference” for insurance companies. Thus firms generally have their own very clear contracts which state a period within which the firm is incontrovertibly indemnified from any liability for paying out the life insurance in the event of a suicide. This is not surprising, considering the natural incentive one might have to sign an insurance contract if contemplating suicide but worrying about the economic well-being of family members left behind – yet as far as I am seeing in my statistic digging around, reality is far from what the above highly static regulations state. Assuredly more on this in the coming weeks.
So, why do we observe the above departures from “the book” and real life?
In the social systems we find ourselves to be participants in, both physically and online, information is passed to and from those who have a common interest in something – this could be as simple as a friend’s thoughts on a recently released film, or could be regarding how a friend was able to deal with the piled up debt after her husband’s suicide – people don’t have to be professionals to be trusted. In fact, we are probably more likely simply to trust those we are acquainted with or fond of already. This is to a degree very instinctual behaviour, and I believe it to be a good thing for the natural transfer of knowledge and information in our generation.
That said, when information is spread in this manner, i.e., through word of mouth or via electronic correspondence of some kind, the transmitter and receiver of the information have their subjectivity inevitably reflected in this information. When talking about a new Bruce Willis movie, there is no way to speak about it other than subjectively, really, while with something like inheritance law, there is an objective way to pass on the information, but that is not to say that is actually take place.
In fact, as the above simple examples illustrated, it is not taking place in countless cases. People learn from their experiences and the experiences of others. This sets up a compounding effect, where a departure from one rule for just one person leads to that person passing on their experience to others, who then might attempt the same thing, and subsequently pass on their experiences. This nonlinear effect then creates a new “reality” for those rulemakers to face, one which doesn’t resemble the one they faced when they initially developed the rules!
In the case of laws, it can take years to implement changes, and years more to effectively communicate to people that said changes have been made, and are being enforced. This standoff between highly rigid organizations which periodically create and update information and those living in an organic, dynamic society who actually interact with said rules first hand is paramount.
Prime examples of said standoff can be seen throughout Japanese social welfare and insurance systems. This is not to say necessarily that the systems themselves are flawed (though there are arguments to be made), but just that they provide a phenomenal example of the socioeconomic links between static entities leaving information out to pasture in an unfathomably complex and evolving social system, and the real potential harm such information can lead to.
–
1. I realize that in using terms like this there is a decent enough chance a dozen other people have used the exact same nouns in an article somewhere, but they seem to fit the idea well.
2. See the almost humorous debacle surrounding GS/DB’s Gemstone products for a well publicized example. As well, the “Levin Report” from April 2011 titled Wall Street and the Financial Crisis: Anatomy of a Financial Collapse has a good overview of it.
3. 参考：保険法第51条1号
4. 上記の1号は任意規定であるが、これに対して強行規定がある。