The All-Seeing Eye

Musings from the central tower…

Panoptic Power and Competition

It is fairly uncontroversial in classic economic theory that free and fair competition is often vastly more productive than limited competition or no competition.  Many economists view a monopoly as a market failure and believe that anti-trust laws must be created and enforced in order to preserve competition.  So-called “no-bid contracts,” in which firms are granted lucrative government contracts based on cronyism rather than competition, are slammed, correctly, for costing a great deal more money than competitive contracts would cost.  As a general rule, when agents compete on the market, the goods or services that the agents are selling become more productive and/or less expensive – in other words, competition allows buyers to get more for less.

How is this related to panoptic power?  Economic competition conforms closely to the panoptic model of power.  Let us compare economic competition to the two hallmarks of the panopticon:  self-surveillance, and isolation.

In the panopticon, self-surveillance is produced within a subject by causing that subject to behave as though at any moment she might be under surveillance by a central observer.  Who is the central observer of the competitive market?  The consumer.  At any time, the consumer might evaluate the quality of the products offered up for sale by the competitors.  Competitors earn reputations based on the quality of their products, and these reputations greatly affect the profits of the competitors.  The consumer is also somewhat unpredictable, in that one never knows exactly what a consumer’s preferences might be.  Perhaps your innovative new product might become the next iPod – or perhaps it might become the next Betamax. Competitors must strive towards innovation and invention and reinvention, and must also master marketing, and still success is not guaranteed.  The point here is that competitors are always being evaluated, and they may live or die based on the results of these evaluations.  This is a powerful incentive towards self-surveillance.

In the panopticon, isolation is caused by physically separating prisoners in individual cells.  In a competitive market economy, isolation comes in the form of patents, trade secrets, and the information asymmetries that arise when competing agents each try to find and maintain a competitive edge.  If you own a restaurant, you might make the best marinara sauce in the county, but if you give away your secret recipe, that will not be the case for long.  Isolation also comes from the fact that individual agents may earn more profits through competition than through cooperation – because there will be fewer people to share the wealth.  Laws against cartelization and other forms of corporate cooperation can produce isolation effects.  In a situation where workers are competing for jobs, the workers may become isolated from each other because some wish to go on strike for higher wages while others wish to take over their jobs.

If the productive power of a competitive market is related to the productive power of the panopticon, then do the same downsides exist?  Sure.  One of these is that PD-like situations may arise in which competitors end up reaching a suboptimal equilibrium state because of their isolation.  An example of this is an industry in which advertising costs comprise a significant percentage of the industry’s income but do not effect a significant redistribution of market share for any one firm nor attract a significant number of new buyers to the market.  Each firm would be better off if no firm advertised, but if any firm advertises, they all must in order to avoid losses.  In the end every firm advertises, and the entire industry essentially throws money away.  The tobacco industry is one such example (although you won’t hear me mourning their suboptimal profits.)  There are also cases like railroads or utilities where, without collusion or intervention, redundant services may be established (imagine the case of two competing rail lines running parallel to each other).

Because the effects of panoptic power are generally experienced as difficult and unpleasant, free markets tend toward a mix of competition and cooperation.  Many agents would like to collude with each other in order to avoid the panoptic effects – in other words, break isolation to resist the power of the panopticon.  A cartel is a good example of this – competitors get together and decide that rather than compete with each other, they’ll fix prices and production at a certain level so they can all profit equally.  These cartels often result in higher prices and lower quality and quantity for goods produced – they are less productive, but they make things easier for those involved.  Labor unions are a form of cartel for workers, who agree to band together to achieve higher labor prices (wages) and shorter working hours (less production).  Such cartels and unions suffer from the risk that one agent will defect or a new agent will enter the market, thus destroying the cartel or union, and as a result an equilibrium can be reached.

The free market, which depends on competition for its functioning, is thus an example of panoptic power at work.  This is an important insight because many experience panoptic power as something which imprisons them, which calls into question how much “freedom” agents in the free market actually have and provides a theoretical framework to contrast, rather than conflate, liberty and productivity.

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October 25, 2008 Posted by | Economics, Power | , , , , , , , | Leave a comment

Cooperation and Membership

In Organized Labor: A Power Analysis, I examined the power relationships involved in the formation of a labor union. In one sense, the formation of a union follows the prisoners’ dilemma: the workers can cooperate with each other by striking, or defect by becoming scabs. If enough of them cooperate, they can be successful and gain a measure of power back from the employers. If enough of them defect, the strike can be broken and the striking workers fired. In this and other examples following the panoptic model of power, cooperation is a counter to the isolation that produces the panoptic effect. Once the workers are part of the union, the union acts on their behalf – negotiates wages, benefits, vacations, etc. The union thus becomes a symbolic agent – instead of saying that the workers took an action, we say the union did it. The union thus has metonymic power. In this example, we see that metonymic power is also a counter to panoptic power – membership in a group with a powerful symbolic agent allows people to act without self-surveillance.

Let me explain that claim a little more. It is safe to say that laborers are under direct and indirect surveillance. An example of direct surveillance would be when a foreman or supervisor actually watches the laborers and directs their activities. An example of indirect surveillance would be an inspector who checks the laborers’ work for defects. In either case, the laborers must constantly behave as though they are under surveillance – hence they regulate their own behavior to fit the standards imposed on them from outside. These standards are imposed through a fear of punishment. If the work is defective, the laborer may be docked. If the laborer behaves the wrong way he may be suspended or fired.

With the intervention of the labor union, workers have a degree of protection from arbitrary discipline. The supervisor or inspector has a burden of proof to satisfy if action is to be taken. The laborer can work knowing that his membership in the union provides a degree of protection from the surveilling authorities. The more powerful the union, or symbolic agent, the more protection the worker, or acting agent, has. The same is true for citizens of powerful countries – the symbolic agent – the king, or president, or country itself – has a power that allows its citizens to act with greater freedom. At the same time, the cost of this freedom is a loss of agency. This may seem paradoxical, however, we can see how a displacement of agency allows greater freedom of action with the simple phrase, “I didn’t do it.” Americans benefit from the privilege of America’s dominance at the same time as many or most of America’s inhabitants disavow their responsibility for the actions which lead to this dominance. Hence the soldier who is just following orders or the taxpayer who is just doing his share for society – yet their money and their lives are used to maintain America’s power in the world at a deadly cost for all who oppose us. Our privilege as Americans comes from a lack of self-surveillance: we do not carefully watch and regulate our actions because we do not fear the consequences of carelessness.

If cooperation and membership both serve to attack the basis of panoptic power, what is the cost of these tactics? The cooperating prisoner takes a risk – the risk that the other prisoners will defect. The member of an organization sacrifices their agency in return for the power of privilege. It seems then that the two goals of any project to mitigate panoptic power should be to decrease the risks of cooperation on the one hand, and to combat the displacement of agency on the other. How can either of these goals be accomplished? A question for the future.

March 16, 2008 Posted by | Power | , , , , | Leave a comment