9.3. How to Tell If an Institution Is Broken

9.3. How to Tell If an Institution Is Broken

There’s an easy way to tell if an institution is broken. Just look at the incentives.

There’s an easy way to tell if an institution is broken:

Just look at the incentives.

Incentives are a great way to get someone to do what you want them to do—and all of our institutions are built on them.

We take important tasks that require a lot of unglamorous hard work, but are really beneficial to society—and we bundle them with incentives, so there’s no shortage of talented people willing to do them for us.

But what happens when this tradeoff misfires?

What if people doing a lot of thankless but extremely important work aren’t properly rewarded for doing all that work?

Or, just as disturbingly, what if our institutional elites figure out how to swindle power, money, or attention out of us—without actually delivering on their end of the bargain?

What we want our politicians and government officials to do is protect us, maintain order, encourage prosperity, implement the best laws and policies, and so on.

But what we directly incentivize is winning elections.

In theory, by making our politicians accountable to the people, voters will reward the good ones and punish the bad ones—and through that process, we’ll end up with what we really want: a good, effective government.

What we want our businesses to do is deliver value to consumers.

But what we directly incentivize is making money.

In theory, through the process of producers chasing money and consumers chasing value, the best value-deliverers will be rewarded with the most money, and all us consumers will get maximum value from all their nifty products.

What we want from the media is accurate, comprehensive reporting about all the stuff we need to know.

But what we directly incentivize, through their current ad-based business model, is attracting attention.

In theory, the best reporting will attract more attention than lousy reporting. The best news organizations will make the most money, and we citizens will get all the high-quality information we need.

But it doesn’t always work the way it’s supposed to, in theory.

After all, our institutional systems are based on kind of a crude trick, when you think about it.

They have a flaw that can become fatal, if the system of incentives fails to deliver the greater good we’re supposed to be getting out of the bargain.

What happens when politicians figure out how to win elections—without actually delivering on their promises of good governance?

What happens when businesses figure out how to pry your money away from you—without delivering any real value?

What happens when the media figures out how to attract your attention—without delivering good, substantive reporting?

An institutional crisis.

A failure to get basic political, economic, and social needs met.

A crueler, weaker, less effective society.

This is why there’s been such a catastrophic implosion of trust in our institutions over the past 50 years.

Because our institutions are wriggling out of their responsibilities to ordinary people like us.

We can’t just fix this by putting somebody new in charge.

We can’t trust them to “self-regulate,” when they’re making out like bandits.

There’s no way around it: we have to make them deliver on their end of the bargain.


This is the 143rd in a series of over 150 videos about how to create real, lasting social change. Click here for a list of all titles, videos, and transcripts.