Wednesday, 21 May 2014

Spying economics

Trust is allocated very strangely in our society. In most situations we work on the assumption that people can't be trusted and spend huge sums on monitoring and regulating them. Rule- and policy-making powers
are routinely and deliberately separated from operational management throughout the public sector. A decent chunk of a whole industry (management consulting) is devoted to monitoring workers' performance and designing contracts that give them incentives to do the "right" things. And then there's the public payroll for services like border control, road policing and health/safety, all of which are predicated on the idea that people can't be trusted.

Yet when it comes to the spooks, none of this applies. There is no transparent performance monitoring - we are expected to just trust them to be doing the right things. Beyond vague generalisations, we don't even know what "the right things" are said to be. And judging from last night's TV, the "separation of powers" dictum doesn't apply either.

This should create quite severe "incentive compatibility" problems. Agency theory predicts that spies will respond to their situation in some or all of the following ways:
  • Shirking, i.e. not doing the stuff they should be doing (whatever that is),
  • Fibbing, for example by over-stating what they've actually achieved,
  • Inventing work that feeds their own ego and sense of place in the world, and
  • Corrupting idealistic new recruits who don't understand the rort. 
This is why, whenever I think about spying my mind turns to The Tailor of Panama, the plot of which involves a spy feeding bullshit to his masters. It's all too believable when you think about the incentives involved, but its also only one of several ways in which society can be screwed over by our spies and those running them.

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