Henry Farrell: evaluation

Transcript context

…Why? This is a piece that Margaret Levi, who has written on the theory of the state, and Tim O’Reilly and I wrote about 18 months ago. More or less what we did was, we took a standard set of arguments from political economy, and in particular North and Weingast. North and Weingast, I’m sure you’re familiar with, and many of your listeners will be familiar with. They have this great article on tying the king’s hands, where they argue that the Glorious Revolution — this crucial moment in British history — why it was so incredibly important was that it effectively allowed the monarch to make promises. Previously, monarchs had been able to borrow money and then renege on their debts. Once Parliament is instituted, the monarch can’t do that nearly so easily anymore. And this weakness turns out to be an incredible source of power for the British crown over the next couple of centuries. It effectively allows it to borrow money, and to borrow money freely, because the lenders don’t have to worry that the money’s going to be confiscated. And as people like John Brewer have discussed in their discussion of the British fiscal state of the 18th and 19th century, this turns out to be an enormous source of power projection. The problem is, I think, that if you look at Mark Zuckerberg and Facebook at the moment, he does not have the power to tie his hands. You have this very, very strange corporate structure where Zuckerberg is effectively CEO. He is in control of the board. He has the majority of the shares that count. And this means that it’s very, very difficult for Zuckerberg or anyone who is in Facebook to really credibly commit to tie their own hands in this kind of way. Doesn’t he have the incentive to tie his own hands? Because the moment he deviates from the court, people blame him for the decisions. And what he possibly would like is simply for it to be someone else’s responsibility. So it’s then incentive compatible, no?…

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