A Story About Axe and Palm, Government, and Information

Members of the Stanford community are filled with valuable knowledge. We have our physicists, our engineers, our historians. Needless to say, all of the academic disciplines at Stanford are valuable in some manner. However, in our rush to praise the highly specialized, we may forget to glorify the ordinary. The Axe and Palm managers who order the correct amount of cups based on their knowledge of students’ consumption habits. The biker who knows the quickest route from FloMo to the gym from experience. The Residence Assistant that can detect when there are problems within a dorm because he lives a door away. This seemingly mundane information is dispersed among thousands of members of the Stanford community. In many cases, it is far more valuable than anything one can learn through academics.

Understanding this “mundane knowledge” helps explain many things we take for granted at Stanford. For example, Wilbur and Stern are not two massive freshman dorms; they are subdivided into smaller communities. Although Residential Education does establish some basic rules, much dorm activity is governed within each dorm. Seemingly trivial knowledge of each dorm’s culture allows staff to plan events that appeal to residents. Even though communities such as Larkin and FroSoCo both house freshmen, they have very different social structures. Governance at the dorm level allows staff to use such basic knowledge both to solve unique problems and to plan events catered to the specific community.

What if Residential Education mapped out exactly what activities the entire dorm community participated in? On the surface, this may seem like a good idea: the freshman experience is standardized across dorms. However, by shifting control from the local dorm level, Residential Education would be unable to devise programs that take advantage of the specialized information contained within each community. As control shifts to the central administration, specialization diminishes. Only Stanford’s current system of individual dorm governance permits staff to sufficiently adapt to local conditions within each community.

Mundane knowledge carries value far beyond Stanford. The local gas station manager may not have a PhD, but he knows how much oil to order to meet his town’s demand. The social worker may not grasp every tenet of welfare law but he has a unique understanding of his caseload’s needs. The realtor probably does not have a Masters degree in economics but she knows more about housing conditions in her neighborhood than any government official. This knowledge, like at Stanford, is dispersed among millions of people. It allows the market economy to function; people may not understand national policy but they have a strong incentive to learn seemingly trivial information when it may mean the difference between profit and loss. No one can possibly know all information or understand how it connects. In a free market, however, no one has to. For example, Axe and Palm managers do not need to understand the complexities of the plastic market and the cup manufacturing process to order smoothie cups. Instead, they just need to understand how many smoothies Stanford students purchase and order the corresponding number of cups from suppliers. Plastic manufacturers have an incentive to supply plastic to cup designers for profit. No one needs to understand the entire process; mundane knowledge dispersed among the cup supply chain works with market forces to provide cups.

When any entity far away from those it governs, whether Residential Education or the Federal Government, tries to impose a policy that regulates behavior on the local level, its inability to synthesize millions of pieces of dispersed knowledge will inevitably lead to failure and inefficiency in most cases. Nevertheless, there is a place for large institutions. Any program or law that does not require much localized knowledge may succeed if implemented at a broad level. For example, Residential Education’s mandate that every dorm has a Residential Assistant does not require local knowledge of each dorm. However, Resident Fellows have the authority to select who the staffers are since they uniquely understand each dorm’s culture. Similarly, national defense does not require specialized knowledge that can only be obtained at the local level. Dictating strategy and maintaining military readiness does not require much knowledge of local conditions. On the other hand, insurance regulations need a large amount of information to successfully operate. Local conditions and patterns are critical when setting rates and other policies. If an agency far-removed from local markets sought to impose detailed regulations, then it would lose the ability to synthesize much localized information when forming policy.

Knowledge helps explain many phenomena in the world, ranging from dorm organization at Stanford to the free market to government policy. In general, as the information needed for a program becomes more localized, its governance should also become more localized. This dispersion of authority is essential for a society to function.

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