Jennifer Pahlka on Reforming Government

27:02But there are actual underperformers, too. And while there are not that many of them, they really drive the rest of the public service like crazy. And it's crazy to me that the unions don't say, actually, for the good of most public servants, let's make it easier to remove these underperforming employees. But there's some asymmetric information embedded in the problem, right? So the people who are losing their jobs, they scream loudly. The other people don't have to pay the cost of that, and so they're willing to let the union be protectionist. But isn't that more or less intrinsic? I think the other people are paying the cost.

27:41Very indirectly, right? Asymmetric information. Those costs are very widely distributed. Whereas if you're losing your job for being an underperformer, you're screaming. Yeah, that's right. But the unions, if they were performing properly to actually advance the needs and interests of all of their members, would take a different stance, I believe. But, you know, any institution, you can say that, well, if the people were doing their job properly, but you need to design the institutions for the fact that they'll pursue their own self-interest. So we're in a university, there's university administration, some things they do well, not well, but it's never an answer to a problem to say they should do their job properly.

28:25That's fair. I don't know enough about unions to know how they would work if they were working properly to me. I do think that especially in government, I mean, Philip Howard's made a bunch of points about this that I've warmed to over the years. There is a different set of circumstances for public sector unions than in the private sector. And I think that's part of the problem is that there's sort of been directly translated into the public sector. Philip Howard's much more articulate on this than I am, but I would, I think, maybe slightly counter to Philip, say that there is a higher need to protect civil servants from firing for a certain set of reasons.

29:08We do want an independent civil service that can say, actually, the science says X, right? Now, an administration may choose not to follow that science, but you want to retain that person and their, say, scientific expertise or their bureaucratic expertise and not create a situation in which the entire civil service gets wiped out every time you get a new administration. That sort of seems to be where we're headed. I don't necessarily see public sector unions succeeding in protecting against that. But to the extent that they exist to do that, I do value that. I do think we need independence. If we think about the United Kingdom, the country, their government, it seems quite stuck.

29:50Do you have an interpretation of how that's happened? They haven't had productivity growth since the great financial crisis. They have a big fiscal problem. It's hard to see signs of progress. The government appears paralyzed. They've had many different prime ministers. What are they doing wrong? I don't know. It's not really my topic. I actually get a lot of inspiration from the UK because they started the government digital service there, which was the inspiration for USDS. And in fact, you know, a lot of the work they did at Code for America also just picked up on their principles and their values.

30:25But I don't think that has been a salve for, yes, stagnation economically that is a little bit out of my territory. But, you know, when I look at what's written about the problems in the UK. I see a lot of that here in the US as well. Take Singapore. I've been to Singapore many times. It's arguably the best functioning government in the world. But when you look at Singapore, does that in any way give you pause? You just think, well, we should be more like Singapore, or you see what has been required to make Singapore work, and it puts you off a bit. And I'm not talking about how democratic is it or not?

31:02I know that's one set of issues, but just the talent drain from the private sector. There's a certain conformity in Singapore. Some of that comes from size. But when you have the super cooperative, well-disciplined civil service, that does come with some costs. And how well have they really done when you consider all possible factors? Look, I think there are obvious benefits to the system that they've set up, the value that they've placed on civil servants. Yes, the sort of technocratic, like extreme competence that they display. You could also say the same thing for Estonia. There's always this desire to say the U.S.

31:43should be like X or Y or Z. And the reality is, yes, you have a different culture, right? So would we be as orderly about it? No, it's just we have a different culture. I think another thing people don't recognize when they're trying to make comparisons between our sort of the way we run our government in any other country is that we have policy complexity and sort of legacy that just goes back further than they do. We didn't clean up for 250 years. We've added and very rarely subtracted. So if you look at a country like Estonia, their problem is not our problem. Like they have a relatively greenfield environment in which to create the digital infrastructure, but also to implement in a policy framework.

32:36You know, you look at something like unemployment insurance and it doesn't really work here. It still doesn't work. Like we, you know, threw our hands up and screamed during the pandemic and said we would fix it and we have not fixed it all. It's going to be a disaster if we have another downturn, you know, another spike in unemployment insurance claims. And part of that is because it goes back to, you know, the 1935 Social Security Act. So you have 90-something years now of just adding, adding, adding, adding. You've got literally thousands of pages of active regulations that make something that should be a very simple program.

33:14Like I get some portion of my salary under some circumstances for some number of weeks. It just shouldn't be that hard. But because we have let the policy accumulate and accrete over decades, the challenge isn't digitization. You can digitize something. The challenge is creating a system that is resilient and scalable with that much policy craft. And I think both Estonia and Singapore have the advantage of just having sort of, you know, less legacy. And they're small, right? And they're small. And they don't have federalism. Sure. Let me give you a weird hypothesis. Tell me what you think of it.

34:03if someone argued, well, the U.S. has the highest state capacity in the whole world, because the number one feature of state capacity is that you can convince enough of your citizens to fight for your country and die for it. The U.S. does pretty well for that. But to do well on that, your country in some ways has to be nutty, a bit militaristic, or maybe you need gun culture or diverse regions. A lot of the military comes from the South, which is a more conservative part of the country and so on, and that a lot of the other problems we have actually stem from our high state capacity, because we've decided to emphasize talking people into fighting for their country, being willing to die for it.

34:42Maybe Israel is pretty good at that too. And that's just another way of diagnosing the problem, that we're doing way better than we think. We prefer to be big and really strong and militarized, and the rest is collateral damage, but we live with it. Well, I'm not sure I agree with the definition of state capacity. I could see that being part of it. But I'd also not accept the notion that because we can convince people to go in the military, though, you know, we're having terrible recruitment problems in the military, we're doing poorly on that. But compared to other countries, I mean, we're way ahead of just about anyone.

35:15But that is not translating into an ability to deter our adversaries. Like we lose our war games with China. But we protect more of the world than maybe any country ever has before, I would say. Well, it's somewhat less now. Somewhat less now. But it's still at an all-time world historical peak. And U.S. soldiers are incredible fighters. You could have them in Afghanistan, Iraq, maybe very complex missions. Connection to life back home is highly unclear. And they fight incredibly well. And maybe that's at least half of state capacity that matters. And we're masters of it. One thing which I agree with is that the separation, I think, between the parts of our country that are involved in the military and the rest of the country is pretty damaging.

35:57I think that's a really, it's a big problem. I'd also, I think, somewhat agree with something behind that question, which is that when we have too much of something, we get bad at it in a certain way. I think very often people, when I talk about capacity of the state to do anything, and my background spans from food stamps to military readiness, people often go to resources. You know, capacity is money, essentially, and people. And I think very often it's, in fact, the situations where there is less money and fewer people where you get services delivered better. And I'll give you an example of that.

36:43When we started working on food stamps in, I think it was 2012 in California, California had the second lowest participation rate in supplemental nutrition assistance in the country. The only state with a lower rate was Wyoming. Maine, on the other hand, was, I can't remember, somewhere in the top five or ten. Maine spent orders of magnitude less on the systems to enroll people. I mean, we had tons of money, you know, and you think about California being, you know, tech forward. It's where Silicon Valley is. You would think that like the online enrollment system would be great. But no, because we could put a ton of money into it, we way over specced it, gathered way too many requirements, you know, gave it to expensive vendors.

37:31And we ended up with an enrollment system that, you know, had 212 questions. You know, there's put everything into this. It took, you know, far longer to fill out that form on a computer than you could, you know, spend on a computer at the library, which is where a lot of people fill out food stamps applications. So, like, when the computer times out after 30 minutes, you haven't finished your application. There's a lot of these very little frictiony ways that we sort of kept people out of the system, which starts to account for that really low enrollment rate. And it wasn't lack of resources.

38:06It was too many resources. As you know, government does not typically have its own AI, not in the United States. As AI becomes more important, will that lead to a de facto mass privatization through procurement? So the government will contract out services to the major AI companies. That will be done privately. Procurement will become far more important. The government itself won't quite vanish, but will be fundamentally different than what we've all grown up with. Is that just going to happen? You know, I think that there is a world in which you get a government with enough technical competence to procure AI and manage AI well.

38:50The problem with our procurement today is that we buy software the way we buy pencils and cars, right? We've bought a thing. AI isn't like that. And actually, software isn't like that. This is a lesson we should have learned in the Internet era. Now we need to learn even better in this AI era is that you can't spend five years developing requirements and sending it out for a bid and then having it come back and then say, OK, I bought this thing. You need the internal competence to do that process far better, far faster, and then to actually own and run that software. Right. It has to be yours.

39:28And I think we could do that. And in some ways, you know, there are rumors that Doge is, you know, actually pro-insourcing more tech talent in government. I don't you're not hearing about that now. And it may just be a rumor and it may not be true. So, you know, don't don't quote me on this. But I certainly think that folks in Musk's world came in and looked at government and said, how do you even operate with so little technical competence in-house? That's crazy. And it is crazy. They're right about that. So AI, you know, yes, will either end up, I think, you know, even further privatizing not just the software, but like the whole operations as the software and the operations are increasingly melded.

40:14Again, this is not new. Or we'll be forced finally to gain the internal competence that we have always needed and start to do this a little bit better. Let's say you're the nation of Peru and AI becomes more important. You run a lot of your education system through American AI, a lot of your military, your cybersecurity, processing of social services. At the end of all that, after, I don't know, 15 years, are you even a sovereign nation still? Like, are we seeing this fundamental shift in what a government is? Like, if the U.S. government does something, at least it's U.S. AI. Other than U.S. and China, it's far from clear how many countries will have their own AI.

40:56What's going to become of Peru? I mean, I can't answer that question, but it's an excellent question. But I think it highlights the degree to which you are going to see. I think you may see countries realize this and take just more drastic steps to maintain their sovereignty, which I don't know how they're going to do it. But they could just stay backward, right? They could just not use the AI and probably some will make that decision. I think some will. But that's a huge cost. And then there's countries like France, where maybe they can have their own AI, but they haven't succeeded so far, but they could at least make a run at it.

41:36Like what you tell France, make sure you develop your own AI so you're controlling your own government. I mean, question back to you, is there some way in which the market fixes this because there's a market for AI that doesn't implicate their sovereignty? I worry that the economies of scale are in conflict with the number of nations in the world today. And we're going to see a very radical shaking out that will go fully unadvertised. But at the end of it all, geopolitics will be very different. And I don't know that France can build an AI good enough, actually. They had Mistral. They still do.

42:14It's not making money. People want to buy it. Macron says we're going to basically prop it up. But you can't just prop it up. It has to be good enough to work and be competitive. I don't know. But won't there be companies that have enough AI expertise that they're able to cater to the needs of a sovereign nation and say, I'll do this for you in the way that fits your needs? Well, it could be France contracts with Anthropic, and Anthropic, in a sense, runs the French government. And maybe we trust Anthropic. I'm not necessarily opposed to that by any means. But again, it's a very different world.

42:57It is a very different world, and it is very hard to game this out. And America and China, for sure, will have their own AIs, and maybe those countries just become much more powerful. And then you've got to decide, well, whose network are you in anyway? Yeah, this is all coming at us very, very fast. And I think the point's been made that this is the first time that such a transformational technology hasn't fundamentally come out of U.S. government resources. This is not one that you can ultimately trace back to DARPA or DOD. And so our government really is at least then even it was privatized and the value, so much of the value came out of the commercialization of, you know, DOD or DARPA investments.

43:45Since that's not the case this time, they don't really even understand it. And I think even before you get to the questions about other sovereign nations, we have the question of the relationship between the companies and the U.S. government, how we're going to sort that out. Not to mention federalism, right? We have plenty of governments in this country. What's your favorite novel about bureaucracy? A novel about bureaucracy? So I would say Kafka, a number of Kafka novels, but maybe that's too negative of you. Can I use a TV show? You can use a TV show. Well, there's so many, but just for a positive vision, I've got to call it Parks and Rec.

44:23Parks and Rec. And what does Parks and Rec show you? I've never seen the show. You've never seen the show. It just indulges in that banality of things like, you know, public meetings that are dominated by, you know, the loudest voice and, you know, how ultimately, you know, humor and, you know, just communities sort of get through it. But it's a very funny show. Yet it often highlights just how mind-numbing bureaucracy can be, but also, you know, how people end up making it sort of beautiful and funny. The Kurosawa movie, Ikiru, is very good if you haven't seen it. Yes. I talked Ezra into watching it.

45:03Isn't that the one that's been remade in the UK recently? I'm not sure. Maybe. Oh, I'm going to forget the name of this movie, but it is excellent. And I believe this is the British version of that about a civil servant near the end of his life. Yes, exactly. That's it. And the playground. Correct. It's coming back. Yeah, I've heard about this. Okay, so I've seen the British version and I should have named that. Okay. Excellent, excellent movie. That would be my favorite movie about bureaucracy. Well, can we put in the show notes the actual name of the British version? We will put it in the show notes, yes.

45:35Do you still do gaming? No. How do you think about not doing gaming? This previous part of your life, like, I don't play chess anymore, and I can't, I sort of feel I can't, I shouldn't, I won't. You know, gaming takes up a lot of time. Like, it's hard to be a casual gamer. I mean, like, my gaming now is like, I do the New York Times games like every day, you know, Wordle. So you are still a gamer. Yeah, yeah. But I mean, since you're referring to me working in the video game industry, running the Game Developers Conference for many years of my life, yeah, you can't play Doom for like five minutes on the bus, right?

46:12Yeah. So many, many hours have gone into many PlayStation games and Xbox games in an earlier part of my life, and it's just not part of my life anymore. What do you think you learned from that being such a big part of your life? Yeah, that's a good question. You know, I went from working in essentially little bureaucracies. So my first job out of college, I worked in a child welfare agency and then at sort of a health care think tank. And then I went away for a year and I came back and I got this job in tech. And it was amazing to me how creative game developers are. they have this sort of completely unconstrained ability to just imagine entirely different worlds.

47:01And of course, you know, like the economies of those worlds and like build the systems that, you know, that simulate all sorts of aspects of our lives. And then we sort of moved from that into this Web 2.0 era and then kind of went back into government. And I think what I kept with me is that you can imagine fundamentally different things. This is an imagination that is so powerful. And the quote I chose for the book, Recoding America, is a David Graeber quote. You may need to open it to remind me exactly what it says. Sorry, I will pull it up. The ultimate hidden truth of the world is that it is something that we make and could just as easily make differently.

47:45And I think I got that from, you know, the designers of Ultima Online and my first husband was on the game Spore. It was a Will Wright game. You can have a whole different world. And once you realize that, all these constraints in our daily lives, you realize they're manufactured. I think we have a little bit of that right now. This is going to sound extremely boring compared to what I just said. But since we've been touching on federalism a little bit, you know, you talk about like the federal civil service and people are like, it's a thing. Like, it can't change. It hasn't changed since 1978, really.

48:22I mean, little changes here and there. But we don't just have the federal civil service. We have 50 civil services in states that are wildly different. A lot of, not a lot, some states have at-will employment. We can't imagine that in the federal civil service. And I'm not advocating for that. But I am advocating for us getting out of the trap of like, this is the only way it can be when clearly, like even in our own country, there are 50 different models that we could pull from. Which do you think is our best run state? I really can't answer that, but I'm very interested in Pennsylvania under Shapiro.

48:59Great paper out by Don Moynihan recently about the work that they've done to just speed things like permits. You know, maybe it's boring stuff, but it matters to people. But their schools aren't that great, right? Their roads are fine. But he can't have changed that much, right? The state as a whole doesn't seem to me exceptionally well-governed, maybe in the middle somewhere. I'm more talking about where I see interesting change happening that others could follow. Colorado as well. I think what Polis is doing is really interesting. That seems to me a well-run state overall. Yeah. Utah? Yeah. I don't know enough about Utah to say that with great certainty, but yes, I think I could see some of that.

49:38I mean, there are states that I think have either tackled that procedural accretion or just not let as much procedure accrete in the first place that are going to have an easier time. California, sadly, is not one of those where I used to live. Tell me what you think of Virginia, since we're in the state of Virginia and I live here now. It used to be one of the top few. It's declined somewhat, but still well above average. It is genuine two-party competition, which I think is a good thing. Yes. It has this cash cow, the Pentagon, which creates jobs and revenue, yet no one in state government can touch it.

50:14You can't grab from it. You can't take corruption from it. It's not like Alaska oil revenue. So that's a huge permanent plus that is fully protected. So that's a great natural endowment. And again, it's one of the best states to live in, I would say. Well, I chose well. Yes. Where did you grow up? I was born in a naval base in Maryland, but very quickly moved to Austin, Texas, and then moved to New York when I was in fourth grade. So I grew up in New York City. New York City. New York City. How well run is New York City today, in your opinion? Well, it's certainly cleaner and safer than it was in the 80s when I was growing up.

50:48But is that because it's run better or just because it's richer? Probably just because it's richer. And I don't, you know, to be honest, like, it was smelly. And I got mugged a couple times, but I don't regret growing up under those circumstances. I think it made me who I am. And I have a fond affection for New York in the 80s, even though it was kind of a mess. I was there often in the 80s. It was a great time. And I went to a public school. I went to Bronx High School of Science. I grew up in New Jersey, right across the river. Say they call you into New York City. We'll do whatever you tell us.

51:23What do you tell them to do? Okay. I have a great answer for this because we just wrote a paper. So if you want your government to be able to achieve its goals, and I think New York's got some good goals that they're not achieving, you need to be able to hire the right people and fire the wrong ones. So you've got to look at that civil service system. New York in particular has a very bad way of hiring. They still are stuck in this, you know, artifacts from the Moses area where you do these civil service exams and they only happen at certain times of the year and all this stuff that just makes hiring really, really hard.

51:54You've got to fix that. Second, reduce procedural bloat. That's sort of my favorite one these days. These go together. The procedural bloat is what creates that ineffective hiring system. The third thing is you have to invest in digital infrastructure. Lots to say about that. And then the fourth thing is that you have to close that feedback loop between policy and implementation. So what that would look like in New York City is, well, I guess it's the same that it would look like at a lot of different places is that your relationship between law and policymakers and those that implement those laws has to change.

52:30And you've got to sort of stop firing and forgetting as you make policy and figure out how to build the affordances for that ongoing iterative feedback. And to close, tell us about your work with Niskanen. I'm loving working with Niskanen. They were the only think tank that had anything on state capacity when I was finishing my book. And I hope I'm helping build a team there that can do much more to articulate how any government, especially in the U.S., at any level, can increase its ability to achieve its policy goals. We have a wonderful team there led by Ben Bain. And we're getting a lot of interest from people that never used to pay attention to things like, you know, technical infrastructure in the agencies, even from health staffers and members of Congress.

53:20So I'm very hopeful that we'll start to make a real impact. Well, not just in Congress, but working with states and cities around the country to sort of tackle these four pillars I just talked about. Jennifer Palka, thank you very much. Thank you. This was a lot of fun.

53:38Thanks for listening to Conversations with Tyler. You can subscribe to the show on Apple Podcasts, Spotify, or your favorite podcast app. If you like this podcast, please consider giving us a rating and leaving a review. This helps other listeners find the show. On Twitter, I'm at Tyler Cowen, and the show is at Cowen Convos. Until next time, please keep listening and learning.