Henry Farrell summarizes an interesting blog exchange between Timothy Burke and Brad DeLong on the proper relationship between leaders and bureaucracies.

Burke first:

[O]ne of the interesting bits of information to come out of the Iraq War so far has to do with why US intelligence was so off about Hussein’s possession of weapons of mass destruction. People who want to argue that intelligence was purely concocted for political purposes are too simplistic, people who want to reduce it all to the will of Dick Cheney or a few neocons are too simplistic, people who want to make it a sincere mistake are too simplistic. Some of what strikes me as actually involved includes:

a. That very indirectly, almost “culturally” or ideologically, actors inside the Bush Administration made it known that they, even more than their predecessors, would not welcome intelligence which blatantly contradicted beliefs or assumptions that they were inclined to make. No one ever sends an order down that says, “Here’s the casus belli we need, please write it up! kthnx.” This kind of pressure gets exerted when someone like Cheney says in a conversation that includes key advisors and heads of executive departments that intelligence has been “too timid” in the past, or is too dominated by experts who are unwilling to act. The thing is, Cheney (or various neocons) could believe that statement as a reaction to some factual understanding of the history of US intelligence, could say it as a reflection of a much more intuitive kind of personal, emotional orientation towards leadership (think John Bolton here), and so on–and could not entirely know themselves why they say it, or how that statement is likely to be received or interpreted.

2) Another thing at play: how the movement of information through institutions is rather like a game of telephone, that there is a kind of drift and transformation which has less to do with intentionality and more to do with processes of translation, reparsing, repackaging and repurposing as information travels from office to office, up and down hierarchies. So at one level of action and knowledge, you can get a very granular, nuanced understanding of the extremely limited value of a source like “Curveball”, but a process rather like genetic drift starts to mutate that knowledge into something else by the time it reaches the layer where ultimate decisions are made.

Tim Burke is both right and wrong. He is right: courts are the natural habitats of deceitful courtiers who tell the princes exactly what the princes want to hear, the people on the spot who control implementation matter in ways that the people around polished walnut tables in rooms with green silk walls do not, and the movement of information through bureaucracies does resemble a game of telephone with distortions amplified at every link.

But.

Those with sufficient virtu to become princes in this modern age are well aware of all these deficiencies of bureaucracies and courts....

by the time anyone (a) possesses sufficient virtu, (b) is forty-five or fifty-five or sixty-five, and (c) has seen the world, there is no excuse for not understanding that as a czar your cossacks respond to the incentives you set them, that you can change those incentives, and that you are responsible for the behavior that your incentives elicit. By the time you are forty-five or fifty-five or sixty-five, you know very well that when you say that "intelligence has been 'too timid' in the past," what they hear you saying is "don't tell me what you think, tell me what I want to hear." George W. Bush--the feckless and virtu-less hereditary prince--may well not have clued in to the fact that Condi Rice had decided that if she told him what he needed to hear she might get fired, while if she told him what he wanted to hear she would get promoted. But Colin Powell knew damned well what the flow of "intelligence" from George Tenet to him was worth unverified, and knew damned well that taking care not to try to verify it was a way of preserving his own options for the future. And Richard Cheney and Donald Rumsfeld knew damned well--unless they are much farther into their dotage than I believe--that their confidence in Saddam Hussein's WMD program was based not on intelligence but on their judgment that they would have active WMD programs if they were Saddam Hussein.

The frictions and distortions of the bureaucracy and the court exist. They are, however, counterbalanced by the intelligence, the sophistication, and the energy of the principals at the top. If the czar wishes, the cossacks do work for him. And if the czar doesn't want to take the time to make the cossacks work for him--well, that is his decision and what happens is his will just as well.

I’m with Brad on this, but I want to go one step further. The very fact of ambiguous motivations and uncertainty about what the people at the top really want can be a crucial source of strategic power for those people. By combining ambiguous information about the motivations of those in power with implicit incentives to please them, powerful people can strategically shape the things that underlings do and do not do, without ever specifically demanding that they do anything....

More generally, the problem of ambiguity, reflects, as Brad says, to a very considerable degree the desires of those at the top. Moreover, it may be a crucial source of power for them. It allows them to blur lines of accountability and responsibility, by making underlings guess what they want, while never having the comfort of explicit instructions. Hence decisions by underlings over torture, to destroy tapes, to skew intelligence in the one way rather than another, that are based on well grounded inferences about the preferences of those above, but which don’t allow others later to reconstruct clear chains of causation and responsibility that lead from those at top to those who want to implement their wishes. That motivations may not be unambiguously discernible from context doesn’t mean that their motivations don’t exist, or that beliefs about those motivations aren’t important. Moreover, precisely that ambiguity over motivations allows for all sorts of strategic actions that wouldn’t be possible otherwise.

On the other hand, there is an large and robust literature in political science on the fact that bureaucracies can also resist, evade, or sabotage the policy preferences of their political superiors. Indeed, this came up earlier this week in the Nevada debate between Barack Obama and Hillary Clinton (NOTE: if anyone can find a shorter YouTube clip that only encompasses the first 7 minutes, post it in the comments):

To be clear, Brad and Henry are correct to say that leaders should be wary of eager-to-please courtiers, and should be willing to pulse the system in order to get alternative sources of information. The irony of the Bush administration, however, is that in the case of intelligence gathering, Cheney and Rumsfeld did precisely this very thing. In their case, however, it was because they thought the intelligence apparatus' inherent risk aversion was preventing them from drawing the conclusions that they had already drawn about Saddam Hussein. And, as Hillary Clinton's statements suggest, this is hardly a GOP phenomenon.

One last quick thought: I don't really buy Farrell's strategic ambiguity argument -- or, at least, it was at best a minor key in this administration. George W. Bush is a lot of things, but "ambiguous" ain't one of them. And it's Bush's decisions that, in the end, set the tone for the administration. One of the biggest problems with liberal critiques of the Bush administration has been the assumption that Bush has been from the nose by Cheney, Rumsfeld, neocons, etc. Bull s**t. The president has been the decider.

In my latest Marketplace commentary, I pointed out that the accuracy of prediction markets would improve as they went more mainstream. Essentially, as markets widen and deepen, their informational efficiency should improve.

I had assumed that we would need to wait for the future for this to happen. However, Paul Rhode and Koleman Strumpf provide some fascinating evidence from the past in thieir paper, "Historical Presidential Betting Markets." The highlights:

This paper analyzes the large and often well organized markets for betting on presidential elections that operated between 1868 and 1940. Over $165 million (in 2002 dollars) was wagered in one election, and betting activity at times dominated transactions in the stock exchanges on Wall Street.

Drawing on an investigation of several thousand newspaper articles, we develop and analyze data on betting volumes and prices to address four main points. First, we show that the market did a remarkable job forecasting elections in an era before scientific polling. In only one case did the candidate clearly favored in the betting a month before Election Day lose, and even state-specific forecasts were quite accurate. This performance compares favorably with that of the Iowa Electronic Market (currently the only legal venue for election betting in the U.S.). Second, the market was fairly efficient, despite the limited information of participants and attempts to manipulate the odds by political parties and newspapers. Third, we argue political betting markets disappeared largely because of the rise of scientific polls and the increasing availability of other forms of gambling. Finally, we discuss lessons this experience provides for the present....

The extent of activity in the presidential betting markets of this time was astonishingly large. For brief periods, betting on political outcomes at the Curb Exchange in New York would exceed trading in stocks and bonds. Crowds formed in the financial district – on the Curb or in the lobby of the New York Stock Exchange— and brokers would call out bid and ask odds as if trading securities. In presidential races such as 1896, 1900, 1904, 1916, and 1924, the New York Times, Sun, and World provided nearly daily quotes from early October until Election Day....

In the 15 elections between 1884 and 1940, the mid-October betting favorite won 11 times (73 percent) and the underdog won only once (when in 1916 Wilson upset Hughes on the West Coast). In the remaining three contests (1884-92), the odds were essentially even throughout and the races very close. The capacity of the betting markets to aggregate information is all the more remarkable given the absence of scientific polls before the mid-1930s. The betting odds possessed much better predictive power than other generally available information. Moreover, the betting market was not succeeding by just picking one party or by picking incumbents. Over this period, Republicans won eight of the elections in the Electoral College and Democrats seven; the party in power won eight, the opposition seven.

Sure, I have a Newsweek column and a bloggingheads appearance in the past 24 hours, but what have I done for my dear readers lately?

My latest commentary for Marketplace is now available online. It's about the fallibility of political prediction markets.

I'm very grateful to Columbia's Andrew Gelman for this blog post and this blog post, which crystallize the state of play regarding these markets.

Let's see, today we've already blogged about the "erection theory of British foreign policy."

As an antidote, here's a link to my latest Newsweek column, which suggests that, "the competitiveness of the 2008 presidential election itself might already be augmenting America's soft power."

Here's how it closes:

[N]ot all dimensions of the 2008 campaign have been good for America's image abroad. With the exception of McCain, the Republican field has been obsessed with who sounds tougher on immigration issues. The Democrats have been less exercised over this issue, but when the topic turns to trade, it has been a race among the candidates to see who can bash China first.

All of the top-tier candidates have published essays in Foreign Affairs outlining their vision of international relations. One of the few areas where there is bipartisan agreement has been the need to improve America's image abroad. It will be a pleasant surprise if the election campaign itself helps them succeed in that effort.

My latest bloggingheads diavlog -- with Henry Farrell -- is now online at the brand-spanking new bloggingheads site. We talk a lot about the 2008 campaign in all its facets.

Go check it out!

Gideon Rachman's most recent Financial Times column opens with a query about Hillary Clinton's lust for power. And then we get to this section:

I got an insight into the thrill of power recently, when I had lunch with a friend who had helped to handle a national emergency in Britain, working from the emergency bunker known as Cobra – which sits beneath the Cabinet Office near Downing Street.

“What was it like?” I asked him. “Brilliant,” he replied. “There are all these video screens and generals and admirals sitting around in uniform. You have to say things like: ‘It is 3.45pm and I am now bringing to a close this meeting of Cobra emergency command.’”

Is my friend uniquely juvenile? I suspect not – just unusually honest. He certainly believed that all the other officials around the table were delighting in the little rituals of crisis management. “I guarantee that everybody around that table had an erection within five minutes,” he mused.

Extrapolating slightly, my friend developed what you might call “the erection theory of British foreign policy”. His argument was that British government’s bias towards the “special relationship” with the US, in preference to the European Union, has something to do with the thrilling nature of American power. “If you fly into Camp David on a helicopter,” he assured me, “it’s instant arousal. But if you have to go to a European summit in Brussels, its so depressing you’re impotent for a week.”

UPDATE: You have to love a comment thread that contains the phrase: "Look, I'm as pro-erection as the next guy, but...."

Shorter (but equally dogmatic) Paul Krugman:

We’re heading into a recession (ignore what I've said before -- this time I'm sure).

The Republicans are blinkered.

Everything is Alan Greenspan’s fault.

I luuuuuv John Edwards.

Barack Obama is not a real progressive.