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Infrastructure and The Principle of The Hiding Hand PDF
Infrastructure and The Principle of The Hiding Hand PDF
Introduction
The principle of the Hiding Hand expresses a pattern observed by the economist
Albert O. Hirschman in his study of major development programmes in the
1960s in countries as varied as Uganda, Peru, Uruguay, (southern) Italy, and
what was then East Pakistan (now Bangladesh). The perhaps best known case
is that of the Karnaphuli pulp and paper mill, established by the Industrial
Development Corporation of East Pakistan in the 1950s to exploit nearby
bamboo forests for industrial processing. Unexpectedly, after years of prepar-
ation, the mill lost 85 per cent of its raw material due to a rare botanical event:
the bamboo began to flower, which made it unusable for pulping. The mill’s
future was threatened because its planners had highly overestimated the
steady supply of bamboo while underestimating the importance of alternatives.
Instead of causing the closure of the mill, however, the bamboo flowering
triggered a number of creative responses, including experimental research
that led to the diversification of the mill’s raw materials, making the mill in
fact more sustainable in the long term. Another example is the San Lorenzo
irrigation project in Peru. Suffering from costly delays due to political changes
and extensive project revisions, these challenges ultimately proved essential
for the project’s success. Indeed, the project served as best practice for the
reorganisation of agriculture across the country (Hirschman 1967b: 11 f.).
Looking for historical analogues, Hirschman discovered John Sawyer’s ana-
lysis of infrastructure projects undertaken in North America during the
first half of the nineteenth century, a truly boom-and-bust era of economic
history, and found similar patterns. Referring to the Welland Canal in
Ontario, Canada, Sawyer (1952: 199) concluded: ‘Had the total investment
Helmut K. Anheier
required been accurately and objectively known at the beginning, the project
would not have been begun’.1 Yet in the end, after periods of uncertainty with
many unanticipated consequences and innovative responses, the project
turned out to be a success, as ‘the error in estimating costs was at least offset
by a corresponding error in the estimation of demand’ (1952: 200).
Across both current and historical cases, Hirschman detected a systematic
discrepancy between what project proponents put on paper when seeking
permission for projects and the actual processes leading to certain outcomes.
He argued that if proponents, especially planners and financiers, had known
in advance all the seemingly insurmountable challenges lying in store, they
would likely not have proposed such projects in the first place, let alone have
pushed for realisation.
Such challenges can involve technological, political, financial, economic, or
other factors, often in some combination. For example, when digging a rail-
way tunnel, the geological formations of a mountain range may turn out to be
different from what engineers had assumed based on exploratory drillings and
tests; when proposing a highway project or a nuclear power plant, NIMBYism2
may be stronger and more unpredictable than expected; and market condi-
tions for information and communication technology (ICT) networks may
suddenly change due to technological advances or regulatory bans on roam-
ing charges. The key point is that planners of infrastructure are typically
unaware of such factors or may at best have only vague notions of the true
challenges involved when embarking on projects.
But why have infrastructure proponents forged ahead in the first place, espe-
cially when the challenges they eventually encountered may seem predictable,
if not rather obvious, in hindsight? Put differently: why do some people—
especially entrepreneurs, planners, financiers, and politicians—take on tasks
that seem nearly impossible and that carry high risks and entail high costs if
they fail? This is where the principle of the Hiding Hand comes in. Hirschman
(1967b: 13) writes:
Creativity always comes as a surprise to us; therefore we can never count on it and
we dare not believe in it until it has happened. In other words, we would not
consciously engage upon tasks whose success clearly requires that creativity be
forthcoming. Hence, the only way in which we can bring our creative resources
fully into play is by misjudging the nature of the task, by presenting it to ourselves as
more routine, simple, undemanding of genuine creativity than it will turn out to be.
1
Built by entrepreneur W. H. Merritt, the first Welland Canal opened on 30 November, 1829
after five years of construction (Sawyer 1952: 201).
2
NIMBY (‘Not In My Back Yard’) refers to a self-serving attitude among citizens who oppose any
infrastructure measures in their immediate neighbourhood. It is often associated with sentiments
to protect wider rural and urban areas from further development.
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Infrastructure and the Principle of the Hiding Hand
Indeed, Hirschman observed various projects being started that later appeared
unrealistic, overambitious, dilettantish, and even almost deceitful in retrospect.
Such projects provided the impetus for the formulation of the Hiding Hand
principle. The examples Hirschman cited included many of the infrastructure
projects in the United States in the nineteenth century—‘digging a tunnel
through that mountain will be easy, and the new rail line will open up the
entire western market to industry’—or development projects in Africa and
Asia in the 1960s—‘if we engage in import substitution, we will achieve high
growth rates and become an industrial economy in no time’. More recent
examples that Hirschman might have considered fitting include the energy
transition in Germany3—‘if we shut down nuclear plants, we will foster green
energy’; re-energising the idea of Europe4—‘if we construct a new narrative, the
European project will move forward’; high-speed railway lines in California5 or
in the United Kingdom;6 commercial space travel;7 and winning the war on
drugs,8 among many other projects, frequently as ambitious as they are contro-
versial, that populate front pages and websites around the world.
For Hirschman, such ideas and proposals appeared neither naive nor simply
ill-conceived. On the contrary, he saw great value in the aspirations and
ambitions of planners and policy-makers. Yet he also saw the principle of
the Hiding Hand at work: by necessarily underestimating creativity or
resourcefulness ex ante, proponents may well underestimate to a roughly
similar extent the difficulties of tasks. In a way, they trick themselves with
‘these two offsetting underestimates into undertaking tasks which we can, but
otherwise would not dare, tackle’ (Hirschman 1967b: 13). The Hiding Hand
‘does its work essentially through ignorance of ignorance, of uncertainties,
and of difficulties’ (Hirschman 1967a: 35).
3
The German Energy Transition (Energiewende) is the shift from both nuclear and fossil energy
to renewables and efficiency. It is Germany’s largest post-war infrastructure project (<http://
energytransition.de/>).
4
The New Narrative for Europe project was launched in 2013 to restore confidence in Europe
and to revive a ‘European spirit’. The project wants to create a European narrative beyond
economic growth and based on common culture and shared values (<http://ec.europa.eu/
culture/policy/new-narrative/index_en.htm>).
5
California is building the first high-speed rail system in the US. By 2029, the system will run
from San Francisco to the Los Angeles basin in under three hours and will eventually extend to
Sacramento and San Diego, totalling 800 miles (<http://www.hsr.ca.gov/>).
6
High Speed 2 (HS2) is a planned high-speed railway in the United Kingdom linking London,
Birmingham, the East Midlands, Leeds, Sheffield, and Manchester (<www.hs2.org.uk>).
7
Just one example among several, Virgin Galactic, a spaceflight company within the Virgin
Group, is developing a commercial space-line (http://www.virgingalactic.com/).
8
The term ‘war on drugs’ was popularised during the Nixon administration in the early 1970s
and became a focus of the first Reagan administration. The Obama administration no longer uses
the term and instead publishes an annual National Drug Control Strategy which aims to prevent
drug use, expand access to treatment, and reform the criminal justice system (<https://www.
whitehouse.gov/ondcp/drugpolicyreform>).
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Helmut K. Anheier
Context
9
Among the analytic challenges of the Hiding Hand principle is the separation between concrete
infrastructure projects, such as dams or high-speed railways, on the one hand, and policies such as
social security reforms, economic development initiatives, or urban renewal on the other.
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Infrastructure and the Principle of the Hiding Hand
closer to being just a piece of witty wordplay by virtue of its implicit reference
to Smith than a testable proposition needed for theoretical advancement.
Perhaps the principle was simply an insight that Hirschman expressed with
few wider theoretical expectations attached, although the principle is closely
connected to his wider interest in a theory of change and the notions of
unintended consequences and possibilism (see Meldolesi 1995: ch. 5). It
could also have been just an early contribution to an emerging trope in
1970s developmental studies that signalled growing disillusionment with
the planning optimism of the post-war years (see Bauer 1972).
Finally, it could be the case that the principle’s formulation was not
economic or sociological enough for social scientists, as Hirschman made
implicit references to psychological concepts; conversely, perhaps its for-
mulation was not psychological enough for behavioural psychologists, as
such references were rather implicit and unconnected to debates in that
discipline. Unlike in The Passions and the Interests (Hirschman 1977) or in
Exit, Voice, and Loyalty (Hirschman 1970), where Hirschman managed
to avoid such disciplinary traps, in the case of the Hiding Hand, he did
not. In the end, the principle did not seem especially pertinent for any of
the disciplines it evoked, and it became something of a sleeper hit in
Hirschman’s work.
Yet what could be the contribution of the principle of the Hiding Hand
today? Is it indeed just another interesting idea yet to be fully developed?
What would it mean to examine the principle in today’s context? Compared
to the world of infrastructure planning some fifty years ago, there are many
more rules and regulations in place today, especially regarding transparency,
accountability, safety, and environmental concerns as well as consumer pro-
tection. Moreover, technology has advanced, as have planning, operations
research, and forecasting; communication has become easier and more rapid,
making information more plentiful and accessible. Is there still a place for the
Hiding Hand in today’s infrastructure projects, or does it better serve times when
visions could trump procedures and investors’ doubts more easily, and when
sales pitches could overrule the concerns of regulators, investors, and business
executives?
Delineations
In order to answer the above, it is first of all necessary to position the principle
of the Hiding Hand relative to similar concepts and approaches. First, there
is what sociologists call the ‘preventive effect of ignorance’ (Popitz 1968).
The basic idea is that there are advantages to not knowing or to being
unaware; such a state may in fact neutralise behavioural impulses and patterns
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Helmut K. Anheier
that would otherwise be evoked or emerge. For example, Popitz (1968) argued
that the official under-reporting of crime statistics—as many crimes go unre-
ported to the police in the first place—actually reduces the number of criminal
behaviours: people would take social norms less seriously and would began to
doubt them if they knew how often and repeatedly they are broken. Especially
for minor offences, the notion that ‘everyone is doing it’ would undermine
accepted norms underlying the law.10 Yet the Hiding Hand principle is differ-
ent because preventive ignorance does not trigger creativity nor lead to
innovative behaviour and subsequent changes. The ignorance about ignor-
ance means continuity rather than change.
The principle is also different from Karl Weick’s (1995) organisational
psychology on the collapse of sensemaking under uncertainty. The central
problem he poses is how to chart a way forward under conditions of extreme
uncertainty. Weick uses a group lost on a mountain as an example of uncon-
ventional yet reasonable problem-solving: finding and using a map to
escape—a map that turns out to chart terrain elsewhere—the group nonethe-
less manages to find safety, suggesting that any plan is better than no plan at
all. Yet again, as in the case of preventive ignorance, the plan followed is based
on conventional, routinised behaviour—more of an enactment of known
patterns than the creative impulse that the principle of the Hiding Hand
entails.
Hirschman’s Hiding Hand also contrasts with the ‘fantasy documents’
sociologist Lee Clarke (1999) writes about, that is unrealistic proposals
made believable by the interplay of special interests and politics. For
example, experience shows the near impossibility of containing and clean-
ing up massive oil spills on the open sea. Nevertheless, regulators and oil
corporations continue to produce detailed contingency plans that serve
symbolic rather than instrumental functions. They divert attention from
the real environmental risks and therefore reflect the interests of influential
political and economic actors. Plans may well be known as unrealistic but
may continue to be propagated and treated as if they were indeed feasible.
Again, there is no genuine creativity involved that seeks to overcome chal-
lenges and obstacles; rather, it is an act of political salesmanship or even
brinkmanship.
10
In German literature, the phenomenon of preventive ignorance has become known as ‘the
ride across Lake Constance’, after a famous nineteenth-century poem: on a clear and bitterly cold
winter’s night, a lonesome rider in search of a ferry to cross the lake mistakenly thinks that the
snowy expanse he crosses is the flat land leading to the shore, only to discover afterwards that he
actually crossed the frozen lake itself (Schwab 1828).
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Infrastructure and the Principle of the Hiding Hand
While we are rather willing and even eager and relieved to agree with a histor-
ian’s finding that we stumbled into the more shameful events of history, such as
war, we are correspondingly unwilling to concede—in fact we find it intolerable
to imagine—that our more lofty achievements, such as economic, social or
political progress, could have come about by stumbling rather than through
careful planning. . . . Language itself conspires toward this sort of asymmetry:
we fall into error, but do not usually speak of falling into truth.
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Helmut K. Anheier
State of knowledge
Ignorance Awareness
11
Latent functions are consequences that are neither recognised nor intended by participants in
a relevant context. In contrast, manifest functions are consequences that are explicitly stated,
expected, and understood by those involved (Merton 1968).
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Infrastructure and the Principle of the Hiding Hand
Types of Hands
12
The precautionary principle is a main policy approach of the European Union (Treaty on the
Functioning of the European Union, Article 191). Through preventive decision-making in the case
of risk, it aims to protect the environment as well as human and animal health. For example, the
principle can be invoked to withdraw products from the market if they might be hazardous, even
when a complete evaluation of the risk is impossible (<http://eur-lex.europa.eu/legal-content/EN/
TXT/?uri=celex%3A12012E%2FTXT>).
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Helmut K. Anheier
In each of these cases, there was considerable risk-taking and uncertainty that
required creative problem-solving. At the same time, the Hiding Hand can
result in adventurism: seemingly daring but ultimately dilettantish ways of
approaching uncertainty.
The Malevolent Hand allows actors to take advantage of information asym-
metries and other market and governance failures. It is essentially about
profiteering and various forms of corruption. However, under some circum-
stances and through successful gaming, the Malevolent Hand can help avoid
planning obstacles and system blockages generally. In situations of what
Crozier (1973) described as structures blocquées,13 Malevolent Hands game
the system not only for personal gain but to get things done somehow.
The Protecting Hand is the quintessential incarnation of the precautionary
principle when facing a combination of unknown risks and latent risk com-
munities. The rational calculation and management of risk is part of the
master narrative of modernity and at its best a corrective of its optimism
bias, in other words the underestimation of costs and overestimation of
benefits. At worst, the Protecting Hand can lead to overregulation and plan-
ning environments with high transaction costs and long gestation periods for
even the most routine of projects.
Finally, the Passive Hand can lead to what could be called the planification
syndrome—the notion that planning for more contingencies is the preferred
option even though many eventualities may either never materialise or may
do so only with the lowest of probabilities. Its inherent risk avoidance implies
slow and long drawn-out planning and implementation processes that may,
despite high costs, nonetheless lead to acceptable results. Its negative version,
‘catastrophising’ by assuming worst-case scenarios as the baseline, can result
in bureaucratisation at best. At worst, with an emphasis on wanting certainty
in controlling what may well be uncontrollable, the Passive Hand can trigger
tendencies towards a do nothing approach.
Indeed, the four hands suggest rather distinct planning and policy-making
cultures and even personality types. For the principle of the Hiding Hand to
work, entrepreneurs, planners, or policy-makers should have limited know-
ledge and underestimation of task complexity while letting themselves be
tricked in order for creativity to kick in and for innovations to unfold. It
requires a culture of accepting failure while rewarding trying as much as
success itself.14 The Malevolent Hand, by contrast, expects and rewards
13
Crozier describes 1960’s France as a ‘blocked society’. Overregulation and top-down
bureaucratic rules create a system prone to stalemate, ultimately causing distrust and a system
that can only change through crises rather than through some evolutionary development based on
compromise (Crozier 1973).
14
See <http://www.forbes.com/sites/darden/2012/06/20/creating-an-innovation-culture-accepting-
failure-is-necessary>.
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Infrastructure and the Principle of the Hiding Hand
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Helmut K. Anheier
and co-presence mean for potential outcomes? Can some stakeholders be held
captive by or lean towards different hands?
Despite its tongue-in-cheek quality, the Hiding Hand is not necessarily a
benign principle in which two necessary conditions coincide with a certain
organisational and administrative culture that values individual dispositions
towards taking initiative and risks, engaging in experimentation, and exploring.
The entrepreneurialism and creativity embodied in the Hiding Hand principle
has a downside: a tendency towards adventurism and risky behaviour. The
Hiding Hand may well lead to failure.
As we have seen, the principle is part of a family of hands, with three other
siblings. Yet how does this family fare over time? Compared to a half century
ago when Hirschman formulated the principle, large-scale infrastructure and
development projects have continued to be planned and built. They remain
numerous and also large in scale and scope. Experiences have been gained,
and infrastructure and development projects today are more and perhaps
better regulated than in the past,15 in part due to the impact of disasters and
failures of many kinds, to name just a few: Bhopal, Three Mile Island, and Love
Canal in the last decades of the twentieth century, the 2004 Indian Ocean
earthquake and resulting tsunami, Hurricane Katrina in 2005, the Fukushima
earthquake in Japan in 2011, the 2010 Deepwater Horizon oil spill, and the
2012 blackouts across northern and eastern India.
One could argue that consolidated, well-regulated fields are those in which
awareness easily trumps ignorance and in which there are lower probabilities
of unanticipated events and consequences that would require the underesti-
mation of complexity. Conventional air or road transport would be examples
of such consolidated, well-regulated fields, as would water and sewage systems.
By implication, other hands become more important: the Malevolent Hand
depending on the extent to which information asymmetries can be exploited;
the Protecting Hand relative to the institutionalised practice of the precau-
tionary principle; and the Passive Hand contingent upon the extent of
regulatory-administrative penetration of the field.
For newer or emerging fields such as ICT infrastructure, transport systems
for semi-autonomous cars, or climate change adaptation, the situation may
well be different. The balance between awareness and ignorance favours the
latter, and underestimation of complexity is more functional. In other words,
such fields may offer more room for the Hiding Hand to work. The same would
apply for fields that are undergoing major changes, for example health care or
even education infrastructure.
15
For example, Stern (2006) reports a significant growth in the number of infrastructure
regulators, with over 200 created between 1995 and the mid-2000s and covering major fields like
telecommunication, electricity, water, and transport.
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Infrastructure and the Principle of the Hiding Hand
On rationality
Infrastructure policies and planning embody a strong belief in rationality—of
the mastery of the world, to evoke a Weberian image, and in the sense that
some form of orderly change is possible if efforts are planned and executed
well enough to reach better outcomes. This belief or plan ideology contrasts
with the Burkean fear that society, with its overwhelmingly complex tapestry
of networks, institutions, and organisations and its deeply embedded values
and inert practices, lies beyond the grasp of policy-makers and planners
alike.16 Especially major, seemingly heroic efforts—be they large-scale devel-
opment plans or infrastructure projects and as well intentioned as they might
be—can have serious unanticipated consequences.
For both planners and policy-makers, action is better than no action, and
any plan—however insufficient for navigating the complex and messy pat-
terns of ever changing modern societies—is better than no plan at all. Policy-
makers, according to this logic, can identify and grasp concrete facets of social
causality, that is a theory of change, and can use them to achieve desired
outcomes. This seems to be the core premise of the rationalist approach to
infrastructure planning (see also the chapter by Wegrich and Hammerschmid
in this volume).
One lesson the Hiding Hand principle offers is that there is more to infra-
structure planning than a belief in rationality and the best laid plans that
come with it. Infrastructure planning can be a process involving trial and error
rather than putting in place known procedures. It is also more than the
intentional, systematic, and rational pursuit of a predetermined outcome,
and there may well be—under some limited sets of circumstances—other
ways to increase the chances of meeting significant challenges: through the
creative acts of inventing and reinventing the wheel as we are falling towards
success, as Hirschman might have put it.
Acknowledgements
The author would like to thank Charlotte Koyro for her assistance with research for this
chapter.
16
Edmund Burke (1729–1797) was an English political philosopher and statesman who is often
seen as laying the foundations of modern conservatism (Langford and Burke 1981–1991).
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Helmut K. Anheier
References
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Infrastructure and the Principle of the Hiding Hand
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