Arnold Kling

Networks, Hierarchies, and History

Arnold Kling*

The first 'networked era' followed the introduction of the printing press to Europe in the late fifteenth century and lasted until the end of the eighteenth century. The second—our own time—dates from the 1970s, though I argue that the technological revolution we associate with Silicon Valley was more a consequence than a cause of a crisis of hierarchical institutions. The intervening period, from the late 1790s until the late 1960s, saw the opposite trend: hierarchical institutions re-established their control and successfully shut down or co-opted networks. The zenith of hierarchically organized power was in fact the mid-twentieth century—the era of totalitarian regimes and total war.

—Niall Ferguson, The Square and the Tower: Networks and Power, from the Freemasons to Facebook, page xxv

In The Square and the Tower, Niall Ferguson propounds some very big ideas about human history. As with many big thinkers, one can find major intellectual gaps in Ferguson's arguments. His intuitions may be correct, but the analysis that leads up to them is not always solid.

If one is going to argue for the importance of social networks in history and that one can interpret major historical episodes as conflicts between networks and hierarchies, then it would seem to be important to define what one means by the terms "network" and "hierarchy." Ferguson neglects to do so. Instead, he offers a few suggestive descriptions:

[we think about hierarchies] as vertically structured organizations characterized by centralized and top-down command, control, and communication. (page 21)

... far from being the opposite of a network, a hierarchy is just a special kind of network... There is only one path connecting any two nodes, which clarifies chains of command and communication. More importantly, the top node has the highest betweenness and closeness centrality—that is, the system is designed to maximize that node's ability both to access and to control information... think of a pure hierarchy as in some sense 'anti-random', in that the promiscuous connectivity associated with networks—above all, clustering—is prohibited. (pages 39-40)

Unlike in the past, there are now two kinds of people in the world: those who own and run networks, and those who merely use them. The commercial masters of cyberspace may still pay lip service to a flat world of netizens, but in practice companies such as Google are hierarchically organized, even if their 'org. charts' are quite different from that of General Motors in Alfred Sloan's day. (page 403)

Here is how I would approach the problem of distinguishing networks from hierarchies:

  1. 1. Consider groups of people who are related to one another in a particular realm. The realm could be intellectual, scientific, economic, or political.
  2. 2. Within a group, some relationships involve hierarchical positions. Someone in position X has the right to give instructions to someone in position Y, and someone in position Y has a duty to obey. The patterns of communication and decision-making within the hierarchy are stable and routine. There are clear rules that determine how one ends up in position X or position Y. One's position within a hierarchy is persistent and widely known. Positions have an existence that transcends the individual occupants. When a position is vacated, someone else is usually brought in as a replacement.
  3. 3. Within a group, some relationships involve peer interactions. Authority is informal, based on perceptions, rather than inherent to one's position. The nature of each interaction is idiosyncratic, depending on the individuals involved and the reason for the interaction. The nature of interactions can change from one interaction to the next. Peers do not occupy fixed positions relative to one another. If one person disappears, there is no process for finding an exact replacement.

As a shortcut, we may say that a group that operates primarily based on hierarchical positions is a hierarchy. And we may say that a group that operates primarily on the basis of peer interactions is a network.

Ferguson wishes to argue that hierarchies promote stability and order, at the expense of dynamism. Networks are flexible and dynamic, at the expense of order.

In this regard, he has company. For example, management consultant John P. Kotter has written:

... at both a philosophical and a practical level, the Hierarchy (with its management processes) opposes change. It strives to eliminate anomaly, standardize processes, solve short-term problems, and achieve stopwatch efficiency within its current mode of operating.

My idea of the Network is a system of teams with representatives from all divisions and all levels, who leave formal titles at the door to participate in a decidedly anti-hierarchical forum. As the environment changes in various ways, this system senses and responds to it, and in turn creates more and more teams with volunteers to address the discrete parts of a larger change. With this Network, potential opportunities and changes are identified, urgency around tomorrow's possibilities is fostered and maintained, strategies for organization-wide changes are formed, barriers are identified and addressed, and change is achieved.1

Ferguson sees a correlation between technology and the relative advantages of networks and hierarchies. For example,

The Iberian network of discoverers and conquerors was one of two networks that transformed the early modern world. In Central Europe, in the same period, a new technology [the printing press] helped to unleash the huge religious and political disruption we know as the Reformation, as well as to pave the way for the Scientific Revolution, the Enlightenment and much else (page 82)

... the new communication technologies created by the Industrial Revolution—the railway, the steamship, the telegraph and later the telephone, as well as national postal services and newspapers... lent themselves well to centralized control. (page 159)

"It is very difficult to show that a particular technology favors peer relationships over hierarchical relationships."

I think that this part of his argument is weak. While it is very plausible to argue that a new communication technology will have cultural effects, I think it is very difficult to show that a particular technology favors peer relationships over hierarchical relationships.

I think that many of us made this mistake when we projected the social consequences of the Internet. Because the Internet is obviously a peer-to-peer network, we assumed that it would break down hierarchies. But the social world is its own sphere, and it does not necessarily mirror the technical world. Groups that are peer-oriented can use the Internet, but so can hierarchies. Perhaps some of the social changes that have taken place in recent decades disrupt hierarchies, including changes that were facilitated by the Internet. However, it is a fallacy to insist that just because the Internet is peer-to-peer, human groups necessarily must array themselves in that fashion in order to be successful in the current technological setting.

Another of Ferguson's big ideas is that we can characterize historical eras as ones that were dominated by networks and ones that were dominated by hierarchies. The network-dominant eras display the advantages of networks, namely flexibility and receptiveness to innovation. The hierarchy-dominant eras display the advantages of hierarchies, namely order and stability.

This idea also struck me as weak. Ferguson uses the period 1500-1800 as an example of a network-dominant era. Indeed, this was an era of innovation and instability.

He then goes on to suggest that the period from 1800-1970 was an example of a hierarchy-dominant era. I would argue that contrary to what one might expect, this was also a period of innovation, and indeed the Industrial Revolution proceeded most rapidly during this era.

Moreover, I am not convinced that the political stability of the 19th century came from hierarchy. Ferguson describes the era as governed by the balance of power among Britain, France, Germany, Russia, and Austria-Hungary. Although other nations may have been below these in a hierarchy, these five empires were not themselves arrayed in a hierarchy. Moreover, Ferguson offers an intriguing chapter entitled "The House of Saxe-Coburg-Gotha," in which he lays out the close cross-national ties of the royal families of that period.

The restoration of order to Europe after Napoleon required more than just a new diplomatic hierarchy that ranked five states above all the rest, however. Of comparable importance was the way that the institution of monarchy itself was re-legitimized. In this process, an often overlooked role was played by an old-fashioned kind of network, namely the intertwined genealogies of European royalty. (page 134)

Moving forward to the twentieth century, Ferguson writes,

The mid-twentieth century was the zenith of hierarchy... Not only did the 1930s and 1940s witness the rise of the most centrally controlled states of all time (Stalin's Soviet Union, Hitler's Third Reich and Mao Zedong's People's Republic); in response to the Depression and the approach of another global conflict, the major democratic states also grew more centralized in their administrative structures. (page 254)

This period includes the Second World War as well as the mass murders committed by the Nazis, the Soviets, and the Chinese Communists. What are we to make of the supposed correlation between order and hierarchy if this was "the zenith of hierarchy"?

The last of Ferguson's big ideas is that contemporary technology has created a network-dominant era, and this could prove to be highly unstable.

The key question is how far this network of economic complexity now poses a threat to the hierarchical world order of nation-states... can a networked world have order? As we have seen, some say that it can. In the light of historical experience, I very much doubt it. (page 395)


For more on these topics, see The Insiders versus the Outsiders, by Arnold Kling. Library of Economics and Liberty, July 4, 2016. See also Industrial Revolution and the Standard of Living, by Clark Nardinelli. Concise Encyclopedia of Economics.

This intuition may prove to be correct. It is an intuition shared by others, including Martin Gurri, but I do not think Gurri or others would be persuaded that it as a historical necessity.

The Square and the Tower includes many interesting historical examples of the influence of peer-oriented groups. Nevertheless, in my view, Ferguson's attempts at generalizations about the relationship among technology, peer-oriented groups, and hierarchies were not often convincing. Perhaps the intuitions to which these generalizations led him will turn out to be correct. Time will tell.


John P. Kotter: "Hierarchy and Network: Two Structures, One Organization". Harvard Business Review, May 23, 2011.

*Arnold Kling has a Ph.D. in economics from the Massachusetts Institute of Technology. He is the author of several books, including Crisis of Abundance: Rethinking How We Pay for Health Care; Invisible Wealth: The Hidden Story of How Markets Work; Unchecked and Unbalanced: How the Discrepancy Between Knowledge and Power Caused the Financial Crisis and Threatens Democracy; and Specialization and Trade: A Re-introduction to Economics. He contributed to EconLog from January 2003 through August 2012.

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