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Notes -
I'll agree about it apparently being a scissor statement, given the responses so far, but...
This is not at all obviously true. This is the crux of the entire conversation.
I guess it really is a scissor statement, because to me, the use of the statement, as rhetoric, seems extremely obviously, and Scott entirely whiffs it. And I don't think it's about giving in to cynicism. It's about naming that different groups of people having different amounts of power in systems, as well as different values and worldviews, that this shapes their rhetoric in complicated ways, and participants in some of those groups can be protected from the rhetoric of other, more powerful groups if they can be taught to think about what systems are actually doing, rather than living in other people's rhetoric about what those systems are supposed to be doing.
Say that my wife and I participate in telling our kids about Santa and giving them gifts from Santa, and it's a happy ritual, connecting their experience to our our own experiences from our childhood. We have a lot of power in the relationship compared to our kids, we can get away with bending the truth if we think there's some cultural good to it all, and if they asked about whether Santa was real when they're small, we would probably fudge the truth about it to keep the happy ritual going, and we could get away with it. But there's absolutely no need for cynicism here - it's much more complicated than saying we were lying to them, because we would be inclined to think that "is Santa real" isn't even asking the right questions about that tradition, we would likely recognize that a 5 year old isn't even really in the right position to understand why we participate in the rituals we do, and we would expect that later, when they're older, they'll understand what we were doing and probably keep the tradition going.
A radical child activist (?) who came along and looked at this system might try to shake my kids out of their Santa belief, if that activist thought the entire enterprise was bad for my kids and needed to be radically overthrown, by adopting a "the purpose of a system is what it does" stance. Because that paragraph that I just wrote, which is something like a functional / sociological description of the Santa ritual, is a really strong inoculation against literally believing in Santa; the sociological explanation of why we do the Santa ritual sounds pretty compelling, and it makes belief in literal Santa much more difficult, or least plausibly it does (except we're talking about 5 year olds here, so my just so story is hitting its limits).
Now, this example is a toy one and likely (to most readers) pretty benign. But arguably, this sort of situation comes up constantly in society between different groups of people with different amounts of power and different beliefs about the broader good in the world and how to achieve those goods. I mean, it's no hard to change my Santa story just a bit, swapping parents with intellectuals, kids with normal people, and Santa with socialism, and you've described much of the 20th century. It's the core idea of Plato's noble lie, too. Or of Steve Jobs standing around on a stage, making all sorts of charismatic proclamations that somehow become true enough by people believing them and changing their expectations and how they act when it came to adopting new technology that went on to impact the social world. It's why faith is stressed in certain major religious traditions, too. The cultural scripts that people load up in their heads change how they experience the world and how they behave, and clean mapping to empirical reality is not the main driver here.
"The purpose of a system is what it does" is in the same skeptical tradition as open source programmers saying "I don't need to see your advertising or design doc - please show me the running code instead". Or the tradition of Marx saying he's a materialist and has no use for idealism or ideology. Or sociology tabling the truth claims of religion and instead theorizing about how different religions function in the world (and thus wrecking their foundations in the process). It's economists examining how people actually behave, in aggregate, in the face of incentives, ignoring questions of how they ought to behave. It's the tradition of C.S. Lewis's Bulverism, ignoring someone's argument and psychoanalyzing what forces caused them to make that argument instead. (And I'm not saying any of these are good or bad, for that matter).
To me, that's the obvious rhetorical use of POSIWID, especially on the dissident right. It's primary use is to shake certain people free from inhabiting the rhetorical frames of other powerful, status quo groups of people.
This. Only modelling the world on realized, actual outputs leads to very sub-optimal models.
You observe A asking B out for a date and getting rejected. You conclude that A likes to get rejected.
You observe C playing the lottery, and losing. You conclude that C just has a strict preference for having less money.
You observe D playing a round of Russian roulette, and surviving. You conclude that D is showing no signs of self-harming behavior since the outcome was harmless.
It is generally better to model agents (humans, armies, chess programs, dogs, ASIs, ...) as have their own world view and a utility function, and ascribe intent to their actions. If your system is larger, than game theory and Moloch enter the picture. And outcomes remain highly relevant, of course.
You want to be able to say "this non-effective charity is trying to do X, but only accomplishing that k times per 1M$ of donations, while that charity is accomplishing X n times per 1M$ of donations, so we should raise the question if there is some incongruity between their stated mission and their actual behavior, or if they operate under additional constraints". Perhaps after further investigation you will conclude that the charity is actually just a business selling the warm fuzzy feeling of doing good to their donors, and their agents are either cynical or in denial about that.
Or take my alchemist searching for the philosopher's stone while inhaling a lot of mercury vapor. You want to point at the fact that he is not succeeding in finding the stone. It could be that he is really into inhaling mercury, or that searching for the stone is just a high status occupation, but it is also possible that he is genuinely trying to find it as hard as he can, and simply operates under a different world model.
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