4bpp
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4mo ago·Edited 4mo ago
What this seems to suggest is that bureaucratic hurdles are also downstream from the threat of legal costs, much like the explosion of US medical expenses (mediated by insurance and certification costs). Could one put a lid on "dentist caused cosmetic damage, courts awarded more in damages than the patient will earn in a lifetime" scenarios that the US is famous for? Should one, given the tension with the other apparent failure mode being like "courts fine megacorp the statutory maximum of $1m for illegal practice that earns them >$1m per interval between successful court cases in profit"?
How do you reconcile the goal of having credible threats with which to make institutions follow the law with the goal of not incentivising institutions to realign themselves around the goal of mitigating that threat? It seems that the fundamental problem is that regulation rarely changes the topography of the incentive landscape per se - it just places spike pits into certain attractive valleys in it, making the incentive-followers strive to get as close as possible to the edge of the legal sanctions pit while not crossing the line. To make sure they actually don't cross it, they introduce ever more procedural requirements - the more you have, the closer to the pit you can venture while still feeling safe. The optimal institution is just barely on the safe and legal side, and has a mile-long paper trail to prove it.
Maybe this suggests replacing "sharp-edged" bans with "terraforming" taxes. Only, how do you sell that to the voting masses? In the FDA example, this would have to look something like "instead of making the FDA/its employees subject to legal penalty if they pass some threshold of neglect in approving a drug that passes some threshold of side effects, tie their funding/salary to the volume of side effects", and, yes, accepting that some whistleblower will report a decision was made that looks like "yes, we figured some patients would get birth defects, but in expectation the funding cuts looked better than the amount of people we would need to divert to shepherd additional tests".
The regulation itself is the terraforming, not the snake pit. The snake pit is the "entist caused cosmetic damage, courts awarded more in damages than the patient will earn in a lifetime" scenario that you mention, and being in compliance with the applicable regulations is a guardrail against falling in. Take a basic traffic accident. If you're being sued for causing an accident, the fact that you were traveling within the posted speed limit and observed all applicable traffic laws makes it harder for the plaintiff to prove negligence than if none of these traffic regulations existed and drivers were asked to exercise their best judgment. If a road has a posted speed limit of 40 and you were traveling at 37 at the time of the accident, it's a tough sell to a jury that you're responsible because you were going too fast (the exception being if there were some condition, like weather, that made traveling that speed unreasonable). Contrast that with a world in which there are no speed limits. Was 37 too fast for that road? They can probably produce a witness who will say it was, and you'll have to produce a witness to say it wasn't, and now there's a 50/50 chance that the jury agrees with the plaintiff.
Now compare this to heavily-regulated industries. The snake pit is there. But any guard rails the company puts up are weak and self-serving. If a company tries to argue that it did x, y, and z to protect the public, the plaintiff's expert is going to unequivocally state that x, y, and z are not enough and that the policy was only put in place to create the appearance of mitigating the risk while placing the lowest possible financial burden on the company. A company can argue about how great its internal procedures and industry best practices are until it's blue in the face, but it doesn't carry the same kind of weight with a jury as being in compliance with regulations created by a neutral government body. Knowing that no matter how much they spend or how seriously they take their internal precautions it won't matter to a jury, there's a strong disincentive for making these procedures any more burdensome than the plaintiff's bar is claiming they are. It's better to just spend as little money as possible and hope you get sued. This is mitigated somewhat by the requirements of insurance companies, but insurance companies can't flat-out prevent suits the way governments can.
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Notes -
What this seems to suggest is that bureaucratic hurdles are also downstream from the threat of legal costs, much like the explosion of US medical expenses (mediated by insurance and certification costs). Could one put a lid on "dentist caused cosmetic damage, courts awarded more in damages than the patient will earn in a lifetime" scenarios that the US is famous for? Should one, given the tension with the other apparent failure mode being like "courts fine megacorp the statutory maximum of $1m for illegal practice that earns them >$1m per interval between successful court cases in profit"?
How do you reconcile the goal of having credible threats with which to make institutions follow the law with the goal of not incentivising institutions to realign themselves around the goal of mitigating that threat? It seems that the fundamental problem is that regulation rarely changes the topography of the incentive landscape per se - it just places spike pits into certain attractive valleys in it, making the incentive-followers strive to get as close as possible to the edge of the legal sanctions pit while not crossing the line. To make sure they actually don't cross it, they introduce ever more procedural requirements - the more you have, the closer to the pit you can venture while still feeling safe. The optimal institution is just barely on the safe and legal side, and has a mile-long paper trail to prove it.
Maybe this suggests replacing "sharp-edged" bans with "terraforming" taxes. Only, how do you sell that to the voting masses? In the FDA example, this would have to look something like "instead of making the FDA/its employees subject to legal penalty if they pass some threshold of neglect in approving a drug that passes some threshold of side effects, tie their funding/salary to the volume of side effects", and, yes, accepting that some whistleblower will report a decision was made that looks like "yes, we figured some patients would get birth defects, but in expectation the funding cuts looked better than the amount of people we would need to divert to shepherd additional tests".
The regulation itself is the terraforming, not the snake pit. The snake pit is the "entist caused cosmetic damage, courts awarded more in damages than the patient will earn in a lifetime" scenario that you mention, and being in compliance with the applicable regulations is a guardrail against falling in. Take a basic traffic accident. If you're being sued for causing an accident, the fact that you were traveling within the posted speed limit and observed all applicable traffic laws makes it harder for the plaintiff to prove negligence than if none of these traffic regulations existed and drivers were asked to exercise their best judgment. If a road has a posted speed limit of 40 and you were traveling at 37 at the time of the accident, it's a tough sell to a jury that you're responsible because you were going too fast (the exception being if there were some condition, like weather, that made traveling that speed unreasonable). Contrast that with a world in which there are no speed limits. Was 37 too fast for that road? They can probably produce a witness who will say it was, and you'll have to produce a witness to say it wasn't, and now there's a 50/50 chance that the jury agrees with the plaintiff.
Now compare this to heavily-regulated industries. The snake pit is there. But any guard rails the company puts up are weak and self-serving. If a company tries to argue that it did x, y, and z to protect the public, the plaintiff's expert is going to unequivocally state that x, y, and z are not enough and that the policy was only put in place to create the appearance of mitigating the risk while placing the lowest possible financial burden on the company. A company can argue about how great its internal procedures and industry best practices are until it's blue in the face, but it doesn't carry the same kind of weight with a jury as being in compliance with regulations created by a neutral government body. Knowing that no matter how much they spend or how seriously they take their internal precautions it won't matter to a jury, there's a strong disincentive for making these procedures any more burdensome than the plaintiff's bar is claiming they are. It's better to just spend as little money as possible and hope you get sued. This is mitigated somewhat by the requirements of insurance companies, but insurance companies can't flat-out prevent suits the way governments can.
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