The inevitable double bind

Here are three recent COVID-19 news stories:

The first two stories are about large organizations (the FDA, large banks) moving too slowly in order to comply with regulations. The third story is about the risks of the FDA moving too quickly.

Whenever an agent is under pressure to simultaneously act quickly and carefully, they are faced with a double-bind. If they proceed quickly and something goes wrong, they will be faulted for not being careful enough. If they proceed carefully and something goes wrong, they will be faulted for not moving quickly enough.

In hindsight, it’s easy to identify who wasn’t quick enough and who wasn’t careful enough. But if you want to understand how agents make these decisions, you need to understand the multiple pressures that agents experience, because they are trading these off. You also need to understand what information they had available at the time, as well as their previous experiences. I thought this observation of the behavior of the banks was particularly insightful.

But it does tell a more general story about the big banks, that they have invested so much in at least the formalities of compliance that they have become worse than small banks at making loans to new customers.

Matt Levine

Reactions to previous incidents have unintended consequences to the future. The conclusion to draw here isn’t that “the banks are now overregulated”. Rather, it’s that double binds are unavoidable: we can’t eliminate them by adding or removing regulations. There’s no perfect knob setting where they don’t happen anymore.

Once we accept that double binds are inevitable, we can shift of our focus away from just adjusting the knob and towards work that will prepare agents to make more effective decisions when they inevitably encounter the next double bind.

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