In society, there are frequently large-scale events that come as a huge surprise to most. These events have a significant impact on society, and perhaps more importantly for our purpose, on the collective conscience of society. People are concerned, and demand immediate action. Legislators are too happy to oblige. In the words of Rahm Emanuel, a “crisis is a terrible thing to waste.”

After this big event, inevitably, the state, ripe with an incurable fatal conceit, rationalizes the event, and contends they know why it happened as if it could have been prevented. Based on this, hasty legislation that has not been duly considered is rushed through the legislatures and promptly signed into law. These events are known as black swans. In this post, we assess the government’s response to these black swans.

In the Black Swan (no, not the Natalie Portman movie), theorist Nassim Taleb develops black swan theory. Wikipedia has a fairly concise summary:

The event is a surprise (to the observer) and has a major impact. After the fact, the event is rationalized by hindsight.

The theory was developed by Nassim Nicholas Taleb to explain:

1. The disproportionate role of high-impact, hard to predict, and rare events that are beyond the realm of normal expectations in history, science, finance and technology
2. The non-computability of the probability of the consequential rare events using scientific methods (owing to the very nature of small probabilities)
3. The psychological biases that make people individually and collectively blind to uncertainty and unaware of the massive role of the rare event in historical affairs

Unlike the earlier philosophical “black swan problem“, the “Black Swan Theory” (capitalized) refers only to unexpected events of large magnitude and consequence and their dominant role in history. Such events, considered extreme outliers, collectively play vastly larger roles than regular occurrences

A few examples of governmental responses to black swans: the Patriot Act passed after 9/11, Sarbanes-Oxley passed after the Enron scandal, Dodd-Frank passed after the recent fiscal collapse, FDR’s first 100 day’s following the Depression, and others.

These laws have several problems. First, laws rushed through the legislative process usually don’t work like they’re supposed to. Look at all the problems from the Patriot Act, SOX, and anticipated problems for Dodd-Frank. Second, they create many unintended consequences, again due to the lack of consideration. Consider the recent debit card interchange controversies with Dodd-Frank. Frédéric Bastiat’s “What is Seen and What is Not Seen” and Amity Shales’ “The Forgotten Man” are quite relevant.

Third, they will not prevent the next emergency. The very nature of black swans make them unpredictable, even to the most brilliant bureaucrats. Attempts to rationalize the previous disaster suffer from Hayek’s fatal conceit. Attempts to prevent the next disaster based on the last disaster are doomed to fail. Think about it. After 9/11 box cutters were banned. The next terrorist tried a shoe bomb. So now we take off our shoes. The next threat feared liquids, so now TSA bans liquids. What’s next? Additionally, we see that once the black swan happened, society latches onto the explanations of “experts” who try to figure out what happened. This ex post exploration may or may not be accurate, provides no information about future black swans of the same type (for example, the Savings and Loan scandal is dissimilar from the related Subprime Crisis). This is not a governmental failure, but a human failure. No restructuring or turnover in the state can avoid this problem.

Fourth, and most normatively, these laws tend to restrict different forms of liberty with minimal concerns, as the crisis just must be addressed ASAP.

A few reflections on this topic.

Let’s impose Legislative Waiting Periods. Before legislatures can pass laws, a legislative cooling off period should be in order. If people need cooling off periods before buying a gun and doing something stupid with it, legislatures should need a cooling off period before hastily ramming through a law. Any bill introduced in either house cannot be voted on for X months. If it’s that important, it can wait. If there is some type of exigency, emergency legislation can be passed right away, but it is only effective for Y days, and must be renewed by a supermajority every Z days (kind of like the War Powers Act). Frankly laws of this magnitude often take months, and even years to be implemented. There are countless rulemakings that need to occur. In some cases, waivers are given to delay any inconveniences for years. Waiting a few months before passing the bill won’t change anything. I’m sure with more deliberation time, the law can only be improved. Congress would be well served to move with all deliberate speed. (Yes we recognize the constitutional infirmities of this approach, but we’re just theorizing here.)

This cooling off period was intended to be the role of the Senate, the “saucer” of the Congress. I suppose this may be an argument that cuts against eliminating the filibuster from a policy perspective.

Movements to force Congress to “read the bill” are short-sighted. The problem is not reading the bill. The problem is what’s in the bill! With more time to work on the substance, hopefully we’ll get a better result.

It would be interesting to track for these Black Swan bills the number of days from the introduction to tis passage, or perhaps the number of days from the inspiring event (9/11, Enron Collapse, etc.) to the date of its passage time. Compare that with the average time it takes to enact a bill.

Also, all bills should be assigned a number, and cannot be named after some victim or problem. I have addressed this before as the Ted Frank rule.

The other day I noted that Ted Frank has a good rule for interpreting a bill based on its title: ““My rule of thumb is a strong presumption that any law named after a victim is poor public policy enacted by legislators who confuse voting against a law with voting against an innocent person.” I think this holds nicely.

Legislators should not be able to leach off of the emotional heartstrings of bills to push through legislation.

We will develop this in future works.

Co-authored with Corey Carpenter.