Complex Rules Are Hard

Tyler Cowen over at Marginal Revolution discusses some possible perverse incentives in the Affordable Care Act, and commenter Eliot Clingman (same link) says,

If the article is accurate ( a big if) then the ACA was very badly drafted, due to either corruption, stupidity or both.

But he’s wrong.  It isn’t “very badly drafted,” and the people who drafted it are not stupid.  The thing is, making rules is hard.  Making rules in the face of hundreds of millions of people with an incentive to find loopholes in the rules is extremely hard, probably impossible to get right without lots of iteration.  The more complex the rules, the harder they are to build without exploitable loopholes.

I have, over the years, played a lot of roleplaying, computer, card, and war games, which, for the uninitiated, typically have more complex rules than a classic boardgame, and which have constituencies of players on the internet who try to figure out loopholes in them.  What we see, over and over again, is that every game ever made features broken mechanics — loopholes that players can exploit to do things undreamed of by the designers of the game.

Some rule systems are worse at this and some are better, but beyond a very simple threshold level, everything is broken in some way.  The only means of keeping the loopholes at bay is to put a human agent in the mix who can make judgment calls that override the rules — and when you do that, then interpersonal relationships start getting complicated very quickly.

I think that some people imagine that you can solve the loophole problem with complexity: that if you’re willing to write a few hundred (or a few thousand) pages of rules, you can cover every eventuality and pin things down.  The truth is the exact reverse.  The more complex the rules, the greater the number of interactions between various areas of the rules, which means a geometrically increasing number of things that the users of the rules can do that the designers didn’t imagine.  The longer and more complex the rules are, the more exploitable they are.

And all of these games, complex as they are, are vastly less complicated than a big bill like the ACA, and unimaginably vastly less complicated than, say, “a whole branch of the US legal code.”  And the populations dedicated to finding loopholes in them are orders of magnitudes smaller than the populations dedicated to finding the loopholes in US laws.  And the incentives to find a loophole in a game are much, much, much smaller than the incentives to find loopholes in US regulations (which may result in millions of dollars of gains).

Put that all together, and what you actually find is that the US government does an amazingly good job of keeping the number of exploits in their laws reasonable.  (Largely by injecting human judgment into the rules and changing them when exploits are found).  But, understand, on some level it’s an impossible task.  They’re fighting against the basic nature of ultra-complex systems.  There will always be major, ridiculous, unjust loopholes in US laws, certainly including the ACA.

It seems like a lot of people find it convenient to imagine that’s not true.  I invite them to try their hands at building a ruleset.

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2 thoughts on “Complex Rules Are Hard

  1. Pingback: Seeking Profit in Student Loans | Sandor at the Zoo

  2. Pingback: What Are Markets? | Sandor at the Zoo

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