# Regulatory failure

`kaal:entity:regulatory-failure`

**Status.** derived

This node is assembled mechanically from the 37 claims that carry the concept tag `regulatory-failure`. It is a roster of what the corpus says under this term. It is **not** an adjudicated definition: no single statement here has been ruled canonical, and no first-appearance call has been made. Read the claims and judge for yourself.

## Every claim under this term

37 claims across 5 works, 2013 to 2016.

**2013**

- [2273857-011](https://wulfkaal.github.io/claims/2273857-011) [failure/argued] *(failure mode)* -- Rules established in reaction to financial crises inevitably fail to soften, curtail, or preempt the effects of financial crises, because reactive rules are tailored to the economic and regulatory issues existing at the time of enactment and ignore possible future contingencies.
  > Rules established in reaction to financial crises also inevitably fail to soften, curtail, or preempt the effects of financial crises because reactive rules are mostly tailored to the economic and regulatory issues at the time of their enactment and often ignore possible future contingencies.
  Wulf A. Kaal, Dynamic Regulation of the Financial Services Industry (2013). SSRN: https://ssrn.com/abstract=2273857
- [2273857-016](https://wulfkaal.github.io/claims/2273857-016) [failure/argued] *(failure mode)* -- The aftermath of a financial crisis creates shock conditions that constitute a suboptimal environment for rulemaking.
  > The aftermath of financial crises creates suboptimal conditions (shock conditions) for rulemaking.
  Wulf A. Kaal, Dynamic Regulation of the Financial Services Industry (2013). SSRN: https://ssrn.com/abstract=2273857
- [2273857-026](https://wulfkaal.github.io/claims/2273857-026) [failure/argued] *(failure mode)* -- The cyclical nature of public rulemaking under incomplete information and bounded rationality is costly and produces suboptimal regulatory outcomes with long-term implications for financial markets and the economy.
  > The cyclical nature of public rulemaking under conditions of incomplete information and bounded rationality is costly and can produce suboptimal regulatory outcomes, often with long-term implications for financial markets and the economy.
  Wulf A. Kaal, Dynamic Regulation of the Financial Services Industry (2013). SSRN: https://ssrn.com/abstract=2273857
- [2273857-027](https://wulfkaal.github.io/claims/2273857-027) [failure/argued] *(failure mode)* -- Regulatory cycles make it nearly impossible to address financial regulatory concerns adequately, and systemic risk in particular is difficult to address if rules are enacted in a cyclical and reactive format.
  > Regulatory cycles also make it nearly impossible to adequately address financial regulatory concerns. Systemic risk is particularly difficult to address if rules are enacted in a cyclical and reactive format.
  Wulf A. Kaal, Dynamic Regulation of the Financial Services Industry (2013). SSRN: https://ssrn.com/abstract=2273857
- [2273857-039](https://wulfkaal.github.io/claims/2273857-039) [failure/argued] *(failure mode)* -- In the current regulatory environment the relationship between the regulatory sine curve and the common elements of banking and financial crises is suboptimal, because regulatory activity only begins its ascent once bank failures are already increasing.
  > In the current regulatory environment a suboptimal relationship exists between the regulatory sine curve and the common elements of banking and financial crises.
  Wulf A. Kaal, Dynamic Regulation of the Financial Services Industry (2013). SSRN: https://ssrn.com/abstract=2273857
- [2273857-053](https://wulfkaal.github.io/claims/2273857-053) [failure/argued] *(failure mode)* -- The core problem for financial regulation is timing: governance improvements are not enacted before crises when they are most needed, because the collective action problem makes financial regulation mostly reactive and tied to business cycles.
  > A core problem for financial regulation is its timing. Governance improvements are not enacted when they are most needed - before crises. Rather, because of the collective action problem, financial regulation is mostly reactive, following business cycles.
  Wulf A. Kaal, Dynamic Regulation of the Financial Services Industry (2013). SSRN: https://ssrn.com/abstract=2273857
- [2273857-054](https://wulfkaal.github.io/claims/2273857-054) [failure/asserted] *(failure mode)* -- Financial rulemaking often relies on centralized rather than decentralized information, which is a further defect of the existing framework.
  > Financial rulemaking also often utilizes centralized rather than decentralized information.
  Wulf A. Kaal, Dynamic Regulation of the Financial Services Industry (2013). SSRN: https://ssrn.com/abstract=2273857
- [2273857-060](https://wulfkaal.github.io/claims/2273857-060) [failure/argued] *(failure mode)* -- Contingent capital triggers have significant design limitations: accounting based triggers may not respond adequately in financial crises because they are updated too infrequently, while market based triggers are susceptible to market manipulation and bank runs.
  > accounting-based measures in institution-specific automatic triggers may not be able to respond adequately in financial crises because they are arguably too infrequently updated. Market-based measures, on the other hand, could be susceptible to market manipulation and banking runs.
  Wulf A. Kaal, Dynamic Regulation of the Financial Services Industry (2013). SSRN: https://ssrn.com/abstract=2273857
- [2273857-061](https://wulfkaal.github.io/claims/2273857-061) [failure/argued] *(failure mode)* -- Prosecutors negotiating deferred prosecution agreements may lack the expertise needed to negotiate high level corporate governance changes such as personnel changes and internal corporate and compliance procedures.
  > While prosecutors may not have the necessary expertise to negotiate high level corporate governance changes, such as personnel changes and internal corporate and compliance procedures
  Wulf A. Kaal, Dynamic Regulation of the Financial Services Industry (2013). SSRN: https://ssrn.com/abstract=2273857
- [kaal-2013-acomparativeperspectiveo-026](https://wulfkaal.github.io/claims/kaal-2013-acomparativeperspectiveo-026) [failure/argued] *(failure mode)* -- Governance adjustments made through stable rules in reaction to a systemic shock can result in suboptimal governance outcomes, market volatility, and economic loss.
  > Governance adjustments via stable rules in reaction to a systemic shock can result in suboptimal governance outcomes, market volatility, and economic loss.
  Kaal, A Comparative Perspective on the Limitations of the Duty of Oversight – A Comment on Lisa Fairfax (2013)

**2016**

- [2739479-002](https://wulfkaal.github.io/claims/2739479-002) [failure/evidenced] *(failure mode)* -- The SEC's 2004 attempt to require hedge fund adviser registration failed: after the D.C. Circuit vacated the rule in Goldstein v. SEC, the overwhelming majority of private fund advisers that had registered under the 2004 requirements deregistered.
  > High- lighting the significant opposition of the private fund industry to the rule, the over- whelming majority of private fund advisers that had registered under the SEC's 2004 registration requirements deregistered after Goldstein.
  Wulf A. Kaal, The Post Dodd-Frank Act Evolution of the Private Fund Industry Comparative Evidence from 2012 and 2 (2016). SSRN: https://ssrn.com/abstract=2739479
- [2740477-001](https://wulfkaal.github.io/claims/2740477-001) [failure/argued] *(failure mode)* -- Ex post trial and error rulemaking built on stable and presumptively optimal rules produces suboptimal regulatory outcomes that are no longer sustainable once disruptive innovation grows exponentially.
  > The ex-post trial-and-error-rulemaking with stable and presumptively optimal rules7 in the existing regulatory framework8 often produces suboptimal regulatory outcomes that are no longer sustainable in an environment of exponential disruptive innovation.
  Wulf A. Kaal, Erik P.M. Vermeulen, Venture Capital as Dynamic Regulation of Disruptive Innovation (2016). SSRN: https://ssrn.com/abstract=2740477
- [2740477-002](https://wulfkaal.github.io/claims/2740477-002) [failure/argued] *(failure mode)* -- Under exponential disruptive innovation the information rulemakers need arrives too late for trial and error rulemaking to be effective, regulatory issues grow more complex, and unknown future contingencies in the rulemaking process increase substantially.
  > relevant information for rulemaking is less likely to materialize soon enough for traditional trial-and-error rulemaking to be effective, regulatory issues become increasingly complex, and unknown future contingencies increase substantially in the rulemaking process.
  Wulf A. Kaal, Erik P.M. Vermeulen, Venture Capital as Dynamic Regulation of Disruptive Innovation (2016). SSRN: https://ssrn.com/abstract=2740477
- [2740477-003](https://wulfkaal.github.io/claims/2740477-003) [failure/asserted] *(failure mode)* -- Exponential disruptive innovation has the potential to overwhelm the existing regulatory process outright, not merely to strain it.
  > In short, exponential disruptive innovation has the potential to overwhelm the existing regulatory process.
  Wulf A. Kaal, Erik P.M. Vermeulen, Venture Capital as Dynamic Regulation of Disruptive Innovation (2016). SSRN: https://ssrn.com/abstract=2740477
- [2740477-012](https://wulfkaal.github.io/claims/2740477-012) [failure/argued] *(failure mode)* -- Rulemakers' inability to address the regulatory issues raised by disruptive innovation will generate high levels of legal uncertainty and inconsistency, and that uncertainty inhibits innovation during technological transition periods.
  > Rulemakers' inability to address regulatory issues associated with disruptive innovation will likely generate high levels of legal uncertainty and inconsistency82 that inhibit innovation during technological transition periods
  Wulf A. Kaal, Erik P.M. Vermeulen, Venture Capital as Dynamic Regulation of Disruptive Innovation (2016). SSRN: https://ssrn.com/abstract=2740477
- [2740477-013](https://wulfkaal.github.io/claims/2740477-013) [predictive/argued] *(failure mode)* -- Technological transition will be a permanent state in the age of disruptive innovation, so the uncertainty and inconsistency caused by rulemakers' inability to react in time is a standing condition rather than a transitional cost.
  > technological transition is likely going to be a permanent state in the age of disruptive innovation, which exacerbates the uncertainty and inconsistency created by rulemakers' inability to react timely and adequately to disruptive innovation.
  Wulf A. Kaal, Erik P.M. Vermeulen, Venture Capital as Dynamic Regulation of Disruptive Innovation (2016). SSRN: https://ssrn.com/abstract=2740477
- [2740477-014](https://wulfkaal.github.io/claims/2740477-014) [failure/argued] *(failure mode)* -- The current regulatory framework contains no mechanism that succinctly and anticipatorily informs rulemakers of beneficial innovative ideas, which is the specific informational gap the article proposes to fill.
  > The current regulatory framework lacks a mechanism that succinctly and anticipatorily informs rulemakers of beneficial innovative ideas.
  Wulf A. Kaal, Erik P.M. Vermeulen, Venture Capital as Dynamic Regulation of Disruptive Innovation (2016). SSRN: https://ssrn.com/abstract=2740477
- [2740477-015](https://wulfkaal.github.io/claims/2740477-015) [failure/argued] *(failure mode)* -- The existing rulemaking process prohibits ex parte communications and insufficiently integrates brainstorming and ideas across industries, and therefore may actually undermine innovation rather than merely lag behind it.
  > the existing rulemaking process prohibits ex parte communications and insufficiently integrates brainstorming and ideas across industries, and therefore may actually undermine innovation.
  Wulf A. Kaal, Erik P.M. Vermeulen, Venture Capital as Dynamic Regulation of Disruptive Innovation (2016). SSRN: https://ssrn.com/abstract=2740477
- [2740477-016](https://wulfkaal.github.io/claims/2740477-016) [condition/argued] *(failure mode)* -- Ex post trial and error rulemaking requires as a precondition that information about optimized rule requirements becomes available, and in an age of exponential innovation that information may never materialize or may arrive too late for the method to work.
  > A prerequisite for ex-post trial-and- error rulemaking is thus the availability of the information on optimized rule requirements. In an age of exponential innovation, that information may not materialize at all or may not materialize in time for the trial-and-error rulemaking to be effective.
  Wulf A. Kaal, Erik P.M. Vermeulen, Venture Capital as Dynamic Regulation of Disruptive Innovation (2016). SSRN: https://ssrn.com/abstract=2740477
- [2740477-022](https://wulfkaal.github.io/claims/2740477-022) [failure/argued] *(failure mode)* -- Because it lacks anticipatory rulemaking capability, the existing regulatory system addresses issues only ex post, and only once they have materialized and burdened core constituents enough to generate political pressure on lawmakers.
  > Because it lacks anticipatory rulemaking capabilities, the existing regulatory system addresses regulatory issues only ex-post, if and when they materialize and if core constituents are sufficiently burdened to precipitate enough political pressure for lawmakers to act.
  Wulf A. Kaal, Erik P.M. Vermeulen, Venture Capital as Dynamic Regulation of Disruptive Innovation (2016). SSRN: https://ssrn.com/abstract=2740477
- [2740477-023](https://wulfkaal.github.io/claims/2740477-023) [failure/evidenced] *(failure mode)* -- Evidence shows that the suboptimal ex post timing of rulemaking regularly forces expedited rulemaking, and expedited rulemaking itself produces suboptimal regulatory outcomes.
  > Evidence exists that the suboptimal ex- post timing of rulemaking in the existing regulatory infrastructure regularly requires expedited rulemaking that results in suboptimal regulatory outcomes.
  Wulf A. Kaal, Erik P.M. Vermeulen, Venture Capital as Dynamic Regulation of Disruptive Innovation (2016). SSRN: https://ssrn.com/abstract=2740477
- [2740477-025](https://wulfkaal.github.io/claims/2740477-025) [failure/argued] *(failure mode)* -- The current process of rule revisions, amendments, and repeals used to fix the inevitable shortcomings of stable rules is costly, time consuming, and in the authors' estimation cannot keep track of future innovations and the regulatory needs they create.
  > The current process of rule revisions, amendments, and repeals to address inevitable shortcomings of stable rules is costly, time-consuming, and cannot in our estimation keep track of future innovations and corresponding regulatory needs.
  Wulf A. Kaal, Erik P.M. Vermeulen, Venture Capital as Dynamic Regulation of Disruptive Innovation (2016). SSRN: https://ssrn.com/abstract=2740477
- [2740477-032](https://wulfkaal.github.io/claims/2740477-032) [failure/argued] *(failure mode)* -- The existing framework for optimal rules is self reinforcing: it perpetuates rulemaking processes that produce more optimal rules requiring costly revision, updating, and revocation, so suboptimal rules and suboptimal processes reproduce each other.
  > The existing regulatory framework for optimal rules reinforces rulemaking processes that perpetuate optimal rules, necessitating costly rule revision, updating, and revocation.
  Wulf A. Kaal, Erik P.M. Vermeulen, Venture Capital as Dynamic Regulation of Disruptive Innovation (2016). SSRN: https://ssrn.com/abstract=2740477
- [2740477-039](https://wulfkaal.github.io/claims/2740477-039) [failure/asserted] *(failure mode)* -- Venture capital has outrun regulation and regulation is now too slow to react, and that lag itself damages the process.
  > VC has outrun regulation and regulation is too slow to react, hurting the process.
  Wulf A. Kaal, Erik P.M. Vermeulen, Venture Capital as Dynamic Regulation of Disruptive Innovation (2016). SSRN: https://ssrn.com/abstract=2740477
- [2808132-002](https://wulfkaal.github.io/claims/2808132-002) [failure/argued] *(failure mode)* -- Ex post facts-based, trial-and-error rulemaking combined with stable and presumptively optimal rules often produces suboptimal regulatory outcomes, and those outcomes are no longer sustainable in an environment of exponential disruptive innovation.
  > of these. The ex-post facts-based and trial-and-error-rulemaking with stable and presumptively optimal rules7 in the existing regulatory framework8 often produces suboptimal regulatory outcomes that are no longer sustainable in an environment of
  Wulf A. Kaal, Erik P.M. Vermeulen, How to Regulate Disruptive Innovation - From Facts to Data (2016). SSRN: https://ssrn.com/abstract=2808132
- [2808132-003](https://wulfkaal.github.io/claims/2808132-003) [failure/argued] *(failure mode)* -- In an environment of exponential disruptive innovation, the information rulemakers need is less likely to materialize soon enough for traditional rulemaking to be effective, regulatory issues become more complex, and unknown future contingencies increase substantially.
  > environment of exponential disruptive innovation, relevant information for rulemaking is less likely to materialize soon enough for traditional rulemaking to be effective, regulatory issues become increasingly complex, and unknown future contingencies
  Wulf A. Kaal, Erik P.M. Vermeulen, How to Regulate Disruptive Innovation - From Facts to Data (2016). SSRN: https://ssrn.com/abstract=2808132
- [2808132-004](https://wulfkaal.github.io/claims/2808132-004) [failure/argued] *(failure mode)* -- Exponential disruptive innovation has the potential to overwhelm the existing regulatory process entirely, not merely to strain it.
  > increase substantially in the rulemaking process.12 In short, exponential disruptive innovation has the potential to overwhelm the existing regulatory process.13
  Wulf A. Kaal, Erik P.M. Vermeulen, How to Regulate Disruptive Innovation - From Facts to Data (2016). SSRN: https://ssrn.com/abstract=2808132
- [2808132-013](https://wulfkaal.github.io/claims/2808132-013) [failure/asserted] *(failure mode)* -- The existing regulatory infrastructure cannot sufficiently distinguish beneficial innovation from harmful innovation and therefore cannot harness the beneficial kind.
  > The existing regulatory infrastructure cannot sufficiently distinguish and harness beneficial innovation. Rulemakers' inability to address regulatory issues associated with
  Wulf A. Kaal, Erik P.M. Vermeulen, How to Regulate Disruptive Innovation - From Facts to Data (2016). SSRN: https://ssrn.com/abstract=2808132
- [2808132-015](https://wulfkaal.github.io/claims/2808132-015) [failure/argued] *(failure mode)* -- The current regulatory framework lacks any mechanism that anticipatorily informs rulemakers of beneficial innovative ideas, and because the rulemaking process prohibits ex parte communications and integrates cross-industry brainstorming poorly, the process may actually undermine innovation.
  > informs rulemakers of beneficial innovative ideas. In fact, the existing rulemaking process prohibits ex parte communications and insufficiently integrates brainstorming and ideas across industries, and therefore may actually undermine innovation.
  Wulf A. Kaal, Erik P.M. Vermeulen, How to Regulate Disruptive Innovation - From Facts to Data (2016). SSRN: https://ssrn.com/abstract=2808132
- [2808132-017](https://wulfkaal.github.io/claims/2808132-017) [failure/argued] *(failure mode)* -- Because facts-based rulemaking does not anticipate the regulatory issues created by innovation, rulemakers may realize far too late, or never, what new regulatory demands a given innovation generates.
  > facts-based rulemaking did not anticipate regulatory issues created by innovation, rulemakers may not at all or much too late realize what new regulatory demands apply to a given innovation and associated regulatory issue.
  Wulf A. Kaal, Erik P.M. Vermeulen, How to Regulate Disruptive Innovation - From Facts to Data (2016). SSRN: https://ssrn.com/abstract=2808132
- [2808132-022](https://wulfkaal.github.io/claims/2808132-022) [failure/evidenced] *(failure mode)* -- Formal rulemaking is simply too time-consuming for an environment of disruptive innovation; the speed of product innovation alone makes formal rulemaking in the existing infrastructure unworkable.
  > speed of product innovation alone makes formal rulemaking in the existing regulatory infrastructure challenging. Formal rulemaking is simply too time-consuming.89 The speed of product innovation makes it possible to bring a new product to market while formal
  Wulf A. Kaal, Erik P.M. Vermeulen, How to Regulate Disruptive Innovation - From Facts to Data (2016). SSRN: https://ssrn.com/abstract=2808132
- [2808132-024](https://wulfkaal.github.io/claims/2808132-024) [mechanism/argued] *(failure mode)* -- Because it lacks anticipatory capabilities, the existing regulatory system only addresses regulatory issues ex post, and then only if core constituents are burdened enough to generate sufficient political pressure for lawmakers to act.
  > associated with disruptive innovation. Because it lacks anticipatory rulemaking capabilities, the existing regulatory system addresses regulatory issues only ex-post, if and when they materialize and if core constituents are sufficiently burdened to precipitate
  Wulf A. Kaal, Erik P.M. Vermeulen, How to Regulate Disruptive Innovation - From Facts to Data (2016). SSRN: https://ssrn.com/abstract=2808132
- [2808132-025](https://wulfkaal.github.io/claims/2808132-025) [empirical/evidenced] *(failure mode)* -- Evidence exists that the suboptimal ex post timing of rulemaking in the existing regulatory infrastructure regularly forces expedited rulemaking, which in turn produces suboptimal regulatory outcomes.
  > enough political pressure for lawmakers to act.91 Evidence exists that the suboptimal ex- post timing of rulemaking in the existing regulatory infrastructure regularly requires expedited rulemaking that results in suboptimal regulatory outcomes.92 Rulemakers often
  Wulf A. Kaal, Erik P.M. Vermeulen, How to Regulate Disruptive Innovation - From Facts to Data (2016). SSRN: https://ssrn.com/abstract=2808132
- [2808132-027](https://wulfkaal.github.io/claims/2808132-027) [failure/argued] *(failure mode)* -- The current process of rule revisions, amendments, and repeals used to correct the inevitable shortcomings of stable rules is costly and time-consuming, and in the authors' estimation it cannot keep track of future innovations and their corresponding regulatory needs.
  > important for rulemaking. The current process of rule revisions, amendments, and repeals to address inevitable shortcomings of stable rules is costly, time-consuming, and cannot, in our estimation, keep track of future innovations and corresponding regulatory needs.
  Wulf A. Kaal, Erik P.M. Vermeulen, How to Regulate Disruptive Innovation - From Facts to Data (2016). SSRN: https://ssrn.com/abstract=2808132
- [2808132-034](https://wulfkaal.github.io/claims/2808132-034) [mechanism/argued] *(failure mode)* -- A core problem for most regulation is its inaccurate and delayed timing, which follows from the collective action problem of regulation, path dependencies, and political inertia rather than from any single institutional defect.
  > Dynamic elements in rulemaking can help optimize the timing of rule enactment. A core problem for most regulation is its inaccurate and delayed timing. Because of the collective action problem of regulation, path dependencies, and political inertia, among
  Wulf A. Kaal, Erik P.M. Vermeulen, How to Regulate Disruptive Innovation - From Facts to Data (2016). SSRN: https://ssrn.com/abstract=2808132
- [2808132-045](https://wulfkaal.github.io/claims/2808132-045) [mechanism/argued] *(failure mode)* -- The decline in later stage robotics and drone investment rounds in the United States does not indicate stalled technological development; companies relocate later stage development to other countries because of the regulatory disconnect that exists in the United States.
  > indicates that the technological development in this area is stalling. However, a closer look at the industry shows that companies relocate the later stage development to other countries due to the regulatory disconnect that exists in the United States.
  Wulf A. Kaal, Erik P.M. Vermeulen, How to Regulate Disruptive Innovation - From Facts to Data (2016). SSRN: https://ssrn.com/abstract=2808132
- [2808132-051](https://wulfkaal.github.io/claims/2808132-051) [failure/argued] *(failure mode)* -- Existing regulatory processes are suboptimally equipped to address the challenges of exponential disruptive innovation, and the notice and comment procedures of the Administrative Procedure Act and the SEC illustrate the resulting suboptimal regulatory response rates.
  > This paper also shows that the existing regulatory processes are suboptimally equipped to address the challenges of exponential disruptive innovation. The notice and comment procedures of the APA131 and the SEC are only some of the examples illustrating the
  Wulf A. Kaal, Erik P.M. Vermeulen, How to Regulate Disruptive Innovation - From Facts to Data (2016). SSRN: https://ssrn.com/abstract=2808132

## Verify

Every claim above resolves to a record carrying a verbatim source quote, the sha256 of the source PDF, and a preformatted citation. Nothing here asks to be taken on trust.

    curl -s https://wulfkaal.github.io/entities/regulatory-failure.md | sha256sum

**Canonical form.** This markdown file is the canonical hashed representation of this entity node. Its sha256 is the content hash.