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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.

But then you wouldnt take on new procedural costs that exceed the benefit of getting marginally closer. Total procedural costs would be bounded by the difference in profit between sitting precisely short of the edge and the best spot thats distant enough to be safe on its own. Its weird that this would be so large.

Maybe this suggests replacing "sharp-edged" bans with "terraforming" taxes.

I think a lot of regulatory burden comes simply from the sheer number of requirements you need to consider. Theres a sort of phase transition where its not worth to consider any course of action besides those established as ok, because the legality is too complicated. Even requirements that are naturally tax-shaped often are done with a sharp cut-off to limit the number of people who have to think about it, and conversely, smoothing existing edges without loosening standards in some place means more people have to deal with it.

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

Why would they avoid diverting people? If anything, management likes to maximise their number of subordinates. Whatever the merits of the smooth regulations in general, I dont think you can correctly steer the state bureaucracy with them. Frankly, the expectation that a legislature can do that at all seems crazy to me.