Circuit Breakers

By: Luca Dellanna

Date: April 21, 2020

In: Personal Blog

Key Subjects

  • Regulations tend to be optimized for everyday life.
    • Not for emergency situations (such as the current pandemic).
  • Need for circuit breakers.
    • Alternative regulations that kick-in fast during an emergency.
  • Fast, low-cost adaptation.
    • Immediate interruption of normal procedures.
    • Achieve maximum results when the costs for doing so are still low.
    • Normal regulations may get you to the same place, but much slower (too slow).
    • Similar to natural reflexes (when you touch something hot, hand “automatically” retracts).
  • Based on leading indicators.
    • Lagging indicators obviously result in circuit breakers being triggered much later.
  • Clear and objective conditions.
    • Execute the circuit breaker only when warranted.
    • Easier to accept be costs of activating the circuit breaker in case of a false positive.
    • Provide protection as needed, without the risk of any bureaucratic delay.
  • Preserve accountability.
    • Allow for fast, not reckless action.
    • Relax regulations only when the cost of not doing so is high.
  • Necessary and likely to have some false positives.
    • High trigger sensitivity to avoid false negatives automatically leads to some false positives occurring (see “Testing – Sensitivity and Specificity“.
    • Only works when the cost of a false negative is (much) higher than the cost of a false positive.
      • Tail risks: when consequences are large enough to justify apparent “over-reactions” to false positives.
    • If not the case, circuit breakers will be quickly opposed.
  • Avoids permanent over-extension of the state.
    • Circuit breaking measures are not permanently in place.
    • Also avoids unnecessary side effects.
      • More permanent relief bills likely stuffed with unwanted provisions.
  • Effective government tool in situations of weak leadership and/or slow bureaucracy.
    • Introduce circuit breaking regulations “when the scars” are fresh.
    • Otherwise, will never happen.

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