Building a P&L for regulation

The IRS has roughly 60,000 fax machines, and nobody can get rid of them. Not because there’s a law that says you have to use them (there almost certainly isn’t), but because likely decades ago a memo got written, somebody interpreted fax machines as the most secure transmission method, and that memo calcified into what Jennifer Pahlka calls "folk law," a perceived rule that nobody can locate, nobody can challenge, and everybody treats as immutable.

Folk law looms large in the American government right now. Cascades of rigidity built from outdated interpretations of rules that were flexible to begin with, administered by people who were never asked whether any of it was working. Jennifer Pahlka, who wrote Recoding America: Why Government Is Failing in the Digital Age and How We Can Do Better, is the founder and former executive director of Code for America, and was Deputy CTO for Government Innovation in the Obama White House.

She’s working on the gap between what government is supposed to do and what it actually does. In this conversation, Robb, Josh, and Jennifer go deep on what’s actually broken and what it would take to fix it.

The folk law problem is real, but it's not the deepest one. The deeper dysfunction: government is structurally designed to be faithful to process rather than outcomes. Oversight bodies don't ask whether people got the benefit. They ask whether you followed the procedure. That incentive structure produces "rationing by friction" — where the hardest programs to navigate self-select for the people who need help least and exclude the people with the most chaotic lives, the fewest resources, and the most at stake.

Her Recoding America team is already working with states to build something Robb describes as a P&L for regulation. Not just removing rules, but assigning friction costs, finding where wet signatures are still required for no reason, and surfacing the trade-offs that have never been explicitly named. LLMs are uniquely good at this. The question isn't whether the technology can help. It's whether the political will to use it correctly can be assembled in time.

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