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founding

Re: "Large groups, above the Dunbar number, come to rely on formal rules."

Formal rules become necessary, but are not sufficient. Informal rules (norms), too, emerge within formal organizations and govern many behaviors. For example, formal rules specify the role of the DEI officer in hiring, but informal norms implicitly govern what counts as "diversity" and "equity." Indeed, perhaps for legal reasons, the formal rules and written policies are abstract.

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What incentives do " governments (have to) redesign the formal rules for international money transfers to make the process less cumbersome?". To make the system more efficient means fewer high paying bureaucratic jobs and fat retirements and high fee's.

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I feel we are repeating old ground so I won't repeat what I ready wrote but two things come to mind based on you last comment:

1 Government institutions have no motives, people within them do. There are no doubt tendencies, but not everyone has the same ones. While the hazards you describe are all present, government within US still does a lot of things fairly well, many being things markets would struggle to accomplish.

2 local governments aren't really as you say. If the local government does poorly in the eyes of the voters and residents, they are far more likely to vote out the leaders or walk out and leave the community entirely. It gets hard for a government to extract from a population that leaves.

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Another aspect is that rules reduce complexity, but sometimes you cannot substitute complexity by simplicity. Aparts it can be important to change rules especially in dynamic complex orders.

Finally, experts often fail establishing rules due to pretence of knowledge.

One solution might be competition. Another: wait and see, formerly known as laissez-faire.

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So much of acceptable behavior is driven by social conventions, some of which still haven't been established for social media. Charles Lindbergh was once hit by a car driven by a random stranger who did it just so he could tell his friends "you'll never believe what happened to me!" because at the time, "celebrity" was such an abstract notion that it didn't seem real. A similar convention will eventually emerge about social media -- trolling will seem as bad online as it is in real life.

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founding

See also Michael Polanyi's fine book Personal Knowledge on the distinction between the tacit and the explicit. https://press.uchicago.edu/ucp/books/book/chicago/P/bo19722848.html

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