Legislative divergence base rate: ~11% of laws land far from their forecast

One-line summary: Brian Potter scored 239 federal laws and found ~89% land roughly where expected — but ~11% diverge substantially, and the divergences are asymmetric: a throwaway provision becomes NEPA or the 401(k), while a headline reform (credit-rating agencies) does nothing at all. The discipline this imposes on policy-driven theses is a base rate, not a bias.

The insight

Policy-driven chains in this project usually reason forward from a law's stated purpose to its market effect. brian-potter's scoring exercise supplies the base rate that reasoning needs, and it cuts against the instinct in both directions.

The distribution is mostly boring. 95 of 239 laws (40%) scored −1 to +1 — they did what was expected. Only ~11% scored ±5 or more. "Most federal laws, it seems, do more or less what they're expected to do." Anyone whose policy thesis depends on a law having a surprising second-order effect is betting on a ~1-in-9 tail.

But the tail is fat on the upside and it is where the alpha lives. The distribution has a positive skew, and the two canonical cases are directly load-bearing for this project's book:

• NEPA — the environmental-impact-statement provision was added last minute, "was not covered in any major media publication", and in Congress received "neither debate, nor opposition, nor affirmative endorsement." It became the primary tool for stalling infrastructure and seeded CEQA and imitators worldwide. This is the permitting friction that now gates datacenter, grid, and fab construction — i.e. a forcing function under ferc-large-load-to-dc-gridscale-construction and aging-grid-replacement-to-td-capex-supercycle originated in a provision nobody read.
• The 401(k) — "originally considered an insignificant provision of the 1978 Revenue Act," scored as having "a 'negligible effect upon budget receipts'." It is now the fifth-biggest individual tax break and the primary US retirement vehicle — the statutory origin of exactly the defined-contribution flow trump-accounts-to-sp500-structural-inflows and passive-flows-db-to-dc trade. Potter quotes Daniel Halperin, then a senior Treasury official: "There was absolutely no discussion in '78 that if you do this, the world is going to change."
• TFTEA (2015), scored +7 — sold as customs modernization; one provision raised the de minimis exemption from $200 to $800 and "is credited as a driver of the explosion of Chinese imports from companies like Shein/Temu over the next several years, until it was reversed by the second Trump administration."

The converse is the falsifier, and Potter states it himself. Creating a legal capability does not mean anyone uses it. The 2006 Credit Rating Agency Reform Act "did nothing to disrupt the market share of the existing agency oligopoly" — S&P, Moody's and Fitch still hold 95%. So the base rate is asymmetric surprise, not reliable amplification: a small provision is a wide distribution, not a call option. That is the sentence that should discipline any "this obscure clause will be huge" thesis in this vault.

The mechanism of divergence is Potter's most transferable contribution: laws are like technologies. A law creates a capability; once the capability exists, actors use it in ways the authors never modelled. Divergence comes from (a) legal operators — courts interpreting broadly (NEPA's "detailed statement"), prosecutors using laws for unexpected ends (the DNA Fingerprinting Act → ICE), agencies declining to use them at all (zero prosecutions under the 2012 STOCK Act), or future Congresses expanding/gutting them; and (b) the world responding unexpectedly (FedEx and air-cargo deregulation; Shein and de minimis).

Two structural patterns worth carrying: larger laws (more pages) skew more positive — plausibly a bundling effect, since bundling many draws from a positively-skewed distribution raises the chance one lands big. And bills that create substantially new programs have much higher variance than appropriations bills, even at the same mean.

Evidence

• The headline result — From 2026-07-16-feed-construction-physics-how-predictable-are-laws: "Overall, I found that federal laws mostly do what they're expected to do. But a substantial fraction of them — around 11% — diverge significantly, having either much smaller or much larger effects than originally predicted." Distribution: 95/239 (40%) scored −1 to +1; 49 (20%) scored −2 to −4; 68 (28%) scored +2 to +4; ~11% scored ±5 or more.
• NEPA — From the same source, quoting Potter and Alec Stapp: "[The provision] was not covered in any major media publication. In Congress, it received 'neither debate, nor opposition, nor affirmative endorsement.'" And: "Not until several months after NEPA was passed did environmental groups realize what a potent weapon they'd been handed."
• The 401(k) — From the same source, quoting Bloomberg: "The initial provision was estimated to have a 'negligible effect upon budget receipts.' Now, defined contribution plans are the fifth-biggest tax break for individuals, with an estimated revenue loss to the government of $61.4 billion in fiscal 2014." And Halperin: "There was absolutely no discussion in '78 that if you do this, the world is going to change."
• The falsifier (capabilities go unused) — From the same source: "Changing the rules for designating a 'nationally recognized' credit rating agency, as the 2006 Credit Rating Agency Reform Act did, did nothing to disrupt the market share of the existing agency oligopoly." Also the 2012 STOCK Act: "As of 2025, there have been zero prosecutions under this law despite suggestive evidence that congressional insider trading does occur."
• Laws that under-delivered — Alaska Natural Gas Transportation Act 1976 (−7): the pipeline "was never completed." California housing laws: "limited to no impact on the state's housing supply" per YIMBY Law, "a surprising source: A new report by YIMBY Law, a pro-development nonprofit that would very much like to see these laws work."
• The framing — From the same source: "A law will create or modify some capability... aimed at accomplishing some particular thing. But once that capability is out there in the world, people might take advantage of it in different ways, finding uses for it that the creators of that capability never expected."
• Structural patterns — From the same source: "If we graph a law's divergence score against the number of pages in the law, we see a small positive correlation." And: "Appropriations bills... have a lower variance than bills that create substantially new programs. Both types of bills have the same average divergence score, but the probability of a large or small divergence is much greater with the latter."

Implications

• Discipline on this project's policy chains. Every mechanism whose forcing function is a statute — trump-accounts-to-sp500-structural-inflows, us-industrial-policy-tariff-shield, cbam-to-fertilizer-price-deferral, german-drug-pricing-to-section-301-retaliation, public-rd-to-state-capacity-erosion — is implicitly a draw from this distribution. The base rate says: expect the law to do roughly what it says (~89%), and treat "this obscure provision will be enormous" as the ~11% tail claim it is.
• The 401(k) precedent cuts for trump-accounts-to-sp500-structural-inflows in kind but not in confidence. It is the single best historical analogue — a small, unremarked retirement-savings provision that became a structural equity-flow engine — and it is exactly why the Trump-accounts chain is plausible. But Potter's own point is that the 401(k) is a tail draw, and tail draws are not forecastable ex ante. The analogue justifies watching, not sizing.
• The PBM read-across. 2026-07-17-autoresearch-pbm-pass-through-preemption-profit-pool-migration found PBMs building GPOs explicitly because "there is no parallel effort to alter GPO safe harbor rules." That is Potter's mechanism running in reverse and deliberately — regulated parties routing around a statute's capability into an unregulated adjacent one. Divergence is not always accidental; sometimes it is engineered. See pbm-profit-pool-migration.
• Sarbanes-Oxley (+5) is the cautionary case for compliance-cost theses: the oversight goal was achieved, but "compliance costs were 30 to 50 times higher than expected."

Contradictions / tensions

• ⚠ The methodology is AI-scored and the author says so. Potter had Claude Opus 4.8 estimate expected effect, actual effect, and a divergence score for each law. He is explicit about the limits: "I expect there to be errors in various evaluations, and I would regard these results as preliminary." He also flags that the scoring rubric produced an artifact — a dip at ±1 — "another reason why we should treat these results with a grain of salt."
• Judging "expected effect" is irreducibly fraught, and Potter concedes it: distinguishing aspirational statutory goals from real ones "requires a process of guessing and using context clues that is likely to be error-prone" (his Indoor Radon Abatement Act example).
• Attribution across successor laws is a judgment call — much of a law's effect often arrives via later laws that build on it (his Psychotropic Substances Act → civil asset forfeiture example, scored +4 rather than higher because "the later bill did most of the work").
• Survivorship in the examples. The memorable cases (NEPA, 401(k), TFTEA) are selected because they diverged. The 11% figure is the disciplined number; the anecdotes are not evidence of frequency.
• This is one analyst's preliminary blog analysis, not peer-reviewed work. Treat the ~11% as an order-of-magnitude prior, not a calibrated probability.

Open questions

• Does the ~11% divergence rate hold for the specific subclass this project cares about — laws that re-price an industry — or is it diluted by post-office renamings and appropriations?
• Potter published the full prompt and evaluations. Is the underlying dataset queryable for the regulatory categories in this book (energy, healthcare, semis, trade)?

Related

• trump-accounts-to-sp500-structural-inflows — the 401(k) is its closest historical analogue, and its best cautionary tale
• passive-flows-db-to-dc
• pbm-profit-pool-migration — divergence engineered on purpose (the GPO safe-harbour route)
• us-industrial-policy-tariff-shield
• public-rd-to-state-capacity-erosion
• ferc-large-load-to-dc-gridscale-construction — gated by NEPA, the canonical accidental provision
• brian-potter