I’ve been thinking a bit more about the analogy of regulation as throwing small pebbles into a stream, and if you throw too many pebbles in, the stream can be dammed up.
Maybe this is related to the idea of congestion pricing in transportation. Each additional vehicle imposes a negative externality on other vehicles using the same road, so many transportation economists have supported the idea of using variable tolls or congestion pricing to give drivers the correct incentives.
In the same way, maybe we can give regulators better incentives by adjusting cost-benefit analyses for the negative externalities of regulation. The question then is the size of the negative externality factor.
Traffic engineers tend to study congestion using turbulence models. These models can give a variety of different behaviors, include sharp shifts in phase where traffic suddenly shifts from free-flowing to congested to stopped. I do wonder whether there is an analogy for regulation…hmmm.