In a rules-based system, lawmakers and regulators try to prescribe in great detail exactly what companies must and must not do to meet their obligations to shareholders and clients. In principles-based systems, which are more common in the U.K. and elsewhere in Europe, regulators worry less about dotted “iâ€s and crossed “tâ€s, and instead evaluate companies’ behavior according to broad principles; the U.K.’s Financial Services Authority has eleven such principles, which are often deliberately vague (“A firm must observe proper standards of market conductâ€). This approach gives companies more leeway in dealing with investors and customers—not every company needs to follow the same rules on, say, financial reporting—but it also gives regulators more leeway in judging whether a company is really acting in the best interests of shareholders and consumers.â€
Surowiecki draws the analogy between these two systems as “something like the difference between football and soccer. Football, like most American sports, is heavily rule-bound. There’s an elaborate rulebook that sharply limits what players can and can’t do (down to where they have to stand on the field), and its dictates are followed with great care. Soccer is a more principles-based game. There are fewer rules, and the referee is given far more authority than officials in most American sports to interpret them and to shape game play and outcomes. For instance, a soccer referee keeps the game time, and at game’s end has the discretion to add as many or as few minutes of extra time as he deems necessary. There’s also less obsession with precision—players making a free kick or throw-in don’t have to pinpoint exactly where it should be taken from. As long as it’s in the general vicinity of the right spot, it’s O.K.â€
George Lakoff describes similar disparate ways of viewing the world as “frameworks†in his book, Don't Think of an Elephant: Know Your Values and Frame the Debate. In politics, Lakoff identifies two distinct cognitive framing devices at play, that of the “strict father model†and the “nurturant parent modelâ€. You can guess which approach belongs to which party. That diametric framework also applies to the modal shift Surowiecki was discussing, as well as to many other more mundane experiences of everyday life.
I was reminded of frameworks and rules vs. principles a week ago when I was pulled over while commuting to work on my bicycle. Unable to give a definitive reason why I “broke the law†and rolled through an empty intersection marked with a stop sign, I was reminded again of the difference between the two philosophies. Cyclists largely operate by principles, but those principles are sometimes not in accordance with the rules that both drivers and cyclists are directed to observe. For example, as a long-standing cyclist I “know†that stopping at every stop sign is the correct and law-abiding way of doing things, but I also know that when I come to a complete stop next to a car, I've sacrificed the only two defensive tools I have: speed and agility. When that car moves into my lane, or turns in front of me, I have no recourse. Without movement, cyclists are pedestrians standing in the street. To a cyclist, rules are important, but not the only concern.
The difficulty inherent in frameworks is that they’re often tackling the same end goals but using completely different methodologies and language to achieve them. I realized quickly that the police officer and I had largely the same overall goals in mind (I, trying to avoid injury, he not wanting me or anyone else hurt on his watch), but we had very different ways of achieving those goals. It was immediately apparent that we weren’t going to convince each other that either approach was better, or even successfully communicate the reasons for our respective approaches. We were left with the implementation of rules in the face of principles.
