Epistemic Debt: The Economics Of Unwarranted Institutional Reliance

Institutions act now and explain themselves later. A decision may stand for years before a regulator, court, auditor, insurer or affected person asks what justified it.

This paper calls the resulting problem Epistemic Debt: the obligation created when an institution completes consequential reliance and sufficient warrant had not been established and evidenced when it acted.

The distinction runs both ways. Later correctness does not prove the institution was entitled to rely. A thin record today does not prove the obligation formed. Where the evidence cannot establish either position, the paper treats the historical warrant as unresolved.

Whether the obligation formed is fixed when the institution acts. What happens afterwards depends on Servicing Capacity - whether it can still identify the event, access and evaluate the evidence, reconstruct what happened and act on what it finds. Records disappear, providers change and colleagues leave. Reconstruction, defence and remediation can become expensive long after the operational benefit was received.

Where an institution cannot satisfy a material justification demand within the evidential, procedural and temporal conditions imposed by a specified forum, the paper calls the condition Proof Insolvency.

At that point the problem is no longer that an institution may have been wrong. It is that the capacity to know, prove and repair why consequence was permitted has begun to fail.