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## Abstract
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This paper examines how two ostensibly beneficent institutional systems—healthcare and family law—can become
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structurally misaligned with the interests of their intended beneficiaries. Through a game-theoretic lens, we analyze
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how rational actors within these systems create equilibria that maximize institutional utility while often minimizing
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outcomes for the vulnerable populations they purport to serve. We argue that both systems exhibit similar patterns of
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incentive misalignment, information asymmetries, and capture by professional interests that transform life's most
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vulnerable moments into profit-maximizing enterprises.
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This paper presents a game-theoretic analysis of institutional failure across five critical domains: healthcare, family
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law, higher education, criminal justice, and enterprise IT infrastructure. We demonstrate how systems designed to serve
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vulnerable populations or improve organizational efficiency systematically evolve to maximize professional employment
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and revenue extraction rather than their stated objectives. Through computational experiments and empirical analysis, we
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identify common patterns of perverse incentives, information asymmetries, and professional capture that transform
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essential services into mechanisms of exploitation. Our findings reveal that these pathologies stem from a deeper
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structural issue: scarcity-based economic systems that require individuals to justify their survival through
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increasingly elaborate professional interventions. We further analyze how artificial intelligence adoption represents a
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critical inflection point, where the tension between technological efficiency and employment preservation creates
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unstable equilibria that will likely collapse rapidly, potentially enabling a transition to post-scarcity institutional
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designs that could finally align system incentives with human flourishing.
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## Introduction
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Modern societies create institutional frameworks to manage critical human experiences—death, family dissolution,
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education, crime. These systems emerge with stated goals of protection, healing, justice, and advancement. Yet empirical
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observation suggests that institutional evolution often diverges from founding principles, creating what we term "
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malevolent equilibria": stable configurations where rational self-interest by system participants systematically
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produces outcomes contrary to stated institutional purposes.
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However, this analysis must acknowledge that not all institutions follow this trajectory. Some healthcare systems,
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particularly in Nordic countries, have successfully maintained patient-centered end-of-life care. Some jurisdictions
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have implemented effective restorative justice programs. These counter-examples suggest that institutional capture is
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not inevitable but rather the product of specific structural conditions we seek to identify.
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These systems share a troubling characteristic: they exploit fundamental human vulnerabilities by targeting moments when
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individuals have no choice but to engage with them. You cannot opt out of dying, avoid family court when your spouse
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files for divorce, circumvent credential requirements for employment, or escape the criminal justice system once
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ensnared. This captive audience creates ideal conditions for what we term "compassionate exploitation"—the extraction of
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resources under the moral authority of helping.
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This paper examines four paradigmatic cases: end-of-life medical care, family law proceedings, higher education
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financing, and criminal justice systems. All involve vulnerable populations, complex professional intermediaries, and
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institutional structures that claim beneficent intent while often delivering prolonged suffering and dependency.
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Modern institutions tasked with managing society's most critical functions—healthcare, justice, education, family
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welfare, and technological infrastructure—exhibit a disturbing pattern: they systematically produce outcomes
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antithetical to their stated purposes. This paper employs game theory and computational modeling to analyze how rational
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actors operating within these systems create stable equilibria that maximize institutional benefit while minimizing
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welfare for intended beneficiaries.
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The phenomenon we examine transcends simple corruption or incompetence. Instead, we identify a systematic transformation
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whereby institutions originally designed to address human needs evolve into self-perpetuating employment systems that
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require the continuation of the very problems they purport to solve. A hospital system ostensibly dedicated to healing
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develops economic incentives to prolong suffering. A justice system intended to rehabilitate creates dependencies on
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recidivism. Educational institutions meant to disseminate knowledge construct elaborate barriers to learning. IT
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departments tasked with simplifying operations systematically complexify them.
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This institutional capture operates through three primary mechanisms. First, professional intermediaries position
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themselves as essential gatekeepers between institutions and their beneficiaries, creating information asymmetries that
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prevent direct assessment of value. Second, these professionals develop complex procedural requirements that justify
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their continued involvement while obscuring simpler solutions. Third, the moral authority inherent in "helping"
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professions shields these practices from scrutiny—questioning a hospital's treatment protocols appears to challenge
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medicine itself, not merely its economic incentives.
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Our analysis reveals that these patterns emerge not from individual malice but from structural features of
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scarcity-based economic systems. When professionals must justify their economic existence through billable activities,
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the incentive to solve problems permanently conflicts with the need for continued employment. This creates what we
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term "malevolent equilibria"—stable states where rational self-interest by system participants produces systematically
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harmful outcomes for those they serve.
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The timing of this analysis is critical. Artificial intelligence capabilities now threaten to expose and potentially
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eliminate these inefficiencies, creating a high-stakes game between technological progress and employment preservation.
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Our computational experiments demonstrate that current AI deployment patterns reflect not technical limitations but
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strategic choices to preserve professional employment. However, we show this equilibrium is inherently unstable and
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likely to collapse rapidly once competitive pressures reach a critical threshold.
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Through detailed case studies, computational simulations, and empirical validation, we demonstrate that institutional
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misalignment is not an inevitable feature of complex societies but rather a specific pathology of scarcity-based
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economics. By understanding these dynamics through a game-theoretic lens, we can begin to envision and design
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institutions that serve their stated purposes rather than perpetuating the problems they claim to solve.
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## Theoretical Framework
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```
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This specification provides a comprehensive framework for implementing the computational experiments described in the paper while maintaining flexibility for extension and modification as research progresses.
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This specification provides a comprehensive framework for implementing the computational experiments described in the paper while maintaining flexibility for extension and modification as research progresses.
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