REGULATORY HYSTERESIS, EXTENDED PHENOTYPE, AND THE LEX ARTIS OF INSTITUTIONAL DESIGN: How Synthetic Agent Simulations Transform State Liability for Defective Normative Production

This paper develops a unified theory of regulatory hysteresis, state liability for defective normative production, and the legal standard of care applicable to legislative activity. Three theoretical traditions are integrated: quality management (Deming 1982; Shewhart 1931), which establishes that defects must be prevented in the production process rather than detected after the fact; hysteresis theory (Blanchard and Summers 1986; Palley 2017), which formalizes the irreversibility of institutional deformation; and Extended Phenotype Theory (EPT, Lerer 2025a), which explains how legal memes construct institutional machinery that persists after the originating norm is repealed. The paper introduces the Regulatory Hysteresis Index (RHI), proposes a graduated strict liability framework based on multilevel intentionality analysis (Dennett 1987), and develops a central argument that has not previously appeared in the literature: the publication of Shapira et al. (2026, arXiv:2602.20021) establishes a scientific inflection point after which the omission of pre-legislative evolutionary simulation constitutes negligence in the normative production process. Just as the diffusion of ecography, radiology, and pre-surgical laboratory testing generated a new standard of medical care, the demonstrated availability of synthetic agent laboratories for institutional dynamics testing generates a new standard of legislative care. Legislators and regulators who approve high-impact norms (RHI > 0.50) after February 2026 without documented evolutionary simulation analysis cannot invoke ignorance of available diagnostic tools. The paper derives seven falsifiable predictions, proposes a fourth RHI dimension incorporating destroyed option value, and develops an extension of the Francovich doctrine applicable to domestic hysteretic damage.