This is a question I have been wandering lately, as I'm spending time on fulfilling idiotic forms and complying with complex, impossible regulations. Modern economy's "complexity and lack of transparency mean that information is highly asymmetrical, giving producers an edge over consumers, managers an edge over capital owners and employees and both producers and managers an edge over public authorities. Even if information is available in principle, it may come at high cost and individuals, struggling with the high degree of complexity, may instead tend to opt for emotional judgment and herding behavior.
"An economist’s standard solution for such inefficiencies is to look for appropriate government regulations. But the more complex a phenomenon is, the more complex the regulatory system has to be that is supposed to solve it. Usually, any rules, laws and contracts leave scope for circumventing or undermining them and excluding such imperfections may be burdensome." Kling through Al Fin.
The why, then, is lack of mutual confidence in a diverse society. Imagine the lack of confidence in Israel, where 20% of the population is Palestinian, an ethnic group in permanent war with the State.