Reproducing the behavior

This excerpt:

def main():
  with IO:
    x <- wrap(1)
    return wrap(wrap(2))

Should be desugaring to

(main) = (IO/bind (IO/wrap 1) λa (a λ* (IO/wrap (IO/wrap 2))))

Instead it desugars into

(main) = (IO/bind (IO/wrap 1) λa (a λb let {c d} = b; λ* (c (d 2)) IO/wrap))

wrap is seen as a free variable, so it gets applied in a deferred way as well as duplicated if it's used more than once.

We need to first substitute the wrap and only then desugar the bind.

System Settings

Bend commit 270f39c

Additional context

No response