Government programs typically alter the incentives faced by private agents and create new incentives that would not exist without government. These then lead to unintended consequences, most of them negative. Many of these, moreover, could not have been forecast at the time the policy was enacted.
In 1914, when the U.S. prohibited drugs, no one could have known the AIDS virus would emerge some 65 years later. Yet it did, and because prohibition increases the incentive to inject drugs and fosters restrictions on the sale of clean needles, many drug users share syringes and thereby contribute to the spread of HIV.
When the Supreme Court handed down its Roe v. Wade decision, many anticipated an increase in abortion utilization. Few forecast, however, the use of stem cells to develop new medical therapies and that the abortion controversy would spill over to the funding of stem cell research.
When Congress created Social Security in 1935, life expectancy was roughly 65 and many suffered significant reductions in health and productivity well before this age. So, Social Security mainly provided income to those who could not support themselves. Now, however, more and more people live past 65 in reasonable health, and this has created the expectation that everyone deserves a comfortable retirement. By itself, this is not a problem, but most people also expect taxpayers to foot the bill.
These examples are perhaps extreme. But the tendency for intervention to change incentives is pervasive. Rent control lowers the return to building apartments and therefore reduces the supply of housing. The Endangered Species Act encourages pre-emptive destruction of habits that might contain endangered species. Anti-discrimination laws encourage firms to avoid hiring members of protected groups so they cannot be sued for firing them.
All this happens because interventions change incentives, sometimes in ways that are hard to forecast. The fact that the future is uncertain is not by itself reason for inaction. But when government introduces something new, it risks setting into motion these unintended consequences. Rational evaluation should thus recognize that the devil one knows might be better than the devil one has not yet met.
Unintended consequences is a problem but an unavoidable one. What happens in government is that when the opposite results occur it is very diffcult to reverse the legislation so as not to lose face. Usually the 'rememdy' is to make the rules even tighter which of course just exerbates the problem. Only after decades of decline and with a new sheriff in town can the legislation be purged. A great case in point was the GOP's change in welfare policies.
Posted by: Norman | July 12, 2006 at 12:18 PM
Just one question, and one comment.
The comment-excellent blog; I've been sending friends who don't understand the case for consequentialist libertarianism here for explanation-your capacity to do so cogently and succinctly is far greater than my own.
Question-where can I find Negative Consequences #1and #2 ? I've perused your archives in vain-well, maybe not in vain, since I found much more worth reading.
Thanks for this blog; I enjoy it greatly. It has become a regular read.
Posted by: Garry Stockton | July 18, 2006 at 09:47 AM
Garry, you can find them just here. They were posted in July. If you choose the archive of July, you'll find them just below this bost.
Posted by: Andrew | July 23, 2006 at 07:49 AM