Alex Tabarrok linked to a great article in the NYT by the authors of Freakonomics on “unintended consequences.”
Unintended consequences arise, says Tabarrok, “when a simple system tries to regulate a complex system.”
Perhaps the most common examples of unintended consequences involve the state regulating society:
The political system is simple; it operates with limited information (rational ignorance), short time horizons, low feedback, and poor and misaligned incentives. Society in contrast is a complex, evolving, high-feedback, incentive-driven system. When a simple system tries to regulate a complex system you often get unintended consequences.Dubner and Levitt examine the unintended consequences of the American with Disabilies Act (ADA), Jewish laws regarding debt relief, and the Endangered Species Act (ESA). The first and third of these are the most interesting.
Researchers found that “when the A.D.A. was enacted in 1992, it led to a sharp drop in the employment of disabled workers.”
Why?
Employers, concerned that they wouldn’t be able to discipline or fire disabled workers who happened to be incompetent, apparently avoided hiring them in the first place.With respect to endangered species, multiple studies have shown that the Endangered Species Act of 1973 has unintentionally incentivized the rapid development of forested land to avoid becoming subject to ESA regulations in the future.
The highest level of assurance that a property owner will not face an ESA issue is to maintain the property in a condition such that protected species cannot occupy the property.Dubner and Levitt suggest that the next president think about unintended consequences when he or she is drawing new legslation.
it might be worth encouraging the winning candidate to think twice (or even 8 or 10 times) before rushing off to do good. Because if there is any law more powerful than the ones constructed in a place like Washington, it is the law of unintended consequences.
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