Friday, October 26, 2012

Logic versus Emotion in Society (Part 2 of 8)

by Elaine Walker, October 26, 2012 (Downloadable PDF file)

(1332 words)

Unintended consequences in society

All societies inevitably have conflicts of all sorts and therefore develop systems and policies for regulating them. But no policy or program will ever benefit all of society equally. In fact, no one can convincingly predict the downstream effects that a policy might have, or even what will happen if the policy is not implemented at all. Societies are complicated, and just like the rest of the Universe everything affects everything. 

Sometimes a policy will affect groups that were thought to be unrelated. And all too often it will hurt the very people it was supposed to help. There are endless examples of policies with unintended consequences, which have become fallacies in themselves. Here are some of the most common ones, starting with their respective slogans.

"Welfare helps the poor" doesn't take into account that welfare helps the poor remain poor because it removes incentives and doesn't allow a savings plan. And I think that is precisely what the Obama administration wants. The more that people are reliant on the government, the more power the government has over the people. Welfare also discourages marriage in poor communities because combined income might disqualify them. 

"Zoning land for parks protects against greedy developers" doesn't take into account that nearby rents will be driven up due to there being less available land, and this not only affects the poorest but raises the income of urban landlords. Many of these zoning laws are in the name of environmentalism, and environmentalists seem to be the last people to understand the consequences.

"Government job creation" never takes into account that private sector jobs are inevitably lost or never created as a consequence. The government can create as many jobs as they want on a whim simply by hiring people, but the money to do so comes from tax dollars – from people in the private sector. That means less jobs can be created in the private sector. But those numbers are never estimated into statistics. Government created "green jobs" typically cost far more than it would to create a job in the private sector. They are often temporary positions, and sometimes jobs that last only one day, yet still get counted into jobs statistics no differently than new permanent jobs.

"Jobs saved" by the government inevitably result in other jobs being lost as well. U.S. sugar jobs were "saved" by restricting sugar imports, but that drove up the cost of domestic sugar thereby costing confection industry jobs, prompting them to relocate to Mexico and Canada in addition to more pre-made confection products being imported to make up for restricted sugar imports. According to a 2006 study by the U.S. International Trade Administration, three times as many jobs were lost in the confection industry as were "saved" in the sugar industry. The key is to look at "net" jobs created, which also takes into account how many were lost as a consequence of the policy.

"Unions help the workers" never takes into account that if they are a private union they hurt the business that employs the workers often causing them to go bankrupt, and if they are a public union that they have no pressure to mitigate their demands because they work for state monopolies. (It confuses me that progressives claim to hate monopolies yet support them all the time.) Part of the workers' dues goes to gigantic campaign contributions giving them enormous influence over who gets elected to bargain with them. These public "managers" have every incentive to give in to the workers' wishes for the sake of their own survival. The normal relationship between excellence and reward is broken because workplace decisions are made on the basis of seniority instead of workplace excellence. This leads to resentment among non-union taxpayers who don’t have that luxury. Unions also hurt higher education. Many professors belong to a union or have tenure, or both. With job security like that the most incompetent, lazy or radical professors won't get fired. 

Those promoting "universal healthcare" seem blind to the fact that former policies are the reason medical insurance is so expensive to begin with. The whole idea of insurance is that it covers things that probably won't happen, but are a valid risk. When coverage for routine things is mandated it will undoubtedly drive up costs. Then legislators proceed to insult insurance companies for raising costs. In 2012 I tried to sign up in advance for maternity care and five different companies informed me that they "are no longer able to afford maternity care since Obamacare was implemented". Women who already have it can continue their maternity care, but it is no longer available for new accounts. That was surely not the original intent of Obamacare, yet it was inevitable.

Policies in the name of "safety" usually don't result in more safety. One of the most graphic examples, which thankfully didn't come to fruition, is one that my absolute favorite economist of our times, Thomas Sowell, chronicles in his book "The Vision of the Anointed". In 2005 the Federal Aviation Administration (FAA) announced that it would not mandate a proposed policy to force parents to purchase an extra airline seat for any children under two. A study by economists drew the connection that lower income families who could not afford the extra seat would opt for ground transportation. Statistically far more babies die in cars than planes. This would have been yet another policy to hurt the poor and even kill babies!

There is no free lunch, as they say. To gain something we want or need means ultimately giving up something we already have, so we can think of unintended consequences as tradeoffs. On a collective level, benefiting from any government "program" inevitably means forcing others to give up something for our benefit, or at the very least to give up an opportunity to have gained something different instead. And again, it's hard to predict ahead of time what the tradeoffs will ultimately be. A program could ultimately kill babies when the original goal was safety!

But it's hard for emotional thinkers to see beyond simple relationships such as (a) if child safety seats are required in automobiles then (b) surely airplanes speeding through midair must also require them, or (a) if the government creates jobs then (b) there are more jobs in the world as a result. But both of those turn out to be incorrect statements. The key is to recognize that most things have a much more complex relationship with multiple interwoven variables that all affect each other. We should give up on the idea of simple causal relationships when it comes to the collective whole. 

In order to grasp the reality of interconnectedness and tradeoffs one cannot think of a government policy as a simple "solution". Rather, a policy is merely starting point that will initiate a series of causal events, which spread out and propagate over time. The very initial outcome might be the one that we were aiming for and thus cause us to congratulate ourselves for our brilliant "plan", but it's hard to predict what other outcomes will unfold, or whom they will affect. The resulting consequences might not be easy to trace back to our initial plan and may actually get blamed on other things that weren't the cause at all. 

Ultimately, it's not actually necessary to predict what the ultimate consequences of any a government policy will be, nor is it possible to an exact science. It's only necessary to realize that there will be unforeseen consequences and that in most cases it is more natural, less risky and more compassionate to actually just leave well enough alone. The wisest decision is often to steer clear of any action on a sweeping collective level and to trust nature’s own corrective measures – meaning, trust in our natural group behavior instead of forcing government’s hand on the problem. In most cases the invisible hand of the free market will find solutions, and even many solutions at once, whether it be pricing adjustments, private charity, innovation or any number of other things, all interacting in lock-step.

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Copyright © 2012 by Elaine Walker. Permission to reprint in whole or in part is gladly granted, provided full credit is given and author notified.

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