The law of unintended consequences

The Freakonomics blog recently carried this article with three fascinating examples of do-gooder laws harming the very people (or animals) that they were intended to help.

They followed up a few days later bringing attention to Alex Tabarrok's insight that this is what generally happens when brute and simple systems (such as politics) try to govern intricate and complex systems (such as the economy), and fail to do so wisely. Arrogance prevents people from understanding that it is rather difficult to regulate a complex system wisely; meanwhile, naive humanitarianism on the side of those helping, and a selfish false sense of entitlement on the side of those affected, prevents people from seeing that, many times, what seems like a dire problem is in fact a good and necessary change taking place.

A classic example of do-gooder laws resulting in harm is rent control. Rents in a certain environment grow high because of economic pressures. Poor people complain that rents are too high. The government imposes an upper limit on rents. With this limit in place, it stops making economic sense for landowners to rent apartments, so they start evicting tenants in order to repurpose the buildings for other uses that pay more. The government responds by prohibiting landowners from evicting tenants. Landowners respond by ceasing to maintain apartment buildings to keep their costs down. Tenants now complain that buildings are not being maintained. The government forces landowners to maintain buildings, driving up their costs while still limiting income from rents, for some possibly resulting in a net loss. Landowners resort to bribery or "accidental" fires which happen to destroy the buildings so that they can be rebuilt for shops rather than apartments, or for non-rent-controlled high-end apartments rather than rent-controlled low-end apartments.

And so on.

There's thousands of years of history that shows that there are systems which function best if left alone, and with which it is stupid to meddle. But most people don't pay attention, and vote for politicians who will meddle regardless.


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