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The Flaw of Unintended Consequences

By: Carl Graham, President, Montana Policy Institute

Epiphanies are rare, especially those of the mass variety. More people are opening their eyes, though, to the fact that actions, even well-meaning ones, do have consequences; most of them unintended, and many of them bad. So begins our climb back up to the shining city on the hill.

What Frederic Bastiat called “The seen versus the unseen” is being seen by more and more people. Our tendency towards feel-good short term policy solutions has resulted in unsustainable and, more importantly, unfair and even immoral costs that are often borne by those we’re trying to help. We could fill a book with examples, but here are just a few.

Take the minimum wage…please. It’s basic economics that if you increase the price of something people will buy less of it. That applies to labor as much as it does to, oh I don’t know, let’s say grapefruit. Except that since most grapefruit are interchangeable the decreased demand applies to all of them equally. Not so with the minimum wage. People at the lower end of the wage scale are predominantly young, less educated, unskilled, and minorities. If you arbitrarily raise the cost of hiring them, it’s just simple logic that fewer will be hired since not all of them can add as much value to a product or service as the minimum wage that’s set. So we’ve seen teen unemployment rise to about 27% overall and to almost 50% among blacks. We’re basically telling these young people that their labor is worth nothing if it’s not worth some government-mandated cost of hiring them. That’s a tragic waste and lost opportunity. And it’s flat immoral to tell someone they have zero value to society if they can’t contribute at some arbitrarily set level. I have a hard time believing that’s what minimum wage proponents intended, but that’s the consequence.

Speaking of government mandates, the U.S. Constitution names three federal crimes: treason, piracy, and counterfeiting. Everything else is left to the states. And yet there are about 4,500 federal crimes spread out among some 27,000 pages of federal code. If all we had to keep track of were the Constitutional three plus state laws we’d probably be fine. Except what would lawmakers in D.C. have to do if they didn’t make laws, or more accurately, make outlaws out of all of us? It’s been estimated that the average professional commits as many as three crimes a day without even knowing it.(1) According to a recent Wall Street Journal article, federal prosecutions have gone from fewer than 200 per million U.S. adults in 1980 to nearly 400 in 2009.(2) The sheer mass of federal code has unintentionally made criminals out of all of us since we can’t possibly know everything they tell us to do and not do in our everyday lives. Unintended? Maybe. Consequential? Ask someone who’s in prison for violating a law they didn’t know existed.

How about housing regulations? Codes, zoning, and other mandates add about 25% to the cost of a new home.(3) No matter how well intentioned, increasing costs by a fourth will hardly result in affordable housing or high-paying construction jobs. We see the uniform architecture and well-ordered streets. What we don’t see are people priced out of the market and workers unable to feed their families.

And finally, the mother of all unintended consequences: health care “reform.” Here’s just one example. The National Federation of Independent Businesses reports that 57% of small businesses may drop employee health care coverage because of the new law.(4) Despite repeated promises that “you can keep your current coverage if you like it,” your coverage doesn’t have to keep you. Turns out it’s cheaper for both employers and employees to move workers to federally subsidized exchanges and have taxpayers foot the bill. I’m not so sure that was unintended, but it’s definitely a consequence.

What’s unseen is more important than what’s seen because it’s often felt by those least able to influence policy, and its effects last much longer than the immediate gratification of doling out favors at somebody else’s expense. So epiphanies are good; especially those that encourage people to make rational decisions based on all costs and all benefits, both seen and unseen.

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For Immediate Release

704Words

 

Carl Graham is president of the Montana Policy Institute, a nonprofit policy research and education center based in Bozeman.

He can be reached at:

67 W. Kagy Blvd., Ste. B

Bozeman, MT 59715

(406) 219-0508

cgraham@montanapolicy.org

 

Notes: (for ed. use)

(1) http://www.amazon.com/Three-Felonies-Day-Target-Innocent/dp/1594032556

(2) Wall Street Journal, “More are Ensnared By Criminal Laws,” p. A1, 7/23/2011

(3) National Association of Home Builders, “High Regulatory Costs for New Homes Another Obstacle to Housing Recovery, Study Finds,” http://www.nbnnews.com/nbn/textonly/2011-07-25/front+page/index.html

(4) Wall Street Journal, “The Flight to the Exchanges,” p. A12, 7/25/2011

Business is the Dinner…Finally They Get It

By: Carl | October 7, 2010, 8:20 am

I can’t remember if it originally came from an Aesop fable or a Twilight Zone episode, but pretty much everyone has heard the old saw about someone being invited for dinner and finding out they were on the menu instead of the guest list. I think some in the business community are finally starting to realize that pretty much anytime they’re invited to the table by the government they’re more likely to be the entree than the honoree.

The Montana Petroleum Association seems to get it, though. They’re doing things to raise awareness of the impacts of regulation and land use restrictions on our economy and on our way of life. They’ve got an annual essay contest for high school kids and this year the question is:

How does a policy restricting and eliminating grazing, farming, oil and gas and timber harvests on federal lands impact the adjoining land owners, communities, schools, tax base and jobs?

How’s that for subtle? This isn’t big Pharma or AARP eagerly backing health care “reform” once they got their guaranteed market carve outs, or banks keeping mum on financial reform hoping not to offend their new regulatory overlords. This sounds like the voice of an industry that realizes they’re on the menu, and that they have less to lose by fighting back than by playing along to get along.

Good for the MPA. I hope they’re successful in educating both young people and old people on the threats to freedom and prosperity that the current trend towards overweening government poses. And if you have a kid in school, have them write an essay.

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