Unintended consequences

The terms "unintended consequences" describes a set of results that was not intended as an outcome.

For the novel by John Ross, see Unintended Consequences (novel).

The law of unintended consequences

The law of unintended consequences is that actions of people—and especially of government—always have effects that are unanticipated or unintended. Economists and other social scientists have heeded its power for centuries; for just as long, politicians and popular opinion have largely ignored it.

The concept of unintended consequences is one of the building blocks of economics. Adam Smith’s "invisible hand," the most famous metaphor in social science, is an example of a positive unintended consequence. Smith maintained that each individual, seeking only his own gain, "is led by an invisible hand to promote an end which was no part of his intention," that end being the public interest. "It is not from the benevolence of the butcher, or the baker, that we expect our dinner," Smith wrote, "but from regard to their own self interest."

Most often, however, the law of unintended consequences illuminates the perverse unanticipated effects of legislation and regulation. In 1692 the English philosopher John Locke, a forerunner of modern economists, urged the defeat of a parliamentary bill designed to cut the maximum permissible rate of interest from 6 percent to 4 percent. Locke argued that instead of benefiting borrowers, as intended, it would hurt them. People would find ways to circumvent the law, with the costs of circumvention borne by borrowers. To the extent the law was obeyed, Locke concluded, the chief results would be less available credit and a redistribution of income away from "widows, orphans and all those who have their estates in money."

In the first half of the nineteenth century, the famous French economic journalist Frédéric Bastiat often distinguished in his writing between the "seen" and the "unseen." The seen were the obvious visible consequences of an action or policy. The unseen were the less obvious, and often unintended, consequences. In his famous essay "What Is Seen and What Is Not Seen," Bastiat wrote:

“

There is only one difference between a bad economist and a good one: the bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen.

”

Bastiat applied his analysis to a wide range of issues, including trade barriers, taxes, and government spending.

External links

• Unintended consequences at Wikipedia
• Unintended Consequences by Rob Norton at The Concise Encyclopedia of Economics
• "Inexcusable Unintended Consequences" by Gary Galles, July 2009
• "The Unintended Consequences of Rent Control" by Art Carden, August 2009
• Some Austrian Perspectives on Unintended Consequences (pdf) by Lowell Gallaway, 1997
• "Unintended Consequences of Trade Sanctions" by Jonathan M. Finegold Catalan, August 2010
• "The Relentless Process of Socializing Health Care" by D.W. MacKenzie, May 2008 (with audio)
• The Law of Unintended Consequences by Alex Tabarrok, January 2008
• The Consequences of Human Action: Intended or Unintended? by Murray Rothbard (from Making Economic Sense)