4. Unintended Consequences
Fri, 2011-06-17 16:42 | by ddoctor
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Speaker
Donald J. Boudreaux is professor of economics at George Mason University and former president of the Foundation for Economic Education.
Prof. Don Boudreaux explains what economists mean when they talk about unintended consequences. Essentially, unintended consequences are the large outcomes that emerge from the actions of many individuals. These outcomes can be good or bad. When analyzing various polices, we must be extremely careful to distinguish between intentions and results.
Learn More
- Unintended Consequences [Article]: Rob Norton provides a basic overview of the unintended consequences that arise from all human action.
- Unintended Consequences [Article]: Steven Horwitz examines the concept of unintended consequences by looking at different institutions and their respective effects on uncertainty.
- Welfare State's Effect on Private Charitable Activity [Video]: Milton Friedman sheds light on the unitended consequences of governmental welfare programs.
- Minimum Wage [Video]: Milton Friedman demonstrates the undesirable consequences that result from well-intentioned minimum wage rates.
Questions
Use these questions to enhance your understanding of the topic. We recommend watching the featured video first; the suggested resources will also help.
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Comments
On review question no. 2: should the govt. deregulate in order to decrease the amount of negative unintended consequences?
David Friedman argues that progress is most likely good but that it might make people worse off http://www.youtube.com/watch?v=l8talvLDfow&t=42m0s) if there are negative externalities which are difficult to internalize via property rights (Coase-style).
In that case, a government can redefine property rights such that the externalities are internalized. This may be just as difficult as solving the socialist calculation problem and the Good Governance (public choice) problem, and therefore infeasible, but it might be in theory possible.
I think this challenges (slightly) the validity of the suggested right answer. Comments?
Interestingly, I addressed this in my recent book, "Prosperity's Predator", but with a much more drastic example - the decision by the Government, at the urging of the EPA, to ban DDT. The result has been millions of human deaths from malaria, since DDT is the most effective killer of mosquitos. Recently, it has be belatedly determined that DDT has virtually no impact on human health. A drastic tradeoff - a few raptors for huge numbers of humans.
Not only do rent-controlled apartments create scarcity, another unintended consequence is that it's primarily rich people who end up getting the apartments due to social connections... remember the Seinfeld episode?
Very good video. The examples are what really drives home the message. Every politician should have to watch this.