Always think of what happens next. People respond to changes by changing their behavior, and other people respond to that, etc. Changing one thing always leads to changing the world. Not always for the better, but what’re you gonna do?
I don’t remember who taught me this… I believe it was Don Boudreaux, or possibly Russ Roberts. I am going to go with it was discussed by Don Boudreaux and Russ Roberts on EconTalk. Seems likely.
Another economic pattern of thought that seems obvious when written down yet we frequently fail at practicing. An example will help.
Say we are concerned that people drive too much, hopping in the car when just walking or even riding a bike would be a better way to go. Traffic congestion is a problem in our town, and we are concerned about all those exhaust emissions. We propose a solution: police can give tickets to those who make unnecessary car trips instead of taking alternative means. We don’t want to get nuts, so the first offense is a warning, and subsequent fines are only say 20$. We work hard to convince people this is a good idea, and yay! The bill passes. High fives for everyone.
But then what happens? Well, police have the new job of figuring out which trips are unnecessary. Let us be generous and assume our bill clearly defines this. (This is really generous; most legislation is incredibly vague.) Say we define any trip less than one mile in a car to be unnecessary, unless the driver is moving small children, the elderly or otherwise infirm, or transporting more goods than can be reasonably carried by hand or other means. Let’s roll with that.
So, our brave police officers now have to keep an eye out for people traveling less than one mile. How does that work? Are we going to require the police to spy on everyone from the moment they leave the house to the moment they get where they are going? Maybe we need to install traffic cams or RFID scanners to track local cars to see where they are being driven.
But even that won’t be enough; what if I drive to the supermarket that is a half mile away to buy a car full of grocers? Which part is the trip? Should I be required to make multiple trips on foot with smaller loads of purchases, or does the fact I am filling up my car justify the trip? This is going to result in a lot of tickets that are going to require a lot of court appearances to deal with.
Ahh, but people are smart! What if I just toss one of my kids in the car? I have three, so if I schedule their naps I can drive wherever I want, whenever I want! This seems… suboptimal from a social standpoint, but ok. Maybe the kids don’t have anything better to do.
Another solution, more problematic, is simply to not go places within a mile of home. Can’t drive to the store down the block? Well, there’s one across town, and driving there takes about as long as walking to the nearby store, and I won’t have to carry stuff instead of driving in the nice AC. Heck, if I rent, maybe I will just move such that everywhere I usually want to drive to is just over a mile away. I might actually drive more as a result of this law.
Ooooh! What if I tie in additional stops so that the entire trip is longer than a mile! I drive to the store that is under a mile away, but I swing over to another random place to make sure it looks like I drove a distance over the requirement. This might be a key trick if I start driving somewhere and realize I forgot something at home and have to turn around… if I want to avoid a fine I had better take the long way home so that no closed loop of the trip is less than a mile.
Having looked at the ways people might get around the rule, let’s look at how we might enforce it. We definitely need some manner of automated car tracking, but how do we get those systems to know if there is a kid or something in the car? Will we see people buy the equivalent of car pool lane dummies so they always look like they have a kid in the back? What if they use the cargo defense, tossing a 50 lb. sack of sand in the trunk? We are going to need a system for processing ticket disputes quickly.
How are we going to investigate for these disputes? How do we deal with the people obviously cheating via children or bricks in their car?
Maybe we just don’t challenge disputes: if someone claims the ticket was unreasonable we just accept that. This seems like it might obviate the entire idea, however. If we are not going to enforce the rule, what’s the point of the rule? If we do require people to show up and dispute tickets, however, doesn’t that tend to more heavily penalize those who have jobs or family obligations that make it difficult to show up in front of the judge? And how do we know those judges are fair? With how many we might need, the chances of them all applying the law even handedly is pretty unlikely. And then what? Endless civil suits against the town for discriminatory application of the law?
What if your car’s transmitter breaks and you can’t afford to fix it?
Let’s stop there; at some point you do have to. Where has our law gotten us? People driving farther than they did before to avoid the hassles of a over burdened and possibly arbitrary enforcement system, with those who can afford it actively choosing to live farther from where they usually go. We might have made the traffic and pollution problem a little better, or much worse, but we definitely added a lot of cost to the system as citizens responded to the legal change and the legal system responded to that response, to which the citizens respond, etc. To make things worse, this strange result is merely what happens off the top of my head; the real problem with unintended consequences is that you can’t easily predict them.
Even less fanciful changes can have interesting impacts. Say that in a small town the price of apples drops, perhaps due to local growers having found a hybrid that just loves the local environment. At first, this means people will spend less on apples. If the price persists, however, we might see people start to spend more on apples. In fact that would be very common and expected. Why? How do you spend more on something that costs less? The answer, known as Jevon’s Paradox, is simply that people will buy more apples than they did before. If apples are cheap, people find more uses for them. So before I might buy a few apples to eat as a snack, but if they are cheaper maybe I start buying some to make pies. I will teach myself to make apple dumplings. It turns out apples are good with pork, so I will make more of that. And not just me, everyone in town is likely to shift their behavior to taking advantage of the low price of apples. Pretty soon the whole local culture might shift towards becoming more apple centric, with apple festivals in the fall and signature apple dishes being the staple of nostalgic memories.
Seem a bit much? Well, the town of North East, Pennsylvania has been having their annual Cherry Festival for years now.
Small changes can lead to huge. The trick is trying to make sure those huge changes are what we want.