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Weeding Out Those Ugly Unintended Consequences

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March 24th, 2014

LFU_OverTop_BrokenBody_vFUnintended consequences are side effects of actions that were not anticipated. Although most people think of unintended consequences as the negative results of government laws and regulations, the term is neutral. It includes, as well, positive outcomes of both government action and actions of individuals. Unfortunately, big government legislation necessarily contains so many negative, yet unanticipated, outcomes that it puts people at the mercy of unmerciful forces. But all may not be lost.

 

The most famous example of favorable aftereffects of individual conduct is Adam Smith’s “invisible hand”, one of the primary tenets of capitalism. It refers to the fact that the selfish profit motive of individuals drives an economic system that benefits society in general. In an effort to make money, business people provide goods and services that customers need thereby fulfilling that need. To maximize profits, businesses create efficient delivery systems. Workers are employed. They create their own demand for goods and services. More workers are employed, and so on, growing a healthy economy.

 

While individuals, driven by self-serving motives, build large beneficial economies as side effects of their productiveness, the same is not true of governments. Since at least the 17th Century, countries have taken actions that produce negative side effects. In 1692, John Locke argued against a decrease in the interest rate from 6 percent to 4 percent as harmful to “widows and orphans”. Rather than making money cheaper to borrow, the opposite would result as lenders increased other borrowing costs to avoid income loss.

 

Price controls and import tariffs have similar adverse economic consequences. Price controls, which keep prices depressed, are a bar to outside suppliers that would otherwise provide products when local merchants cannot meet demand. Import tariffs effectively bar foreign competition and keep prices artificially high to local customers.

 

The more pervasive the government action, the more adverse the unintended consequences. Lawmakers simply do not understand large, complex pieces of legislation. Nancy Pelosi’s oft-repeated statement about the need to pass Obamacare so voters can find out what’s in it, applied to her as well. Congressional enactments that leave much of the implementation detail to myopic bureaucrats are guaranteed to create widespread problems for those within their reach.

 

ObamaCare is huge program with even larger negative side effects. They’re getting a lot of press lately. The legislation encourages sloth. It reduces the income in all but the lowest 20% of wage earners. It raises the cost of healthcare to union workers. And it has about one hundred other unintended consequences.

 

The 401(k) change in Obama’s proposed budget is another example of a provision with disastrous side effects. The change penalizes the 401(k) contribution of high-income earners. The intent is to force them to spend their money now. The side effect will be fewer 401(k) plans offered to employees, costing them the opportunity to participate in the country’s largest retirement-savings vehicle. Why? High-income earners are also business owners. Obama’s change removes the current incentive for the to-be-penalized owners to set up plans for their employees.

 

Obama’s unintended consequences plaguing the nation stem from his forcing changes without understanding the dynamics of the effected sector, be it the economy or other. The President’s profound, and unwavering, ignorance is wrecking havoc across the national landscape. The more he continues to force his agenda, the greater the damage he leaves behind.

 

Living at the mercy of unintended consequences is a fact of big government life. It is a major result of large programs controlling greater and greater portions of people’s lives. The solution is downsizing the intrusion of government into daily existence by restricting legislation to that with more easily vetted consequences.

 

Even with more manageable legislation, the enactment process should mimic the pre-release testing of a software product. This testing phase is designed to discover and remove software bugs, those nasty code interactions that frustrate proper functionality. Removing bugs is driven by the selfish business motive to sell a lucrative product.

 

Legislation should have a pre-enactment modeling phase during which outcomes not anticipated by its human creators are discovered and corrected. Unfortunately, legislators have no selfish preservation motive for pre-passage scrutiny. The legislation may produce negative outcomes on the populace but they rarely impact Congress.

 

But, there may be another remedy. How about a commercial software product that models legislation to reveal unintended outcomes? If some enterprising business could turn that into a smart phone app, it might just have the direct effect of negatively impacting legislators.

 

Direct effects aimed at side effects may be just the consequence we need.


 





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