The Law of Unintended Consequences

Of course,if such a treatment did exist, it would be a litany of sometimes comic, sometimes tragic and often perverse failures, a gloomy, but instructive tome replete with hubris and the comeuppance of overly-ambitious social engineers. Sounds like my kind of subject, so let me explain what I mean by the LUC and why it should be right up there next to the Laws of Inertia and Gravitation on the list.

A ‘law’ of course should be ubiquitous, its operations seen everywhere, and explaining with elegant brevity an important aspect of the human condition. The LUC meets this test without difficulty. I define the LUC very simply as the unforeseen results of overly ambitious planning initiatives. Sounds somewhat mundane, doesn’t it? Well, its effects are far from mundane. The LUC put huge sums of extra cash in the pockets of the Taliban; decades ago, it was responsible for a significant increase in teen pregnancies among single black women in the U.S.; a recent tragic increase in malaria fatalities in Africa is also attributable to the LUC, and, in an altogether more benign incarnation, it was a very material factor in the demise of communism.

Let me give you the example of the LUC’s operation that first got me pondering this weighty subject. The Americans went into Afghanistan to destroy the Taliban’s ability to host terrorist activities, an essentially straight-forward if difficult, military objective. Along comes a group of bright bulbs in Washington’s policy elite who see a synergistic opportunity in the U.S. military presence in the country that is the world’s chief source of the poppy crop. Why not have the U.S. military oversee the destruction of as many Afghan poppy fields as possible, thus striking a blow on the behalf of the good ‘ole war on drugs by reducing the heroin available to flow to U.S. addicts. This would also hurt the Taliban directly, given that drug sales provide important revenue for their operations. Sounds peachy in principle.

It would appear that the policy wonks missed something, perhaps they were absent the day economics 101 was being taught at Georgetown. The demand for heroin is highly inelastic, economic-speak for the fact that the price of heroin has very little effect on the demand for heroin. In fact since those demanding the stuff are addicts, heroin is one of the most inelastic products in the marketplace. Off go the Americans burning poppy fields in areas of the country they control, bye-the-bye causing tremendous ill-will among Afghan farmers for whom poppy cultivation was their primary source of income.

But that is not the heart of the matter. Predictably, the destruction of poppy was much less effectively carried out in areas with a heavy Taliban presence. So ….., the American effort reduced the overall supply of poppy/heroin; but this actually increased the proportion of poppy that was grown in areas under Taliban control. So, given the inelasticity of demand, where did the increased profits from the sale of scarcer heroin at a higher price go? Well shucks, folks, it went into the pockets of the Taliban, so that they could buy more ordinance with which to kill Americans and Canadians and locals. The Economist estimates that the Taliban were earning $100 million annually from the sale of heroin while this policy was in effect.

This sad tale is a classic demonstration of the impact of the Law of Unintended Consequences, and there are so many others, the subject is indeed worthy of a book-length treatment. From social assistance subsidies that actually made it economically rational for poor unmarried black teenage girls to have as many kids as possible, to the replacement of DDT with products that don’t kill malarial mosquitoes nearly as well, to the often hilarious results of Soviet efforts to replace the pricing efficiency of the market with centralized planning (I’m so sorry Boris, we only have left shoes for sale in Moscow this week, the right shoes are still in Stalingrad) the LUC is truly everywhere.

The LUC is, of course, a corollary of the complexity of human social life itself. Things, very important things are always escaping out from under the predictive modeling efforts of planners and social engineers. What is the lesson here? Obviously, we must plan, that is what we humans do, and we are often pretty good at it. However, hubris, manifested in these instances in the belief that we have figured out the consequences of sweeping policy initiatives when we really haven’t, is a constant danger — a specter at the feast that many planners never seem to see. The over-broad delegation of legislative purview to administrators who are less accountable to critics than elected politicians is part of the problem; but that is a subject for another time.

l we begin to move from predicting the weather to trying to alter it! The LUC will pervade these endeavours in truly epic fashion. I can’t decide whether to stock up on parkas or sunblock — I may need both and possibly a raft.