The Law of Unintended Consequences

The Law of Unintended Consequences is a theory that says that the act of trying to force order on a complex system with a simple solution guarantees that there will be unplanned side effects. Sometimes these side effects will be beneficial, sometimes they’ll be adverse.

When government tries to direct complex policy by using simple rules and requirements, it’s a virtual guarantee there will be side-effects. An easy example of this is minimum wage. Every time minimum wage is increased, numerous people making less than the new minimum wage lose their jobs. In fact, this one has become so predictable that whenever new legislation is introduced to raise the minimum wage, the Congressional Budget Office actually predicts how many jobs will be lost.

Numerous cases involving political policy can be cited.

  • In Italy, government regulators tried to reduce city congestion by limiting access to congested city centers based on odd or even license plate numbers. The result? Many people bought cheap cars and outfitted them with the opposite type of license plate. This didn’t cut down on traffic at all, but it did succeed in putting more “clunkers” on the road.
  • Implementation of the Americans with Disabilities Act was intended to improve working conditions for the disabled. The result? It lowered employment numbers for disabled Americans, with no improvement in the wages for the remaining workers.
  • The Endangered Species Act was intended to save species at risk. The result? Many landowners that didn’t want to run the risk of having their land classified as a “habitat” for an endangered species made pre-emptive strikes by removing anything that could be vaguely interpreted as a habitat.

This is not exclusively a political issue. In Beyond Fear, Bruce Schneier, reports that drivers in Russia tried to solve the problem of increasing car theft by installing car alarms. How did the thiefs get around that? They waited for the drivers to turn off their alarms remotely, and then shot the drivers! Not exactly the result the drivers were hoping for. So, instead of using car alarms, the drivers started installing systems that made the cars virtually impossible to hotwire. Since hotwiring wasn’t an option, the thieves took to carjacking instead. Again, not the desired result!

In another example, Digital Rights Management (DRM) was introduced to combat illegal copying of songs. Microsoft added functionality to Windows Media Player (WMP) to automatically retrieve licenses when “protected” files were loaded. The only problem is, there’s no real validation of where the license is actually retrieved from. One researcher decided to test it out by allowing WMP to automatically retrieve a license for a “questionable” file. Here’s a summary of his results:

My computer quickly became contaminated with the most spyware programs I have ever received in a single sitting … all told, the infection added 58 folders, 786 files, and an incredible 11,915 registry entries to my computer.

So what’s the point of this? Simply put, it should always be remembered that any time that a policy is proposed with the goal of solving a complex problem, there will be unintended consequences. What will the consequences of Obamacare be? Of course, it’s impossible to say with absolute certainty, but odds are good that adding 45+ million people without substantially increasing the number of doctors will guarantee rationing of services. Will it bankrupt the economy? Unfortunately, only time will tell.