Framing the Dialogue

The Law of Unintended Consequences

The events surrounding the AIG bailouts, fallouts and now hearings made me think of an episode of the animated series The Simpsons.  You will have to give me a little leeway to develop this concept.

The episode (Bart the Mother – 1998) featured a storyline where Bart accidentally killed a robin only to find the abandoned nest full of eggs.  He becomes obsessed with hatching and raising the birds.  When the eggs hatch, he is surprised that the young are not robins, but an invasive lizard species that replaces bird eggs with its own eggs.

Rather than kill the lizards as recommended by experts, Bart tries to save them only to have them escape.  The lizards’ fondness for birds is ok at first as they prey on pigeons before moving on to more desirable species.  The Springfield towns people then introduce another species to control the lizards only to have those go out of control, which then necessitated that another species be introduced, and so on and so on.

The residents only intended to control the pest species, but did not look beyond the initial step.  I cannot remember how the episode ended.  That is a rather long example of the Law of Unintended Consequences.  Generally this concept has been applied in discussions of economics.  I found a great article on this concept which defines it as:

“The law of unintended consequences, often cited but rarely defined, is that actions of people-and especially of government-always have effects that are unanticipated or unintended. Economists and other social scientists have heeded its power for centuries; for just as long, politicians and popular opinion have largely ignored it.”

Let me retell the story in terms of the country’s economic meltdown.  Politicians accidentally killed the economy by allowing, encouraging, and in many cases, compelling banks to lend money to people who could never live up to the terms and actually repay the loans.  The Politicians become obsessed with fixing the crisis and rapidly introduce and pass TARP legislation.  TARP assets disappear and can no longer be found so the Politicians introduce stimulus to, again, fix the crisis. 

Stimulus spending becomes uncontrollable and many bonuses are paid which embarrass the Politicians who then introduce more legislation to control earlier legislation, and so on and so on.  I do not know how this will end, but I am not optimistic.

The above referenced article also references some work done by Robert Merton where he identifies five sources of unintended consequences.  As you read the five sources, relate them to the example of Bart Simpson and our elected officials:

  1. Ignorance
  2. Error
  3. Imperious immediacy of interest (we need it now)
  4. Basic values (hard work leads to wealth which leads to decline)
  5. Self-defeating prediction

As I sat to write this, I remembered a recent Associated Press article regarding a movie whose release is now before the United States Supreme Court.  The movie in question is a documentary film about Hillary Clinton.  I have not seen the movie, but  watched the trailer and it does not look like a flattering portrayal.  It is before the Supreme Court because its release was slated to occur during the presidential primaries. 

Federal courts would not allow advertising for the movie as they felt that would violate the McCain-Feingold Law (Campaign Finance Reform).  They argued that showing the movie or running advertisements for the movie constituted a “90-minute attack ad.”  The intent of McCain-Feingold was to reign in spending and financing of political campaigns. 

I can remember Senator McCain preaching how we must pass this legislation now (Imperious Immediacy), leading to mistakes in the language (Error), caused by lack of knowledge of the issue (Ignorance).  The unintended consequence in my mind is not even being argued in the Supreme Court case.  The consequence of McCain-Feingold is an abridgement of free speech. 

If you want to spend your money attacking __________________ (fill in your least favorite politicians name here) you should be allowed.  Actually you are Constitutionally guaranteed that RIGHT.

Here are a few suggestions for our elected officials to minimize future unintended consequences:

  • Read the legislation BEFORE you vote on it or sign it.  Read every page – maybe even twice.  Having your staff read it does not count.
  • Post proposed legislation (ALL PROPOSED LEGISLATION) on a web site for two weeks before it is debated.  There are many very smart people in the country who do not work in Washington.  Actually most very smart people do not work in Washington.
  • Footnote all language in legislation to identify who introduced/included that section.  Some call this “sunshine.”  It would be a refreshing idea for officials to stand behind what they propose.
  • No legislation may be voted upon after 9:00 PM or on weekends.  That is more of that light.
  • Term limits:  I was on the fence about term limits until recent events.  It has been very difficult for me to watch entrenched elected officials pontificate about how to fix problems that they created.  It has been very, very difficult.
  • Repeal the Seventeenth Amendment, which caused the Senate to be elected rather than appointed by the states as specified by our founding fathers.  This will make them more accountable to the states.  The more that I read about our forefathers’ efforts and deliberation, the more impressed I am and the less I think we should deviate from their vision.
  • We should scrap the current tax code (the MOTHER of all unintended consequences weighing in at 7,500 pages).  The Fair Tax jazzes me.  More to come on that soon.
  • Cut legislative staffs and budgets.  There are far too many people in Washington who feel like they have to pass legislation.  They should spend more time with the people that elected them.

My last recommendation is for all of us.  We need to keep the heat on elected officials.  Keep calling, e-mailing, and sending snail mail voicing your opinions.  Voice your biggest opinion in the voting booth.

There is only one difference between a bad economist and a good one: the bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen.

                                                                        Frédéric Bastiat

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