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What kind of law is the Law of Unintended Consequences?

Stephen Dubner and Steven Levitt wrote this Freakonomics column, which concludes, “if there is any law more powerful than the ones constructed in a place like Washington, it is the law of unintended consequences.” What I’m wondering is, what sort of law is this? Obviously it’s not a real “law” like the law of gravity or even one of those social-science laws like Gresham’s law or the statement that democracies usually don’t fight each other. But it’s supposed to be more than just a joke in the manner of Murphy’s law, right?

I’ve remarked previously that unintended consequences often were actually intended but Dubner and Levitt’s examples seem actually unintended. So these seem like real examples, but I don’t know what it takes for this to be a “law.” Surely there must be dozens of other examples of intended consequences that actually happened? Or unintended consequences which, although unfortunate, were minor compared to the intended consequences? The Freakanomics article was interesting; now I want to hear a statement of the law itself…

P.S. Interesting comments below. Also, Alex Tabarrok has further elaboration:

The law of unintended consequences is what happens when a simple system tries to regulate a complex system. The political system is simple, it operates with limited information (rational ignorance), short time horizons, low feedback, and poor and misaligned incentives. Society in contrast is a complex, evolving, high-feedback, incentive-driven system. When a simple system tries to regulate a complex system you often get unintended consequences.

14 Comments

  1. Sarah Lawsky says:

    Their examples of this "law" may not be so good, either. To take the one example in their article that I know something about: The paper they cite on the ADA and the disemployment effect is one of the very earliest papers on the subject, and there has been a lot of subsequent refinement. For example, there is a case to be made that the disemployment effect was actually due to more people with disabilities choosing to get further education, rather than enter the job market immediately, because the ADA increased educational opportunity for people with disabilities. See, e.g., Christine Jolls, Identifying the Effects of the Americans with Disabilities Act Using State-Law Variation: Preliminary Evidence on Educational Participation Effects, American Economic Review, 94:447-53 (2004). But whether the Jolls paper is exactly right or not, there is certainly no consensus (to say the least) that employers stopped hiring disabled people after the ADA because of onerous requirements created by the ADA. (Indeed, there is not even consensus that the ADA did in fact create onerous requirements, at least for the vast majority of employers.)

  2. Ken says:

    Maybe in any large complex system there will always be at least one unintended consequence, even if it affects only a few people. Wikipedia has an article http://en.wikipedia.org/wiki/Unintended_consequen

  3. Andrew says:

    Sarah,

    That's interesting background on the disabilities example. I wonder if Dubner and Levitt are aware of that article.

    Ken,

    Yes, but if it affects only a few people, that doesn't really count, at least not in the usual calculations of economics. After all, economists don't say that loss of jobs is an unintended consequence of free trade; rather, they say that free trade is inherently good, and that some people's loss of jobs is more than compensated by others' gains. (This might be right or wrong–it's outside my area of competence–I'm just pointing out that, from an economics standpoint, a negative outcome is really only an "unintended consequence" if it actually outweighs the positive "intended consequences."

  4. Sarah Lawsky says:

    Mike Dorf, a law professor at Columbia, has posted a very good discussion of the Levitt/Dubner disemployment effect claim on his blog.

  5. ZBicyclist says:

    I think the Law of Unintended Consequences can be seen as a social science / organizational behavior law.

    First, let's get a definition, which I'll borrow from http://www.fredlaw.com/articles/health/heal_95su_… "the proposition that [MOST] every undertaking, however well-intentioned, is generally accompanied by [GENERALLY] unforeseen repercussions that CAN overshadow the principal endeavor."

    I added "MOST" and [GENERALLY] to the definition above to tone it down a bit.

    Another variation on this is to look at a list of the effects of a proposed policy, and to realize that there are probably more effects than the ones listed. In fact, at heart it's a lot like forecasting error, particularly the forecasting error caused by unforeseen events outside the model.

    I think as social science goes, its a decent law. It's even testable. For example, we might take old environmental impact statements from some years ago and see how well they anticipated what we would now regard as the true impact of a project.

  6. Jonathan says:

    I usually think of the law as a normative one: if you propose a policy to do X and use only the direct consequences of X to motivate your decision, you will have overestimated the effect of X by ignoring indirect effects. The reason the expected effect is always counter to the direct effect is that the economic incentives must work in the other direction — otherwise you wouldn't have needed to impose X in the first place. Thus, the ingenuity of people attempting to follow the economic incentives underlying the problem will always frustrate, to some extent, the direct effect of what you're trying to do.

  7. Jim Lebeau says:

    Consider American culture during prohibition. I have heard that alcohol consumption increased.

    Another example is that sales of Rolls Royces is said to have decreased dramatically in England after Thatcher cut the marginal tax rates.

    Another example is the widening of highways to relieve congestion. The unintended consequence is an increase in the number of highway users, and congestion soon returns.

    I suspect, but cannot demonstrate, that the wars on drugs and poverty have not been won due to unitended consequences of the wars themselves.

  8. Phil says:

    That Dubner and Levitt column is pretty irritating in the cherry-picking of what they call "do-gooder" laws. They surely would not claim that the "law" of unintended consequences doesn't apply to corporate subsidies or tax relief, yet they chose not to give any examples of _those_ unintended consequences.

    I agree with Andrew's implicit point that "law" is much too strong a word for whatever it is we're discussing. Perhaps "rule" would be better.

    I also like Jonathan's way of looking at the issue. It's pretty easy to look at the first-order effect of a policy, but the higher-order effects get harder and harder to predict, without _necessarily_ getting smaller and smaller. I think this is usually what people mean when they talk about unintended consequences. I would distinguish this from first-order effects that were unanticipated, which might be included in ZBicyclist's tests.

    To give an example: When the fuel additive MTBE was required in California, the intended consequence was reduction in air pollution in winter. Something that was not appreciated at the time was that since MTBE is soluble in water, even small leaks in underground fuel tanks would produce large plumes of toxic MTBE spreading in the groundwater. Although this consequence was unintended, it is not an "unintended consequence" in the interesting sense; it was a first-order effect that had been missed.

  9. In response to Jonathon's comment, you have hit it right on the nail. Especially with the whole expansion of free-ways thing. :)

  10. blah says:

    The law is most apparent in software — the introduction of a change in one place often causes bugs in unanticipated regions.

  11. Thom says:

    "Another example is that sales of Rolls Royces is said to have decreased dramatically in England after Thatcher cut the marginal tax rates."

    Interestingly, Thatcher increased average tax burden. One of her first tax policies was to increase VAT from 14% to 17.5%. This was followed by decreases in income tax rates and new taxes such as insurance premium tax and abolition of mortgage interest tax relief. The net effect was that most people paid more tax as a proportion of income. Only the very wealthy had tax reductions – those who benefitted from the reduction in the upper rate from 50% to 40%. The equations are complex because very few higher rate tax payers earned enough in the higher rate band to offset the extra VAT they paid (as consumers of high-end luxury goods).

    That said … the fall in Rolls Royce sales probably had more to do with other factors. The 80s cars were perhaps seen as vulgar by traditional customers and at the time British cars were not well regarded in terms of quality (including Rolls Royce).

  12. Jeff says:

    Dubner elaborates on what they meant at
    http://freakonomics.blogs.nytimes.com/2008/01/25/

  13. BrianDRPM says:

    I know I am coming in late making comments on this thread but this concept has interested me in the past. This has more to do with the Alex Tabarrok statement.

    I can agree with the concept of complex and evolving but would argue that we only know in hindsight what it is evolving into. There may be high-feedback for the system as a whole but we don't have access to that total information system. The alignment of incentives is also something it seems to me that is determined after the event can can involve complex interactions. I also have problems with the implied concept that there is some overall arching system out there which is true and correct and our little political/economic systems are poor and inadequate copies. We also need to look at the alternative options that Andrew Gillman provides, a,"examples of intended consequences that actually happened? Or unintended consequences which, although unfortunate, were minor compared to the intended consequences," including as well "unforeseen adaptions".

  14. BrianDRPM says:

    I know I am coming in late making comments on this thread but this concept has interested me in the past. This has more to do with the Alex Tabarrok statement.
    I can agree with the concept of complex and evolving but would argue that we only know in hindsight what the system is evolving into. There may be high-feedback for the system as a whole but we don't have full access to that total system information so the problem of limited information remains. The alignment of incentives is also something it seems to me that is determined only after the event and can involve complex interactions which are often not always apparent. I also have problems with the implied concept that there is some overall arching system out there which is true and correct and our little political/economic systems are poor and inadequate copies. We also need to look at the alternative options that Andrew Gillman provides, "examples of intended consequences that actually happened? Or unintended consequences which, although unfortunate, were minor compared to the intended consequences," including as well "unforeseen adaptations".