Unintended consequences

It's a little simplistic and heavy on anecdotes, but this column by Dubner and Levitt (the Freakonomics guys) highlights one of my favorite economics topics -- the law of unintended consequences.

But before charging ahead with such plans, the new president might do well to first ask him- or herself the following question: What do a deaf woman in Los Angeles, a first-century Jewish sandal maker and a red-cockaded woodpecker have in common?

The answer is they all may have been harmed by government regulations designed to help them. The section on the ADA is kind of obvious -- and is likely subject to even more regulation today -- and the part about Jewish sabbatical law just made me go "huh?" The discussion of the Endangered Species Act, though, caught my attention.

I've always thought it incredibly stupid to designate a species "endangered" with such a long lag time before designating its protected habitat. OF COURSE property owners are going to act to clear/develop the land before it's "taken" (in a sense) from them. I guess I'd just never thought of it as a strategic decision.

In their paper, Lueck and Michael cite a 1996 developers’ guide from the National Association of Home Builders: “The highest level of assurance that a property owner will not face an E.S.A. [Endangered Species Act] issue is to maintain the property in a condition such that protected species cannot occupy the property.”

Now I certainly agree with Dubner and Levitt's endnote that not all regulation is bad. But I also agree that it's WAY TOO COMMON for us to fail to think through the incentives created by a new regulation -- especially when we're trying to "help" one group or another. Whenever I'm considering a new "twist" in my class grading or testing procedures I always ask myself, "Now how could I 'scam' this system?" I don't foresee all problems, but that approach has saved me from more than a few policy headaches.