An Unintended Consequences (we should have seen coming.)

In the mid-1800s thousands of European rabbits were introduced into Australia for the purposes of sport-hunting.  But rabbit populations expand exponentially, and soon the botanical composition of the areas where the rabbits were introduced was altered.  Because those rabbits grazed more closely than sheep and cows, their grazing resulted in weakened native perennial grasses.  This in turn caused significant soil erosion which radically affected agricultural yields making the impact of introducing those ‘innocuous’ rabbits disastrous to the Australian economy.

A few years after the Eighteenth Amendment was instituted (Prohibition), more people died of alcohol related deaths than had died when alcohol was legal.  There were several reasons for this; illegal alcohol provided an incentive to those who sold bootlegged liquor to make strong alcohol such as gin instead of beer or wine because strong alcohol is more profitable as well as being easier to distribute and conceal than beer or wine. Ironically, many people were introduced to ‘hard liquor’ because of Prohibition.  At the same time, because bootlegged liquor was often made in bathtubs and other less-than-sanitary vats, it was often dangerous to drink, and thousands of Americans died as a result of consuming contaminated alcohol.

In 1953 the World Health Organization (WHO) thought it had the perfect solution to the outbreak of malaria that was ravaging Borneo.  The WHO sprayed large amounts of DDT to kill the mosquitoes that carried the malaria.  As anticipated, the mosquitoes died, and malaria declined; but soon the roofs of people’s houses began crashing down on their heads.  It seemed the DDT was also killing parasitic wasps that had previously controlled thatch-eating caterpillars.  Worse, the DDT-poisoned insects were eaten by geckos, which were eaten by cats.  When the cats began dying in great numbers the rat population burgeoned, and instead of malaria, people were threatened by epidemics of typhus and plague.

In the early 1990s Congress pushed through a luxury tax clearly focused on “the rich” who were buying expensive and lavish commodities—such as yachts.  But a funny thing happened on the way to the harbor—the rich stopped buying American-made boats (the tax didn’t apply to foreign-made boats purchased outside the U.S.) and 10,000 middle-class American boat builders lost their jobs as the America boat industry cratered.

So, what do these four stories have in common?  Each is an example of the “law of unintended consequences.”  Unintended consequences result when an action creates an outcome that was not planned or was completely unforeseen.  This immutable “law” dictates that every undertaking, however well-intentioned, is often accompanied by unforeseen repercussions that frequently overshadows the reason for the undertaking in the first place.

From New York to San Francisco, the unintended consequences of rent control have been to reduce the number of available housing units in any given marketplace and to actually drive-up prices in non-rent-controlled properties.

When government dictates how much rent a landlord can collect (thereby limiting income while the landlord’s expenses rise unabated) the result is that landlords invest less in the upkeep of their properties, which is why rent controlled properties deteriorate three times faster than non-rent-controlled properties.

It’s been estimated that there are four times more housing units available in New York City than there are homeless people.  But because it’s cheaper for landlords to abandon their run-down rent-controlled properties rather than paying taxes and maintaining these buildings, thousands of vacant apartment units remain boarded-up while the homeless sleep in the streets.

Economist Stephan Levitt relates how many governmental entities have begun basing their garbage pick-up fees on volume.  The ‘political wisdom’ was that if people must pay for each extra bag of garbage, they’ll have a strong incentive to produce less of it.

But in Seattle, the incentive created was for people to stuff their garbage bags even fuller thus creating problems for trash collectors.  In Germany, “trash-tax” avoiders flushed so much uneaten food down their toilets that the sewers became infested with rats.  In Ireland, a new garbage tax resulted in increased backyard trash burning and St. James Hospital in Dublin reported that the number of burn-patients admitted to the hospital for setting themselves on fire while burning trash, tripled.

What politicians never seem to grasp is that all governmental policies must be evaluated in terms of the incentives they create, rather than the goals they proclaim.  Economists and other social scientists understand this dynamic; unfortunately for us, Biden and his very woke and diversity infused administration don’t have a clue.

Recently French President Emmanuel Macron was in Beijing currying favor with the Chinese and was unabashed in his desire to strengthen ties with the CCP (Chinese Communist Party.)  His press release stated that all of Europe should focus on lowering its dependence on the U.S. dollar.  Then later in an interview with Politico, Macron said European leaders should soften ties to America in certain instances.

So, why did America’s oldest ally (France), a nation we saved from the Nazis in World War II and shielded from the Soviets for half a century afterwards suddenly distance itself from the United States? We can speculate about Macron’s motivation, but we’d be foolish to discount the fact that this was a consequence of our shameful pullout from Afghanistan when we left Macron and the Europeans “high & dry.”

Recall, the European response was one of anger and disbelief after the Biden administration blindsided them by giving Afghanistan back to the Taliban thus making a mockery of the sacrifice of the troops (both American and European) who fought and died there.

Shortly after the shameful retreat from Afghanistan I wrote that this would back to haunt us.   In essence, Joe Biden gave a green light to Putin, Kim, Xi and others making it not unreasonable to suggest that the Russian invasion of Ukraine, North Korea’s return to belligerence and the number nations now contemplating switching their reserve currencies from the dollar to the yuan are very much linked to our ignominious retreat.

Quote of the day: “The law of unintended consequences is the only real law of history.” – Niall Ferguson