The law of unintended consequences explained

Undercover Economist Tim Harford

TEXT OF INTERVIEW

KAI RYSSDAL: Try as you might, things don't always work out the way you planned. Sometimes quite a bit worse. It's called the law of unintended consequences. It happens to people and it happens to governments, too — despite their best intentions.

Tim Harford is our Undercover Economist. His story today begins with a pile of rubble across the street from his house

TIM HARFORD: Well it used to be a church, a very nice church as well, Kai, but the owner of the church knocked it down to build apartments. Now that's not a big surprise, I guess, except that the reason they knocked it down was because the local authority was trying to stop them knocking it down.

RYSSDAL: So they were trying to save it, but they destroyed it?

HARFORD: What happened was the local authority decided they were going to give it historic preservation status, which means that you needed to get special permission before you knocked it down. And, well, think about it: If you owned a church and you're a developer, you're thinking you might knock it down and build apartments, or you might hold onto it for a bit, see how the market moves. And then suddenly the local authority says in three months time you're not going to be able to knock down this church without our express permission. Well, what are you going to do? You knock it down straight away.

RYSSDAL: But you know, developers may well just decide to knock it down all the same, regulations or no?

HARFORD: Well that's true but even if they do that, it's not exactly a brilliant success of a regulation if it just doesn't prevent the kind of thing you were hoping it would prevent. Actually this doesn't just apply to churches. There's a big debate in America about the Endangered Species Act of 1973 and the question some economists are asking is, does the Endangered Species Act endanger species? And it's for exactly the same reason. The moment developers, for example, or farmers fear that they're going to lose the right to develop their land because some rare owl or woodpecker might have been spotted in the area, they move at once.

RYSSDAL: Well, put on your economist hat for me for a minute here, Tim, and help me figure out a solution to the problem that this presents.

HARFORD: Well the economist says it's probably not a great way of preserving the environment to tell people they have six months to do whatever they like to the environment and then after that they won't be able to. That's a way of really forcing people to move.

So one thing you could do is you could introduce temporary restrictions immediately. You'd say actually we think there might be woodpeckers, we think we might want to introduce a conservation area so until we decide you can't do anything. Well that's one possibility but you're putting a lot of responsibility on the government to make smart decisions and economists are nothing if not a bit skeptical of government's ability to make those decisions.

So here's another possibility: If the government really wants to preserve that forest or preserve that church, well the government should buy the church or the forest. Now, that could get expensive but it's a way of forcing the government to take responsibility for making the right decisions.

RYSSDAL: What if I don't want to sell it? I want to keep on to my option?

HARFORD: Well if it's worth more to you as a private landowner than the government's willing to pay, you're just saying actually people really want these apartment blocks and you the government on behalf of the taxpayer can't seem to summon up much interest for preserving the church so can you really be so confidant that it should be the church and not the apartments?

RYSSDAL: Tim Harford's book is called "The Undercover Economist." That's what we call him too. Tim, thanks a lot.

HARFORD: Thank you.

About the author

Kai Ryssdal is the host and senior editor of Marketplace, public radio’s program on business and the economy.

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