Tuesday, September 14th, 2010 at 2:16pm

Unintended Consequences

Posted by admin

Government legislation, laws and regulations “solve” a problem through  coercion and almost always have unintended bad consequences.   A few non intuitive examples:

TRAFFIC SIGNALS CAUSE MORE ACCIDENTS. – research shows that traffic flows better with less accidents when there are no traffic signals.   Drivers have to be more alert so they make less mistakes. Drivers signal to each other which is faster than waiting for lights.

SEAT BELT LAWS CAUSE DEATHS – The total number of deaths from traffic accidents has increased even though there are less motorist deaths.  Drivers who voluntarily wear seat belts are more cautious in general.   Forcing the reckless driver to wear seat belts causes them to be more reckless than they would be without the belts and they kill more pedestrians and bicyclists.

ZONING INCREASES CRIME – Where business and residential mix, residents, businesses and customers’ mutual interest creates an informal neighborhood self-policing.   Engineered neighborhoods end up the most decrepit and crime ridden unless they pay for doormen, security patrols and private gated security.  Projects for the poor with plazas and long corridors that people don’t usually frequent defeat the neighborhood eyes which stop crime.  

BANK RUNS ARE GOOD AND KEEP BANKS HONEST – Government regulation, bailouts and deposit insurance allow bankers to take unreasonable risks.  They lend out more than they actually have (reserves).   In a competitive free market, bank failure is a necessary mechanism for bankers to be more careful with their funds.   What they should be doing is keeping 100% of their reserves.  If you want withdrawal on demand they charge you a fee for keeping your money safe and for checking.  If you want to earn interest, you must put the money in a time deposit CD.  It is not available to you because it is lent out. 

GOVERNMENT STIMULUS DOES NOT JUMP START THE ECONOMY – It just moves money from one part of the economy to another usually contrary to where it should best be allocated according to the intelligence of the market. 

WARS AND DISASTERS DO NOT JUMP START THE ECONOMY – War kills millions of workers and consumes resources.  Repairing or Replacing resources doesn’t create new wealth.   Without the war we would have had the people and the resources and the new business.  If a hurricane breaks a window replacing it may benefit the glazier but is a wash to the economy as a whole.   The gain for the glazier’s business is offset by business lost elsewhere in the economy now that the capital has been spent on the window.  If the window wasn’t broken I would have enough money to buy a suit.  Repairing the window uses up the money.  Repair gives the glazier business but the tailor loses an equal amount of business.  

Moral –  Government interference is more harmful than helpful.   Together the people are more intelligent than a small number of government pencil pushers.  

Above summarized from “The Politically Incorrect Guide To Capitalism” by Robert P. Murphy Ph.D., Regnery Publishing 2007

Reliance on the government leads people to be less responsible.  Instead of talking to their neighbors they call the Police when they hear a loud argument or a child breaks a window.  Rules and regulations replace common  sense and leads to the spectacle of a school principal calling the police to arrest an 8 year old child with a water pistol.