You get what you pay for, and how

Posted by Marc Hodak on May 14, 2007 under Unintended consequences | Read the First Comment

Glenn Whitman wrote a wonderful essay called Slavery, Snakes, and Switching. This essay is a compendium of unintended consequences. Here are a few:

* Subsidizing slavery: Several Western charities learned about children in central Africa taken away from their villages and sold into slavery. These charites raised a considerable amount of money to buy the freedom of many of these slaves. They also inadvertently created an incentive to capture more children for eventual sale. Many of the kids they freed may not have been captured in the first place if they had not made the funding available to pay for them.

* Making health care less affordable: Every state mandates specific levels of care that must be provided by insurance companies–cancer care, psychiatric care, acupuncture, etc. Politicians want to claim that they are providing the best coverage possible to their people. What the people end up with, however, is a crisis of uninsured. The mandates basically force “Cadillac” coverage on everyone. If you can only afford “Chevy” coverage, you may have little choice but to go without.

* Paying for snakes: An Italian town paid its people for dead snakes in an effort to provide incentives to get rid of the snakes. What they got was more snakes. People began growing the snakes in order to kill them and turn them in.

Read the whole thing! The article provides a very interesting framework around the economics of unintended consequences.

(HT: Cafe Hayek)