To help those allergic to sesame seeds make better dietary choices, Congress passed a law requiring food manufacturers to label sesame on their products. In response to the law, many companies began using sesame in their products for the first time, a measure to prevent potential recalls due to trace amounts of unlabeled items. By including “sesame” on the label, the companies had complied with the law, even though those affected are now inadvertently consuming sesame in products they had safely eaten for years.
The law of unintended consequences.
In response to a late 19th century epidemic of cobra attacks in Delhi and other large Indian cities, the government began offering a bounty for dead cobras. At first, the policy had the desired effect, removing a number of the venomous reptiles from the streets. Eventually, however, enterprising risk takers began breeding cobras simply to collect the reward. When government officials realized what was happening, they ended the program, prompting the breeders to release their snakes, resulting in the exact opposite outcome the policy was supposed to produce.
We see it today whenever a gun control advocate is elected to public office. Gun sales soar.
Any change that quickly occurs at a large scale produces unintended consequences, especially when the change is inorganic. Decision-makers who myopically focus on a single issue run the risk that the second and third order effects of their decisions might be worse than the problem they purport to address.
Draconian, top-down management of complex systems almost always produces unintended second and third order consequences.
It can also happen on the local level. Someone in Knoxville city government decided that having cars on Cumberland Avenue was bad or ugly or dangerous – so they redesigned the area to discourage people from driving there. Mission accomplished. But when the cars disappeared, so did the bars and restaurants. Will college students now get in their cars and drive to bars in the Old City and west Knoxville? Could the new well-manicured golf cart path version of Cumberland Avenue create a false sense of pedestrian security, resulting in more jaywalking and therefore more auto-pedestrian accidents?
For a decade beginning in 1935, the federal government Soil Conservation Service imported and intentionally planted kudzu along rail and highway rights-of-way. We know how that turned out.
Government officials committed to shutting down the world’s economy may have relieved the health care system by flattening the Covid curve, but the many second order effects include an undoing of 20 consecutive years of declining world poverty, increased income inequality, the largest single year increase in the suicide rate, and an increase in excess deaths from all causes – even excluding Covid.
David Moon is president of Moon Capital Management. A version of this piece originally appeared in the USA TODAY NETWORK.