Trying to fix problems that affect vast numbers of people has an intuitive appeal that politicians and policymakers find irresistible, but several warehouses of research studies show that intuition is often a poor guide to fixing systemic problems. While it seems like common sense to pump money into an economy that is pulling the bedcovers over its head, the problem with most social interventions is that they target not robots and machines but human beings -- who regularly respond to interventions in contrarian, paradoxical and unpredictable ways.Vedantam adds, a little later, that
"How well does government do in helping the market to improve what it does?" asked Clifford Winston, an economist at the Brookings Institution and the author of the 2006 book "Market Failure Versus Government Failure." "The research consistently finds that, in fact, government efforts to correct market failures have little effect, or actually make things worse."
"There is a tendency for people to say, 'If things are safer, then I will take more risk,' " he added. "It does not have to involve government interventions: Drugs are developed to reduce blood pressure, so people say, 'Okay, I can eat more, and it does not matter if I gain weight, because I can take this pill.'"
Previous research has shown that people drive faster in vehicles that feel safer, attempt to bike on more dangerous terrain when they wear helmets and pay less attention to infants being bathed when the children are in seats that are said to reduce the risk of drowning.
He [Winston] once studied the effect of installing air bags in cars at a time when automakers were offering customers the option of buying cars with and without the safety devices. Winston found that people who bought cars with air bags tended to be the safest drivers to begin with. And now, lulled into a sense of security, they tended to drive faster, effectively canceling out the safety benefits.The basic insight here is nothing new. In the 1960s the US government bought in a range of automobile safety legislation. They mandating the use of seat belts, padded dashboards, collapsible steering columns, dual braking systems, and penetration-resistant windshields.
What were the effects of this? First note that the regulations tended to decrease the number of driver deaths by making it easier to survive an accident. But at the same time, the regulations tended to increase the number of driver deaths by encouraging reckless driving behaviour. Which effect is the greater? Do we see an overall increase or decrease in driver deaths? In the middle 1970s, Sam Peltzman of the University of Chicago looked at the evidence. What he found was that the two effects were of approximately equal size and therefore canceled each other out. There were both more accidents and fewer driver deaths per accident, but the total number of driver deaths remained essentially unchanged. But perhaps the must interesting result found in the Peltzman study was the side effect that the regulations appeared to have leading to an increase in the number of pedestrian deaths; those outside the car are affected by the increase in accidents, but are not protected by the in-car safety equipment.
When explaining these results Steven Landsburg asks
If the seat belts were removed from your car, wouldn't you be more cautious in driving? (p.5)He then notes
Carrying this observation to the extreme, Armen Alchian of the University of California at Los Angeles has suggested a way to bring about a major reduction in the accident rate: Require every car to have a spear mounted on the steering wheel, pointing directly at the driver's heart. Alchian confidently predicts that we would see a lot less tailgating. (p.5)The fundamental message from all of this is, "people respond to incentives." And politicians and policymakers need to remember this when designing policy.
Update: Not PC is concerned about Unintended consequences.