One of my favorite themes, and not just in the field of tech policy, is the “Unintended Consequences of Well-Intentioned Regulations.” I believe that all laws and regulations have dynamic effects and that to fully appreciate the true impact of any particular public policy, you must always closely investigate the potential opportunity costs and unintended consequences associated with those policies. Because all too often laws and regulations are hastily put on the books with the very best of intentions in mind, only to later be shown to produce the opposite of what was intended.
Today’s case in point comes from a Wall Street Journal article by Rachel Bachman and it involves how the growing wave of cycling helmet laws are having a net negative impact on public health because they discourage ridership in the aggregate. Thus, those potential riders are then either (a) just less active overall or (b) driving their cars to get where they need to go. And both of those results are, ultimately, riskier than cycling without a helmet. For that reason, Bachman reports, cycling advocates “are pushing back against mandatory bike-helmet laws in the U.S. and elsewhere. They say mandatory helmet laws, particularly for adults, make cycling less convenient and seem less safe, thus hindering the larger public-health gains of more people riding bikes.” Supporting evidence comes from this 2012 paper in the journal Risk Analysis by Piet de Jong, a professor in the department of applied finance and actuarial studies at Sydney’s Macquarie University. His paper included an empirical model that showed how mandatory bike-helmet laws “have a net negative health impact.”
This strikes me as one of the very best examples of how to do dynamic benefit-cost analysis and show the full range of societal impacts associated with well-intentioned regulations. And it reminds me of the playground example I use in several of my papers: Laws and liability threats discouraged tall playground climbing structures in the ’80s and ’90s. As a result of those policies, kids have been shown to not only be less active on playgrounds over the past two decades, but even more interesting is the fact that some studies suggest this led to phobias and anxieties about heights later in life when those children became adults. Again, dynamic effects matter! In this case, social learning and resiliency was stunted when children lacked the ability to explore and push boundaries. In essence, it’s the “Boy in the Bubble” problem. [Read this 2012 law review article of mine for all the details on this particular case study.]
Of course, those of you who have read your Frédéric Bastiat have already identified these case studies as excellent examples of what the nineteenth-century French economic philosopher was talking about when he famously explained the importance of considering the many unforeseen, second-order effects of economic change and policy. Many pundits and policy analysts pay attention to only the first-order effects—what Bastiat called “the seen”—and ignore the subsequent and often “unseen” effects. In both these cases, policymakers were myopically obsessed with the short-term “seen” benefit of bike helmet laws or playground safety restrictions. At first blush, it probably seemed like their was no downside to such rules. Of course, a fuller exploration of the potential dynamic effects associated with those policies revealed the opposite effect: They discouraged public health in the aggregate.
Again, every action—especially political and regulatory action—has dynamic consequences. Paternalistic public policies may sound sensible on the surface, but as Milton Friedman taught us long ago, “One of the great mistakes is to judge policies and programs by their intentions rather than their results. We all know a famous road that is paved with good intentions.”
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[Note: If you are interested in more examples like this, I encourage you to read, “The Unintended Consequences of Safety Regulation” by my Mercatus Center colleague Sherzod Abdukadirov.]
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