Tuesday, February 22, 2005

Meme: Unintended Consequences and Chaos Theory

In the past few weeks I've noticed the popularity of this meme exploding to the level of cliche. What, exactly, are unintended consequences?

From the Library of Economics and Liberty:
Unintended Consequences
by Rob Norton

The law of unintended consequences, often cited but rarely defined, is that actions of people—and especially of government—always have effects that are unanticipated or "unintended." Economists and other social scientists have heeded its power for centuries; for just as long, politicians and popular opinion have largely ignored it.

The concept of unintended consequences is one of the building blocks of economics. Adam Smith's "invisible hand," the most famous metaphor in social science, is an example of a positive unintended consequence. Smith maintained that each individual, seeking only his own gain, "is led by an invisible hand to promote an end which was no part of his intention," that end being the public interest. "It is not from the benevolence of the butcher, or the baker, that we expect our dinner," Smith wrote, "but from regard to their own self interest."

Most often, however, the law of unintended consequences illuminates the perverse unanticipated effects of legislation and regulation. In 1692 John Locke, the English philosopher and a forerunner of modern economists, urged the defeat of a parliamentary bill designed to cut the maximum permissible rate of interest from 6 percent to 4 percent. Locke argued that instead of benefiting borrowers, as intended, it would hurt them. People would find ways to circumvent the law, with the costs of circumvention borne by borrowers. To the extent the law was obeyed, Locke concluded, the chief results would be less available credit and a redistribution of income away from "widows, orphans and all those who have their estates in money."

Summing up

What exactly are unintended consequences? They are ironic. Certainly that is part of their appeal. At the core, they are a byproduct of complex systems. As the world becomes more automated, more complex, more legalistic, more prescriptive, more dogmatic, more populous, more confusing, full of more choices restrictions of choice, so every choice made will inevitably have unintended consequences. Think of the butterfly effect. A butterfly's wings flapping in China could have environmental effects that lead to a drought that causes a famine in Egypt. Chaos Theory is the trendiest of popular, post-modernist theories. Now the reason why the meme is spreading becomes apparent.

The danger of Chaos Theory is that if taken too far, it can lead people to think that their actions have no logical relation to the consequences of their actions. That way leads to nihilism and sociopathy. A much better way to view Chaos Theory is as a warning to always think at least two moves ahead.

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