The Law of Unintended Consequences warns us that when governments exceed their God-given sphere of competence the unintended consequences of their actions mean that we are worse off than if nothing was done. The actual outcome is usually the direct opposite of what was intended.
Another way of expressing the law is, beware politicians with a grand vision. Grand visions usually turn out to be grandiose, causing a great deal of unintended harm, pain, and suffering.
The current economic malady has produced a number of grand visions. We have had a few in New Zealand. One example is the "feel good" policy of the government funding home insulation. We are told that this is a win,win,win. Well, that's it then. Who could possibly object?
The protagonists argue thusly: the government needs to spend money to keep the economy from sliding into depression. So, funding home insulation gets a tick. It will fund jobs that would not otherwise exist. Secondly, people will end up with warmer, better insulated homes. This will reduce sickness and disease--thereby lowering public health costs. Tick. In the long run it will reduce government spending. Tick. Thirdly, heating costs will be lower, thereby reducing our "carbon footprint", lowering demands for energy, and reducing our national pollution. Tick.
It has to be good. There simply aren't any downsides. As we said, it is win, win, win. We have shattered the Law of Unintended Consequences!
Well, not quite. Firstly, the government will have spent money it does not have--thus increasing our national debt burden. That is a bad outcome. Secondly, the jobs will be unsustainable. They will exist only by virtue of government subsidy--thus no real long term national wealth based on sustainable production. Meanwhile, there is an opportunity cost. Those home insulators could have been employed in jobs producing goods and services that would be sustainable and productive.
Thirdly, home insulation is likely a crock. Modern methods of home insulation seal up houses so that air is kept within a house. Over time, it entraps moisture in the house, leading to mould and dampness--ideal conditions for respiratory diseases and maladies like colds and flu. Moreover, the more damp a house is, the more energy it takes to heat it, and keep it warm. Thus, the outcome of home insulation is more likely to be greater energy costs and a less healthy population.
Snap. The Law of Unintended Consequences will bite with a vengeance. The actual outcome will be the exact contra-polar opposite of the intent. We expect that within fifteen years we will be hearing how stupid we all were back in the noughties, when home insulation was the official flavour of the decade.
Another example of unintended consequences has recently come to light. Spain has been touted as having a progressive and advanced policy on creating "green jobs" through state subsidisation of "clean energy" projects (wind farms and the like). Now, however, the truth has started to emerge. A study has been undertaken by Dr Gabriel Calzada, an economics professor at Juan Carlos University which has shown that in Spain for every four jobs created through state subsidised green energy projects, nine jobs were lost.
State subsidising of green jobs results in rising unemployment! Now, of course, President Obama has cited Spain as the country he wants to imitate in his green jobs initiative (part of the huge public spending to stimulate the economy.)
"Think of what’s happening in countries like Spain, Germany and Japan, where they’re making real investments in renewable energy,” said Obama while lobbying Congress, in January to pass the American Recovery and Reinvestment Act. “They’re surging ahead of us, poised to take the lead in these new industries.”
“Their governments have harnessed their people’s hard work and ingenuity with bold investments — investments that are paying off in good, high-wage jobs — jobs they won’t lose to other countries,” said Obama. “There is no reason we can’t do the same thing right here in America. … In the process, we’ll put nearly half a million people to work building wind turbines and solar panels; constructing fuel-efficient cars and buildings; and developing the new energy technologies that will lead to new jobs, more savings, and a cleaner, safer planet in the bargain.”
Yup. Win, win, win. The guy's a genius. Well, actually, no. Obama's great green energy spending initiative will make energy in the United States more expensive, less efficient and productive, and it will destroy permanent jobs. Moreover, the Spanish study concluded that only one in ten jobs created in the "green energy subsidy" rort actually turned into a permanent job. So even the jobs that were created have largely proved to be impermanent.
But who can gainsay a politician with a grand vision, who chants "yes, we can". Well, no-one. Expect the Law of Unintended Consequences to bite deep and painfully.
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