In my ECONS102 class last week, we spent a bit of time considering unintended consequences. Sometimes, a policy unintentionally creates exactly the opposite effect to what was intended, such as this example I wrote about in 2015:
The government was concerned about the number of snakes running wild (er... slithering wild) in the streets of Delhi. So, they struck on a plan to rid the city of snakes. By paying a bounty for every cobra killed, the ordinary people would kill the cobras and the rampant snakes would be less of a problem. And so it proved. Except, some enterprising locals realised that it was pretty dangerous to catch and kill wild cobras, and a lot safer and more profitable to simply breed their own cobras and kill their more docile ones to claim the bounty. Naturally, the government eventually became aware of this practice, and stopped paying the bounty. The local cobra breeders, now without a reason to keep their cobras, released them. Which made the problem of wild cobras even worse.
Now, if you've ever been to the U.S., then you may have noticed the absence of public toilets. Unlike New Zealand and many other countries, there are simply no public toilets to be found. If you are caught short, you need to find a Starbucks or McDonalds or the like. Why is that? John Cochrane provided the answer yesterday:
Answer: Because it's illegal to charge for toilets. There were once abundant public toilets in America, as there are in many other countries. And you pay a small fee to use them. A small fee that everyone in Nicholas' stories would have been delighted to pay...
The absence of pay toilets is in fact a delightful encapsulation of so much that is wrong with American economic policy these days. Activists decide free toilets are a human right, and successfully campaign to ban pay toilets. For a while, existing toilets are free. Within months, upkeep is ignored, attendants disappear, and the toilets become disgusting, dysfunctional and dangerous. Within a few years there are no toilets at all. Fast forward, and we have a resurgence of medieval diseases that come from people relieving themselves al fresco.
Cochrane's post is worth reading in its entirety. His blog is called The Grumpy Economist, and you can see why. Anyway, the point is that, in an effort to make public toilets more affordable and accessible, by making them all free, government policy eliminated the incentives to provide public toilets at all, meaning that none are now provided. Classic unintended consequences.
[HT: Marginal Revolution]
The thing that left me unpersuaded by Cochrane's argument was NZ. As far as I know there is no ban on charging for using toilets, few public toilets do charge, and yet there are a lot of public toilets - some really grotty, but most not.
ReplyDeleteNorms are important too. In a country like NZ where providing a range of public services at no marginal cost to the public (and funded from taxation) is a norm, private toilet providers would be competing with a free alternative, so there is no market. And so there's never been a need to ban charging for toilets. Paid public toilets are increasingly taking over though, so it will be interesting to see how long it will be before there is a human rights campaign to ban charging for toilets. Then we'll get to see if the same consequence holds in NZ.
DeleteU.S. has more of a norm of small government. I imagine that public toilets probably have never been a big thing there (and this article seems to corroborate that: https://www.jstor.org/stable/43306014). The policy outlawing charging for toilets crushed any chance of a private market too, except for the likes of department stores or Starbucks, offering toilets as an ancillary service. Of course, that was the opposite of what was intended.
Most of Cochrane's post is a libertarian gripe about government interference in the market, but the point about unintended consequences (in the US context) is fair at least.