Just say no to unintended consequences

by Russ Roberts on August 19, 2009

in Intervention, Man of System

One of the unintended consequences of the cash for clunkers program is that it is hurting charities. As USA Today reports:

Charities across the country are concerned that the popular “cash-for-clunkers” program will entice people to junk old cars for credit toward new ones rather than donate them.

“We know there’s going to be a significant impact,” says Chad Iseman, director of the Kidney Cars program for the National Kidney Foundation. Iseman says the foundation gets about 19% of its annual revenue from selling donated cars. The charity said it estimates a 10% to 15% decline because of the federal rebates.

But I love this quote from the White House:

White House spokeswoman Jen Psaki says the program, which got a $2 billion boost Friday, will have a “negligible” effect on charities. Psaki says the Car Allowance Rebate System (CARS) was created to provide a “timely, temporary and targeted” economic stimulus and was not intended to divert vehicles from charities.

What she seems to be saying is that because CARS wan”t intended to affect charities, the effect has to be negligible. So unintended consequences don’t exist. Beautiful. It is always good to remember your Hayek:

The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.

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{ 23 comments }

joenorton August 19, 2009 at 6:10 pm

That’s a riot.

Curious August 19, 2009 at 6:35 pm

The idea that the Government should not act because of the unintended consequences seems specious to me. Do people who argue that the government should not pass policies because of the unintended consequences also agree that car manufacturers should not ever manufacture cars because of the unintended consequences of automobile pollution and fatalities from car accidents?
Even living one’s life has unintended consequences. Does that mean people should just stay in bed every day to avoid any unintended consequences that they could cause? Simply arguing that actions have unintended consequences is not sufficient justification to support the idea that Government action should not occur.

Anonymous August 19, 2009 at 6:44 pm

Huh where does it say in the Constitution that the Federal government should have a “cash for clunkers” program? My god this country is filled with ignorant idiots who know nothing of basic civics.

Ike Pigott August 19, 2009 at 7:23 pm

Curious, you completely missed the point.

ALL consequences should be weighed in decisions. Once Unintended Consequences of an activity are identified (either through unforeseen variables or misjudging of human reaction) one needs to re-evaluate.

The hubris Russ describes is an utter disregard for the very existence of Unintended Consequences.

I was engaged in an online discussion with an ardent proponent of ObamaCare. He was very direct that he had read every page of the bill, and was not capable of understanding that a bill’s INTENT is a very different animal than its EFFECT.

Ron August 19, 2009 at 7:27 pm

No, but the argument is that government pretends like there are no unintended consequence that only their intentions are relevant. Problems arise for individuals and governments alike when they pretend there are no unintended consequences.

Yet Another Methinks August 21, 2009 at 1:34 am


cash for clunkers program is that it is hurting charities

When Congress perpetrates something that is so obviously wrong, so obviously ass-front-wards that you see new argument against it every day do you then get the eerie sensation that the minor irritation of the perpetration is merely a smoke-screen, merely a distraction to take the critic’s mind off a much more horrendous outrage of enormous insidious scam silently creeping toward us?

Arrrrgghhh
!

I_am_a_lead_pencil August 19, 2009 at 7:47 pm

Simply arguing that actions have unintended consequences is not sufficient justification to support the idea that Government action should not occur.

Private actors do not spend my money going about their work. Government does. The burden of proof, with respect to public policy, should be on those proposing action with my money. Public policy is sold on the basis of its goals rather than its net results. Instead of admitting the potential harm of these rather obvious consequences, they pretend as if they do not exist, as Russ points out. Any acknowledgment of a problem by spokeswoman Psaki would have made it clear that they were either:

a. Ignorant of the potential for these economic consequences beforehand.
b. Deliberately picking winners and losers beforehand.

Since a block of real voters also make up the losers in scenario b, it is unlikely they will admit to having knowledge of the potential for their demise.

Anonymous August 19, 2009 at 11:39 pm

Curious, you are correct that unintended consequences abound. The point you are missing is this: when I take an action that has negative unintended consequences, they only redound to me (or maybe an immediate circle around me). The negative consequences that result from a government’s policy affect the entire population.

Anonymous August 19, 2009 at 6:48 pm

What matters to libs is intentions, not results (or human nature).

Until that attitude changes, they will be the kings and queens of unintended consequences.

Sam Grove August 20, 2009 at 1:40 am

They seem to hold that intentions are a substitute for results.

speedmaster August 19, 2009 at 7:03 pm

Hubris meets ignorance.

speedmaster August 19, 2009 at 7:04 pm

I’m also generally leery of laws that have names that are nifty acronyms.

hawk30 August 19, 2009 at 7:09 pm

I’m just leery of laws.

joenorton August 20, 2009 at 2:04 am

I’m just leery of acronyms.

Justin P August 19, 2009 at 7:35 pm

This was my list from the Quiz for Clunkers post.

“Partial list of unintended consequences:
1. The poor will be worse off since there will be fewer lower prices, perfectly usable cars on the market.
2. Short term boost in auto sales for dealerships, all this does is reduce inventory, by offering incentives to buy but does nothing about the long run outlook for the auto manufacturing companies. The underlining problem is why there was so much pent up inventory? That’s something government fiat cannot fix.
3. From number 1, we will see a “crisis” in “affordable” cars for the poor, looks for another government program to help elevate that, which will cost even more tax dollars.
4. From number 2, the auto companies will see this short term boost as a sign of consumer confidence and long term expectations. They will boost production, but quantity demanded hasn’t changed. If anything quantity demanded will go down in the long run because of this program. The Auto companies will loose money in the long run because of C4C and will require government intervention, which thanks to all those campaign donations, they’ll receive able tax money to pay for their foolish investments.”

The only thing that hasn’t happened is number 3, but I’m sure it will soon enough.

Love your Hayek quote, wisdom is eternal.

Anonymous August 19, 2009 at 11:52 pm

Massive spin job in Ohio today:

http://www.autoblog.com/2009/08/18/breaking-gm-ups-production-due-to-cash-for-clunkers-1-350-unio/

This was all over the news, including The Governor out there explaining how Cash-For-Clunkers is such a raging success. Sometimes I just can’t help yelling at the radio during the ride to work.

louh August 19, 2009 at 11:58 pm

The White House is being consistent, their stimulus program has had no unintended consequence. It was a welfare program and vote buyer for the Democrats, and it has achieved that end and nothing else. There was absolutely no unintended growth, or boost to the economy. Three cheers for a transparent, consistent government policy.

Ray Gardner August 20, 2009 at 1:06 am

My favorite line of reasoning by the media is that it has all been a huge success simply because they’ve given away so much money.

Mark August 20, 2009 at 2:50 am

Aside from charities, the other unintended consequence is that cash for clunkers will create more surplus in the allready downtrodden recycled metals market.

My car is worthy of replacement and I researched to see if my subaru qualified for the rebate. Unfortunately, it is allready considered a low mileage car.

Per Kurowski August 20, 2009 at 11:16 am

Yes like giving so much power to the risk sentries the credit rating agencies and not thinking that precisely that made turned these into very juicy targets for a capture.

Lenny August 20, 2009 at 5:52 pm

Ignoring the fact that the whole thing is based on a bad premise to begin with, what bothers me most about this is how arbitrary the whole thing is.

The original program was given a $1B budget with a particular time limit. Don’t bother asking what’s behind those numbers – they’re both arbitrarily chosen. When the money went faster than expected, another $2B was arbitrarily added to the program – which only underscores how arbitrary the first number was.

Now we see the white house making the arbitrary statment that the program “will have a “negligible” effect on charities”. There’s no way that there is any research or data behind that statement. I am aware that if I state there is a negative effect on charities then I am being just as arbitrary although I can at least point to a mechanism that could produce that effect.

This has really made me see how much of what congress does is arbitrary and based on arbitrary statements leading to arbitrary decisions.

Anonymous August 20, 2009 at 10:26 pm

Politicians were told before the program was passed that car donation charities woulbe hurt by it. We asked that the c4c cars g to charity with the charity deciding their fate. Cars in good shape would be given to the poor or sold. Those in poor shape would be junked. Our concerns were not taken seriously.
http://www.cars4charities.org

aaron August 21, 2009 at 5:22 pm

From the Economist bloggers:

http://www.economist.com/blogs/freeexchange/2009/08/the_latest_on_cash_for_clunker.cfm

LUCAS DAVIS and Matthew Kahn suggest that you can’t judge America’s cash for clunkers policy without considering its international impacts—and its international impacts are troubling:

““Cash for clunkers” programmes can reduce carbon emissions both in the US and abroad, though at a high cost to consumers in developing countries. Because retirement rates are lower in low-income countries, imported vehicles may be driven for years while such vehicles would be scrapped under the cash for clunkers programme. This programme effectively raises the price of used vehicles in developing countries.

In addition to affecting greenhouse gas production, the “cash for clunkers” programme also affects average vehicle emissions in importing countries. If the exported vehicles are dirtier than the average vehicle registered in the exporting nation but they are cleaner than the average vehicle registered in the importing nation, then trade in used vehicles will reduce average vehicle emissions in both countries.

In our new paper…we document evidence of this trading pattern…Our NAFTA research has documented that the US is exporting relatively high-polluting vehicles to Mexico but that these vehicles are cleaner than the average vehicle currently registered in Mexico. This suggests that trade lowers the average vehicle emissions in both countries. Since Mexico’s total base of registered vehicles is much smaller than the US, the composition shift is much more quantitatively important for Mexico than it is for the US.”

The authors note that the net effect of the policy on total greenhouse gas emissions depends on several behavioural responses; will developing nation residents respond to an increase in used car prices by driving older and dirtier cars longer, by not driving, or by purchasing a new vehicle? Will Americans respond to the programme by simply driving more? As an environmental policy, the effect of cash for clunkers is far from clear and may well be counterproductive.

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