By Kevin Meyer
Grim Reader is always one of my favorite reads as Eric never fails to challenge my intellectual capacity. Of course some of you will claim that’s no major challenge.
A couple weeks ago he started a series that dived into a pet peeve of mine: the inane ability of regulations and policy programs to create layers of unintended consequences. In the past I’ve referred to it as a poking the balloon… push in one place and something will happen elsewhere, often where least expected.
Eric begins with a simple mathematical model to show that conundrum, then eloquently makes the point I’ve long promoted:
A favorite theme of mine is the idea that every organizational regime contains elements of its own destruction, and that no regime is free of this. I believe that this is the fundamental fallacy with the technocratic state and is the analytical blind spot for policy wonks. They seem to believe that any imperfection may be corrected with precise policy adjustments. But at every step, they "discover" new problems.
He provides one real-world example – I’m sure each of us could recall a dozen others.
As part of anti-malarial campaign in the northern states of the island of Borneo in the late 1950's, the World Health Organization sprayed DDT and other insecticides to kill the mosquito vector for malaria. As a consequence of this effort, the incidence of malaria in the region fell dramatically. However, there were two unintended consequences of this action. There was an increase in the rate of decay of the thatched roofs covering the long houses because a moth caterpillar that ingests the thatch avoided the DDT but their parasite, the larvae of a small wasp, did not. Also, the domestic cats roaming through the houses were poisoned by the DDT as a consequence of rubbing against the walls and then licking the insecticide off their fur. In some villages, the loss of cats allowed rats to enter, which raised concerns of rodent-related diseases such as typhus and the plague. To rectify this problem in one remote village, several dozen cats were collected in coastal towns and parachuted by the Royal Air Force in a special container to replace those killed by the insecticides.
Parachuting cats – got to love it. He also tells the mind-blowing story of what happened when the Florida everglades were drained to reduce disease-carrying mosquitoes, which created sugar plantations, which caused sugar prices to dive, and then the really bizarre solution eventually proposed by Clinton and Gore.
The bottom line?
Each displacement to an equilibrium will cause at least one change in the equilibrium. At least one adjustment needs to be made to restore the equilibrium to efficiency. This is Second Best theory at its simplest. However, few analysts go beyond that and recognize that each of the secondary disturbances, the "corrections", will also create disequilibria that must be adjusted with 3rd and 4th order corrections. In their analysis, somehow, the original disturbance -- the market failure -- must be corrected, but the secondary disturbance -- regulation -- is perfect? Maybe in a one or two dimensional model, but the real world is not one or two dimensional.
Yes we’re picking on government here – perhaps because it is simply so easy. But similar circumstances and patterns exist in any organization – any bureaucracy - and yes any political party. How often do we attack a problem by looking at only that problem… without analyzing the root cause and potential peripheral and secondary effects of the proposed solution. Regulation, whether handed down from on high by a government nanny or some corporate suit, is like inspecting in quality. It doesn’t really solve anything. The original process creating the defect is still there and all you’re doing is adding more cost to inspect and find the defect after all the value-added has been sunk into the process. Then propagating secondary and tertiary and so on effects are created by the layers of regulatory band-aids that try to corral the cascading effects.
Unmanageable, unsustainable, and increasingly costly and inefficient. Even today we have some wonks that want to “regulate cost out of the process” in health care or by the nonsense and anti-partner concept of extending payment terms to Net-60 or longer. Good luck with that.
Fix the fundamental original process, don’t poke the balloon.