Paved with Unintended Consequences

Economists, especially those of us who criticize government interventionist policies, often point to bad unintended consequences that many of these policies lead to. Sometimes people say that we delight in pointing to such policies, but that verb certainly doesn’t apply to my attitude. There is typically nothing delightful at all in these consequences, many of them tragic. In this piece, I’ll cover six cases, but they’re a tiny fraction of the cases that exist and even a tiny fraction of the cases I know.

We need to distinguish between unintended and unpredicted consequences. Many unintended consequences can be easily predicted. Others might not be. An example of an unintended consequence that I never would have predicted, and that the highly paid “experts” at the Food and Drug Administration didn’t predict, came about because of an FDA regulation that, on its face, looked reasonable. The regulation was an FDA mandate that food containing sesame be labeled as such. Almost instantly, food producers predicted the consequences and acted accordingly.

This is from David R. Henderson, “Paved with Unintended Consequences,” Defining Ideas, October 5, 2023.

Another excerpt:

Ayanna Pressley (D-MA) and Rashida Tlaib (D-MI) have proposed federal legislation to prevent landlords from doing criminal background checks on prospective tenants. In the writeup on Pressley’s site, I can’t find her addressing why landlords would want to know whether potential tenants have a criminal record. Is it because they don’t want criminals no matter what those criminals did? Hard to believe. I own a small share of a large apartment complex and I know why I want the general partner to do criminal background checks: to see if there’s any evidence that they would fail to pay rent, wreck the apartment, or carry on illegal activities in the apartment. The virtue of a criminal background check is that you can find out specifically what crime the person committed. What if he smoked weed twenty years ago? Who cares? My guess is that the general partner doesn’t.

What would happen if this bill passes? Would landlords say, “Oh, well, I guess I’ll have to take all comers”? No. Instead, they would look for what statisticians call “noisier” data, data that are correlated with criminality. The result would be that some people with no criminal record would get turned down.

Who would be turned down? Two researchers, Marina Mileo Gorzig and Deborah Rho, did a study for the Federal Reserve Bank of Minneapolis to look for the answer. They chose a clever methodology. They sent fictitious e-mails to landlords using names that looked to be those of whites, blacks, and Somalis. After the Minneapolis government banned criminal background checks, they found, “discrimination against African-American and Somali-American men increased.” Moreover, found the researchers, discrimination increased in Minneapolis relative to discrimination in St. Paul, whose government had not imposed the policy.

I’m tempted to ask Reps. Pressley and Tlaib, “What do you have against blacks and Somalis?”

Read the whole thing.