Cobras, Rules and Unintended Consequences

Unintended consequences happen so often that economists call them “Cobra Problems,” after one of the most interesting examples.

In colonial India, Delhi suffered a proliferation of cobras, which was a problem very clearly in need of a solution given the sorts of things that cobras bring, like death. To cut the number of cobras slithering through the city, the local government placed a bounty on them. This seemed like a perfectly reasonable solution. The bounty was generous enough that many people took up cobra hunting, which led exactly to the desired outcome: The cobra population decreased. And that’s where things get interesting.

As the cobra population fell and it became harder to find cobras in the wild, people became rather entrepreneurial. They started raising cobras in their homes, which they would then kill to collect the bounty as before. This led to a new problem: Local authorities realized that there were very few cobras evident in the city, but they nonetheless were still paying the bounty to the same degree as before. City officials did a reasonable thing: They canceled the bounty. In response, the people raising cobras in their homes also did a reasonable thing: They released all of their now-valueless cobras back into the streets. Who wants a house full of cobras?

The Cobra Effect: Lessons in Unintended Consequences
Antony Davies and James R. Harrigan

Unintended consequences have a price.

Evey human decision brings with it unintended consequences. Often, they are inconsequential, even funny. When Airbus, for example, wanted to make its planes quieter to improve the flying experience for travelers, it made its A380 so quiet that passengers could hear, with far too much clarity, what was happening in the plane’s bathrooms. Other times unintended consequences have far-reaching, dramatic effects. The US health care system is a case in point. It emerged in its present form in no small part because of two governmental decisions.

First, wage and price controls during World War II caused employers to add health insurance as an employee benefit. Why? The law prohibited employers from raising wages, so to attract workers, they offered to provide health insurance. Then, in 1951, Congress declared that employer-provided health insurance benefits would not count as taxable income. This made it cheaper for employees to take raises in the form of increased tax-free insurance benefits rather than in the form of increased taxable wages.

Consequently, not only do workers now receive health insurance through their employers (unlike, for example, their car and home insurance), but those insurance plans also tend to be more luxurious than what they would have been had Congress never given them special tax treatment. These two political decisions helped to create the health care system we now have, a system that nearly everyone agrees is broken.

No one set out to create a broken system, no more than anyone ever set out to make bathroom noises more conspicuous on airplanes. These were unintended consequences. And you can see them everywhere when you know to look.

Unintended consequences happen so often that economists call them “Cobra Problems,” after one of the most interesting examples.

[…]

None of this means there is no place for legislation. What it does mean is that lawmakers should be keenly aware that every human action has both intended and unintended consequences. Human beings react to every rule, regulation, and order governments impose, and their reactions result in outcomes that can be quite different than the outcomes lawmakers intended. So while there is a place for legislation, that place should be one defined by both great caution and tremendous humility. Sadly, these are character traits not often found in those who become legislators, which is why examples of the cobra problem are so easy to find.

The Cobra Effect: Lessons in Unintended Consequences
Antony Davies and James R. Harrigan

The writers of this article are incorrect: men are not to make laws. That’s God’s job.

When governments assume sovereignty to itself – instead of being a servant of God – it inevitably starts to bloat and rot, claiming to be God in truth and in fact.

Men are commanded to administer and interpret God’s law, a job that is difficult enough.

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