I find economics to be pretty dry stuff. With so many variables, predicting the outcome of a certain action is a bit like forecasting the weather, with about the same rate of accuracy as near as I can see. There’s not much we can do to affect the weather (global warming aside). But when it comes to economics, everything we do affects it. That’s the collective we, including large aggregations of us, like governments and corporations, which affect the economy in their own hulking way. And considering how bad we are at prognosticating both weather and the economy, I wonder at the wisdom of economists trying to manipulate the beast.
Consider the Law of Unintended Consequences. It is one of the core concepts of economics, famously illustrated by Adam Simth’s “Invisible Hand.” In essence, each individual, seeking just his own best interest, “is led by an invisible hand to promote an end which was no part of his intention,” that end being the public interest. “It is not from the benevolence of the butcher, or the baker, that we expect our dinner,” Smith wrote, “but from regard to their own self interest.” Our Capitalistic system thrives on the notion that if we just leave it alone, the Market will run itself. There will be a nice, healthy balance between businesses competing to build the best widget for the best price, and consumers choosing the winner. A kind of economic Darwinism.
And Darwinism is a pretty good metaphor for the way it works. The greater good is not generally on anybody’s mind; it’s what will benefit them and their family. And if that includes something that will prove disastrous to the majority, well, too bad. Me and mine are entitled to our survival/profits. And to be fair, those who make selfish choices for their own benefit aren’t doing so maliciously. Any suffering those choices might cause are Unintended Consequences. An infectious disease doesn’t mean anything personal; it’s just following the successful strategy that worked so well in the past to propagate itself.
So we create laws and social programs to try to counteract the most egregious of the Market’s Unintended Consequences. Rather like using antibiotics to counteract the worst of what Natural Selection in the germ world has thrown at us. Unfortunately, the Law of Unintended Consequences rears its head again. Our laws and social programs affect the economy in ways we didn’t anticipate, not to mention provoking the perpetrators of the problems we are trying to solve into discovering more devious ways to accomplish their ends. Rather like our use of antibiotics provoking the germs we are battling to evolve greater immunity.
The Law of Unintended Consequences governs each of us as we go through our lives making choices. We decide to move, to change jobs, to marry, based on the benefits we anticipate will come out of it. But then we discover all those unanticipated effects of our choices. The dog we adopt thinking how wonderful it will be for the kids to grow up with a companion, like in all those stories, proves resistant to housebreaking, howls in the night, and chews up shoes. It’s another logistic to have to deal with every time we want to go on vacation. The vet bills are more than anticipated and the food bill is tremendous for that loveable mutt who seemed so much like Clifford or Mudge.
Marriage is not the endless walk on the beach we thought it would be; the new boss is even more of a demanding tyrant than the old one; the new computer comes with megabytes of frustration. We would probably never do anything if we really knew what we were in for.
But then, what poor lives we would live.
It would be foolish to abandon our economic system because it malfunctions appallingly from time to time, or give up the idea of laws and social programs because they sometimes yield less than stellar results. I doubt anyone would give me an argument to stop using antibiotics altogether because of the super bugs they’ve bred. We just keep tweaking and tinkering based on what we learn, dealing with the side effects as they arise. Sometimes the Unintended Consequences, like Adam Smith’s invisible hand, are good. That blasted dog who needs to be walked every day is getting you the exercise your doctor recommended.