Trade-offs and Unintended Consequences
By the end of today
You will be able to recognize trade-offs and unintended consequences in public policy and begin to understand why they matter.
Where this fits
We limit government because:
- It is organized coercive force
- Even good people are not omniscient
Today: the knowledge problem and the trade-offs that follow
If men were angels
“If men were angels, no government would be necessary.”
— Federalist 10 (Madison)
Even if they were angels
Good intentions and incorruptibility are not enough.
Why?
The knowledge problem
![Diagram showing a single central planner with incomplete information versus many local actors each holding partial knowledge]()
Knowledge problem: central planner versus dispersed local knowledge
Trade-offs are everywhere
You have $3.
Candy bar or soda?
Every choice has a cost
- Time
- Money
- Attention
- Opportunity
Government faces the same reality
- Collective choices still involve trade-offs.
- The tool is still coercive force.
Benefit versus enforcement cost
The stated goal is only one side of the ledger.
John Hancock
![Portrait of John Hancock]()
John Hancock, smuggler who signed the Declaration
Smuggler evading British taxes.
Eric Garner
![Photograph of Eric Garner]()
Eric Garner
Killed while selling loose cigarettes to evade high New York taxes.
Human costs of enforcement
Unintended consequences
Results that were not intended or foreseen.
They are a form of trade-off.
The cobra effect
![Historical illustration of a government bounty on cobras that led to people breeding cobras]()
Classic cobra-effect illustration of a bounty creating more of the problem
Sin taxes and black markets
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