Thursday, January 24, 2008

The Law of Unintended Consequences

I also suppose this post could also be titled "The Unintended Consequences of Law." Either way, it's about how when we attempt to direct the market, we frequently create additional problems. This is not to say that the problems would not arise if the market led us to the same point...just that we frequently don't think things through.

The example comes from an article in today's issue of The Wall Street Journal titled The Dark Side of Green Bulbs. And while the illustration features a compact fluorescent light (CFL) partially morphed into a skull-and-cross-bones, it deals with issues beyond lighting. Specifically it points out that, in our rush to develop more efficient appliances and to become more efficient energy users, we are creating additional environmental issues. The article also points to a couple of examples of market players stepping up to deal with the consequences.

As far as lighting goes, I believe the market would have seen a substantial voluntary move toward CFLs from the traditional incandescent by itself. And I think more efficient lighting is in the offing. However, I also believe that government mandates to force people to move in a certain direction only creates other problems...or in this case, brings them to a head sooner.

I encourage you to use this article in your economics or personal finance classes. For the former, it could make for a debate on the role of government in the marketplace. For the latter, the discussion could revolve around short-term vs. long-term costs and how we, as individuals, pay for our decisions. Either way, I suspect it will make for interesting discussion. I look forward to your comments.

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