Beware of Good Intentions

→ Incentives are what matters

While driving down a country road, Jack spotted a scrawny stray dog. The pitiful creature was a sack of skin and bones. Being an animal lover, Jack was compelled to stop. The scared dog was too weak to resist when Jack placed him in the back of his pickup and drove home to his one-acre estate.

Soon, the pooch was restored to health and Jack had a new best friend he named Buddy. One day, Jack decided to have a barbecue and invited over a few friends. While tending to the burgers on the grill, he noticed Buddy darting across the grounds, chasing a rabbit. When the dog caught the critter, Jack was immediately alarmed. The animal lover raced to the bunny’s aid, freeing it from Buddy’s grasp.

Feeling guilty about depriving the dog of his catch, Jack compensated Buddy with a burger from the grill. Moments later, Buddy was back at the grill with another rabbit in his jaws. On that day, Jack learned about incentives.

While intentions reflect our hopes, it is incentives that determine our behavior. Many government programs fail because they do not account for how people will change their behavior in response to new incentives. When incentives are miscalculated, the result is shortages, inefficiencies, black markets and unintended consequences. Consider the following:

Initiated in 1964, “the War on Poverty” was sold to the public as a social safety net, seeking to provide temporary economic assistance during hard times. However, it sometimes discouraged work, as some low-paying jobs were less lucrative than aid. And, with absent fathers a prerequisite for welfare eligibility, it also encouraged single parent households. That temporary assistance program devolved into generational dependency for many.

Rent control provides another example. It was promoted as a means to ensure affordability, stability and protection for tenants. But, the incentives put into motion discouraged landlords from improving, or even maintaining, existing properties, as well as curb motivation for the building of new housing.

Price gouging laws are another case of government shooting itself in the foot. These measures were intended to prevent businesses from exploiting a vulnerable population by increasing prices on essential goods and services during emergencies or disasters. However, they have only succeeded to discourage entrepreneurs from taking on the added expense of transporting goods to disaster victims, thus limiting the availability of necessities to those in desperate need. Most folks would take the option of paying double for a bottle of water or a unit of fuel rather than having no access.

The Department of Education, established in 1980, provides more evidence of how good intentions can go awry. Its mission was to improve the quality of schooling nationwide by coordinating federal assistance, enforcing education laws, and promoting equal access to education. Now, forty-five years later we can see its major effect. It has replaced the once prominent voice of parents and local control with that of self-interested federal bureaucrats. The indoctrination of students with a woke, often anti-American, agenda would not have been allowed if parents were monitoring the schools.

USAID (U S Agency for International Development) has shown how good intentions can be deployed as a pretense for exploitation and grift. Established by an executive order in 1961, the agency’s stated mission to promote economic development, human assistance and global stability. But, despite its noble objectives, it turned out to be little more than a slush fund for radical leftist causes. It is nothing short of a $40 billion boondoggle.

And let’s not forget the War on Drugs. Launched by President Nixon in 1971, its mission was to reduce illegal drug use, distribution, and trade through strict enforcement and criminal penalties. But, the jury is now in, and what was the verdict? Since the drug war’s inception, overdoses have skyrocketed from less than 6,000 in the seventies to more than 100,000 today (CDC).

In addition, the concerted effort to crackdown on cocaine use led directly to the creation of far more lethal alternatives, such as meth and fentanyl. Overall availability of drugs has not been hindered. Criminal activity is still rampant, and zombified addicts roam the streets. Worst of all, drug illegality produces the primary funding mechanism for criminal gangs and their bloody turf wars.

One thing all of us have in common is that we act in accord with our own self interest. Capitalism takes advantage of that reality. It is a beautiful system because it is based on creating productive incentives. Success can only attained by offering products or services so valuable that customers will voluntarily trade their money for it. The intent may be greed but the incentive is to serve one’s fellow man. Contrast that with socialism, which gets points for warm and fuzzy intent, but puts into motion a destructive ‘let the other guy do it” mentality.

Policies, especially government ones, are often like snake oil. They have enormous appeal at the point of sale but positive results are seldom delivered.