Law of Unintended Consequences

This week, I read The Most Unusual Day by Gans and “An Academic Episode” in The Intellectual and the Marketplace. I was a little confused in the first place when Rizzo asked me to analyze the two articles in only one paper. But, after finishing reading them, I realized that these two papers, the first of which talked about a failure of an academic promotion system and the second of which illustrated the unintended incentives and outcomes of a governmental policy about baby subsidies, are all illustrations of a simple but dominant law in economics, the law of unintended consequences.

Economic Concepts: As I mentioned above, the core economic concept within these two articles is the law of unintended consequences. In the first article, the sector invented the “challenging system” in which young scholars can challenge the people over them to win a promotion. The intention of this proposal was really good as to make capable scholars get the resources they deserve. However, then a lot of problems about the efficiency and the equality of this system rose. Finally, the university had to make various policies to offset the flaws while in fact the real intention of this proposal had almost been forgotten. In the second article, the government policy that there’ll be a more baby subsidy on a following future affected the behavior of pregnant moms, pushing them all give birth to their children after specific date. Hence, the hospital faced more pressure while in fact the intention of this policy, which is cutting governmental spending, remained absent.

Three rhetorical questions:

i.                     As we learned, people are more in favor of complex system rather than simple system. Does this then same with the chase of order and perfection that Adam Smith mentioned in the Wealth of Nation.

ii.                   Why doesn’t the Australian government stop these kind of policies after realizing its effect?

iii.                  Are people responsible for the unintended consequence they incurred?

My opinion: Thinking about the two kinds of ethics, Economic Sophism by Bastiat, I realized that law of unintended consequence may be one reason Bastiat prefers economic ethics rathan than moral, religious of philosophical ones.