Lecture Notes: Unintended Consequences of Government Policies

Overview

• Politicians often make promises to improve sectors such as consumer protection, employment, and economy.
• However, many policies have unintended consequences that can sometimes outweigh the intended benefits.

Key Examples Discussed

Cash for Clunkers

• Purpose: Stimulate the auto industry by incentivizing car trade-ins.
• Unintended Consequences:
  • Increased car sales temporarily but stole from future sales.
  • Raised used car prices due to fewer available used cars.
  • Charities suffered from fewer car donations.
  • Cost billions with minimal impact on the environment.

Minimum Wage Increase

• Purpose: Ensure fair wages and reduce poverty.
• Unintended Consequences:
  • Employers reduce hiring, especially for entry-level jobs.
  • Increased unemployment rates, particularly among teens.
  • Automation replaces human jobs to cut costs.

Title IX

• Purpose: Create gender equality in educational programs and athletics.
• Unintended Consequences:
  • Reduction of men's sports teams to maintain gender balance.
  • Even self-funded teams cut due to headcount rules.
  • Critics argue that equal opportunities don't always mean equal interests or demand.

Public Stadiums and Events

• Purpose: Boost local economy and job creation.
• Unintended Consequences:
  • Facilities often underused and become financial burdens.
  • Events like Olympics or G20 summits often fail to deliver promised economic boons.

Tax Incentives for Alpacas

• Purpose: Support agricultural industry.
• Unintended Consequences:
  • Creation of a market bubble not sustained by real demand.
  • Tax incentives largely benefit wealthy individuals seeking tax shelters.

Credit Card Regulations

• Purpose: Protect consumers from unfair credit card practices.
• Unintended Consequences:
  • Higher interest rates across the board.
  • Reduced credit availability for certain consumers.

Healthcare for All (Obamacare)

• Purpose: More affordable healthcare for everyone.
• Unintended Consequences:
  • Rising insurance premiums and some companies leaving the market.
  • Waivers provided for certain organizations appear to be favoritism.

Ethanol Subsidies

• Purpose: Create renewable energy sources and reduce oil dependence.
• Unintended Consequences:
  • Increases food prices due to corn diversion.
  • Not as environmentally friendly as initially believed.
  • Critics argue it's a sustained government boondoggle.

Housing Market Intervention

• Purpose: Increase home ownership.
• Unintended Consequences:
  • Contributed to the housing bubble and subsequent crisis.
  • Promotion of risky lending practices.

Overall Criticism of Government Intervention

• Government intervention often leads to more harm than good through unintended consequences.
• Calls for reduced government intervention and a more free-market approach.

Final Thoughts

• The lecture emphasizes a pattern where good intentions in government policy result in negative outcomes.
• Encourages a shift towards less government involvement and more personal and economic freedom.