How Restrictions Come Back to Haunt You

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There is a review of Kat Long‘s The Forbidden Apple in last Sunday’s New York Times. The review describes a number of incidents where efforts to ban or restrict transactions in one market spilled over with negative consequences into a related market.

To eliminate drinking on Sundays, New York City restricted it to hotels. In response, bars created makeshift hotel rooms, separated by dividers, which in turn created a burgeoning prostitution business. To avoid having men buy a drink in a bar in order to use the only publicly available restroom, the city opened public restrooms. But this created places where gay sex could proliferate.

Both of these examples illustrate the law of unintended consequences: actions that restrict quantity or price in one market will affect them in related markets. Indeed, they may even create markets that nobody had heretofore imagined. No doubt there are many other, equally prurient examples.


jonathan

Have to disagree with some of your language. "Created" prostitution is misleading; the new rooms moved it into those rooms from other rooms. Same with gays in the loo; they were gay before and used to meet elsewhere.

Some restrictions do work. For example, when 19thC towns banned firearms - pretty common rule - deaths went down. There were still fights, lots of them, but very few killings. Back in college, I went through the newspapers for a bunch of frontier towns - mostly cattle drive towns - and the number of gun related killings was much, much less than popular culture believes. Fights yes, but few deaths, so there the restriction changed the result of the activity.

David Chowes, New York City

A constitutional amendment was passed to prohibit the sale of alcholic beverages. Of course, they the imbibing of this substance has the potential to destroy many individuals and can have a negative impact on society. Good idea?

Unintended consequence: the expansion of organized crime -- a far greater threat.

[This amendment was later repealed. But, it gave the Mafia a continued stronghold on our country and set a model for organized crime world wide.]

jaster

It seems like anytime government bans something, it tends to invigorate regulation... in nyc, I bet the smoking ban, which I was originally in support of, led to the trans-fat ban... which may in turn lead to more ridiculous regulation of people's private consumption choices.
This article talks about some unintended consequences of city smoking bans, such as non-smokers starting to smoke to join their friends outside, and celebrities being photographed smoking outside of a club/bar, thus promoting smoking.
http://news.bbc.co.uk/1/hi/magazine/6664871.stm

William Cross

When I was an undergrad, there were restrictions on which majors you could sign up for -- engineering and literature, for example, required a minimum GPA. So I signed up for a major in a department that wasn't so particular: physics. In retrospect, it was a good call.

Mike

This is a topic that I try to bring up any time I can. Especially when discussing government intervention in markets. I don't mean to sounds like a crazy libertarian (I am one, but I don't want to sound like one!), but I think this is why bad things happen in the market (bubbles, crashes, etc).

My background is in theoretical chemistry. Basically my job is to optimize equations all the time. When you put a restriction on one thing (say the size of one molecule), all the other degrees of freedom (size, shape, location of the other molecules) stretch to make up for that restriction.

The same thing happens with markets. You try to regulate one thing, the market will work around that regulation. There's a natural equilibrium that everything wants to be at. Restrictions/regulations try to displace that equilibrium, but since the market is _always_ smarter than the regulators, (simply because there are more brains in the market than in the regulators) so the market will evolve around that regulation - and not always in a good way, as this article trys to say.

Read more...

trader n

In Toronto smoking restrictions were grandfathered in. Initially smoking was restricted in restaurants but allowed in bars. Besides the way they are marketed restaurants and bars are the same things, except bars are restricted to people over 19.

But as a consequence of this law some restaurants were re-designated bars to allow smoking on premises, which meant some diners and sandwich shops were now off limits to under-19 yr olds.

Ian

@jonathan

If you think (rightly), that reducing the the supply of guns will result in fewer deaths, why don't you agree with the author's suggestion that increasing the supply of private meeting places will result in more prostitution/illicit sex?

Steven Bone

The Energy Policy Act of 2005 makes it difficult to use energy saving LED or CFL bulbs. The regulations stated that if you use standard light bulb bases, the fan must be packaged with CFLs. CFLs that could deal with vibration without premature failure were so rare at the time of the legislation they may have well not existed. The regulation provided two other options: (1) a pin-based always fluorescent option or (2) prevent the use of more than 190 watts. Since no consumer wants to be locked into the fluorescent choice (or pay more even when not suited for their application), the industry made a new light bulb base type for which bulbs can't be manufactured that exceed the wattage requirement. Now, there is less choice for standard bulbs and no availability of CFL bulbs that fit the sockets. Thus, the regulations are directly responsible for the exact opposite result of what they intended to - which seems to happen a lot these days....

Read more...

Avi Rappoport

This can also happen when government removes restrictions -- Enron twisted the California deregulated energy market so thoroughly that they broke it entirely.

I've often thought that government regulators and legislatures should hire really good gamers to test their proposed systems. The people who figure out the best tactics in Squad Leader or even D&D based on the existing rules are likely to find the weak areas in regulations as well.

Caliphilosopher

"To avoid having men buy a drink in a bar in order to use the only publicly available restroom, the city opened public restrooms. But this created places where gay sex could proliferate."

Wait - so why is gay sex a negative consequence of this whole bar restriction thing?

HoldOn

I find your suggestion that gay sex is prurient more than a little troubling. What you might have meant was that unprotected sex amongst strangers in public places proliferated due to the opening of public bathrooms and that this was an undesirable effect; however your wording suggests that gay sex--in general--was more likely after public bathrooms were opened and that gay sex--in general--is a prurient and undesirable outcome. If you meant this homophobic statment exactly as it came across, then I'm sorry to have corrected you, but if you didn't, you might want to watch that.

Christopher Strom

I think that another useful way to think of "unintended consequences" is not to approach it simply in terms of 'regulation' - this tend to bring out heavy biases on the subject - but rather that there will always be a population of people that will game the system they are in.

This is not to say that systems are bad, just that they exist, and when people try to game the system for personal advantage they can be very creative. This should be carefully considered when making changes to any system.

As an operations manager (manufacturing), this is my daily experience.

Nuclear Mom

Agree heartily with #9 and #11. The human drive to game a system can surely somehow be turned to our benefit.

CandyKay

>>"Created" prostitution is misleading; the new rooms moved it into those rooms from other rooms. Same with gays in the loo; they were gay before and used to meet elsewhere.<< I have to disagree with Jonathan's supposition that there is a set number of sexual encounters regardless of opportunity or convenience. I would guess that the number of encounters increased once a convenient meeting place was available to a larger number of people. As a single mom (involuntarily) celibate because I can't get a reasonably-priced babysitter, I can testify from my own experience that volume of sexual encounters responds to opportunity cost. And "Holden", you are the thought police, an Anthony Comstock for the 21st century. Anyone who says anything you might disagree with should "might want to watch that." Yuk.

Dust

I would like to know exactly how opening a public toilet is a restriction? An absolutely awful illogical example.

Michael

@Mike

The regulators take the line of prohibiting what can be done and the markets take the line of what (else) can be done.
The regulators will always come second in that race.
The way for the regulators to win would be either to say what can be done (and thereby excluding anything else) or to rely on the courts to use principles rather than rules: principles such as 'do no harm' (possibly derived from 'love thy neighbour').
In other words, the regulators need to embrace simplicity and avoid making many rules -- kind of difficult for full-time rule-makers!

rafa

The article does not say that gay sex in public bathrooms is dangerous or inmoral or anything, it just states that it was unintendedly promoted by those.

cyberhiber

HDTV anyone?

Eric M. Jones

Of course there are unintended consequences everywhere. There are unintended consequences when the desire is purely to do good. You save a child who grows up to be awful. His beastly children grow up to be kind geniuses who cure diseases and write great books. There are unintended consequences in every path, both those taken and those not taken. Perhaps one can see the first order consequences; but the second...the third...a hundred years down the road?

".....I shall be telling this with a sigh
Somewhere ages and ages hence:
Two roads diverged in a wood, and I-
I took the one less traveled by,
And that has made all the difference."
Robert Frost, "The Road Not Taken"

Ian

Re: Caliphilosopher's comment

I think the point was that promiscuous sex is negative and sex in p a public place is negative.

An increase of sex in a public place, whether gay or straight, is negative. No?

I would agree that the 'gay' part was not needed though.