How Restrictions Come Back to Haunt You
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.