Department of Unintended Consequences

**Shek** · 02-12-2008, 09:59 AM

Studying unintended consequences is one of my favorite topics in economics. Here's the first installment

Quote:

Uncommon Knowledge - The Boston Globe

A rigorous statistical examination has found that smoking bans increase drunken-driving fatalities. One might expect that a ban on smoking in bars would deter some people from showing up, thereby reducing the number of people driving home drunk. But jurisdictions with smoking bans often border jurisdictions without bans, and some bars may skirt the ban, so that smokers can bypass the ban with extra driving. There is also a large overlap between the smoker and alcoholic populations, which would exacerbate the danger from extra driving. The authors estimate that smoking bans increase fatal drunken-driving accidents by about 13 percent, or about 2.5 such accidents per year for a typical county.

T_igger_cs_30 · 02-12-2008, 10:23 AM

Interesting

Exarecr · 02-12-2008, 11:35 AM

What happens to the stats if the smoker walks ?

captain · 02-12-2008, 12:15 PM

Quote:

Originally Posted by Shek

Studying unintended consequences is one of my favorite topics in economics. Here's the first installment

Yep, interesting.
Another story re smoking, from Australia.

About 15 years ago the Victoriian State Health Commission decided to commission a report on the cost to the community of smoking related illness.
The Health Commission zealots at the time expected a damming report on smokers and tried to make sure of that by using government statiticians and health researchers.
When the report was finished the Victrian government tried to supress the findings but it leaked and was widely circulated.

At the time of the report the total government taxes and excise on a packet of cigarettes amounted to about 40% of the wholesale price of a packet.

What the report found was that the total taxes and excise paid by the average smoker in his/her lifetime covered the cost of medical care from the discovery of terminal illness to death, four times over.
They also indicated that the average smoker with lung cancer could expect to live about twelve months from the time of discovery and initial medical intervention.
Those who had smoking related heart attacks often did not expend any of their "paid for credit".

At the time of the report, 25% of Australia's population smoked therefore, by extrapalation the smokers had funded the health care of 100% of that part of the population that was in permanent health care and hospices etc for at least 12 months.

Today, 16% of the population smoke and the tax/excise component has risen to approx 90% of the wholsale price of a packet of cigarettes and the revenue to government from smokers is currently about $8.5 billion a year.

The average Australian is living longer than they did 15 years ago but more significantly a far greater percentage of the population eventually die of diseases other than those caused by smoking.
Those other diseases take far longer to run their course before fatality and therefore the health budgets in the entire country are constantly blowing out and increasing at alarming rates.

Eg. My own father developed Parkinson's disease and had it for 12 years, the last 5 years of which he was in a nursing home and required complete 24/7 care before he passed away.

So,,a type of consequence of the anti smoking push is a vastly increased health care cost and as the government stack on even higher taxes on tobacco, more people quit, live longer, die slower and the govt gets less revenue.

Not sure that the above was unintended consequence but what is, is the fact that one of the best investment opportunities in Australia today is aged care facilities because they are largely goverment funded, and you will have a never ending and increasing client base.

Cheers.

Adux · 02-12-2008, 12:57 PM

"Department of Unintended Consequences"

brilliant!!!!!!!!

dalem · 02-12-2008, 15:57 PM

Quote:

Originally Posted by Exarecr

What happens to the stats if the smoker walks ?

To the next town?

-dale

**Shek** · 02-12-2008, 16:47 PM

Quote:

Originally Posted by Exarecr

What happens to the stats if the smoker walks ?

Quote:

Originally Posted by dalem

To the next town?

-dale

He sobers up by the time he gets to wherever he's going next . . .

**Shek** · 02-12-2008, 16:49 PM

More unintended consequences from the vault . . .

Quote:

http://www.nytimes.com/2008/01/20/ma...n-freak-t.html

January 20, 2008
Freakonomics

Unintended Consequences

By STEPHEN J. DUBNER and STEVEN D. LEVITT

The Case of the Red-Cockaded Woodpecker

One year from today, a new president moves into the White House. This president will be eager to carry out any number of plans — including, surely, plans to help the segments of society that most need help. Extending a helping hand, after all, is one of the great privileges and responsibilities of the presidency.

But before charging ahead with such plans, the new president might do well to first ask him- or herself the following question: What do a deaf woman in Los Angeles, a first-century Jewish sandal maker and a red-cockaded woodpecker have in common?

A few months ago, a prospective patient called the office of Andrew Brooks, a top-ranked orthopedic surgeon in Los Angeles. She was having serious knee trouble, and she was also deaf. She wanted to know if her deafness posed a problem for Brooks. He had his assistant relay a message: no, of course not; he could easily discuss her situation using knee models, anatomical charts and written notes.

The woman later called again to say she would rather have a sign-language interpreter. Fine, Brooks said, and asked his assistant to make the arrangements. As it turned out, an interpreter would cost $120 an hour, with a two-hour minimum, and the expense wasn’t covered by insurance. Brooks didn’t think it made sense for him to pay. That would mean laying out $240 to conduct an exam for which the woman’s insurance company would pay him $58 — a loss of more than $180 even before accounting for taxes and overhead.

So Brooks suggested to the patient that they make do without the interpreter. That’s when she told him that the Americans With Disabilities Act (A.D.A.) allowed a patient to choose the mode of interpretation, at the physician’s expense. Brooks, flabbergasted, researched the law and found that he was indeed obliged to do as the patient asked — unless, that is, he wanted to invite a lawsuit that he would probably lose.

If he ultimately operated on the woman’s knee, Brooks would be paid roughly $1,200. But he would also then need to see her for eight follow-up visits, presumably with the $240 interpreter each time. By the end of the patient’s treatment, Brooks would be solidly in the red.

He went ahead and examined the woman, paying the interpreter out of his pocket. As it turned out, she didn’t need surgery; her knee could be treated through physical therapy. This was a fortunate outcome for everyone involved — except, perhaps, for the physical therapist who would have to pay the interpreter’s bills.

Brooks told several colleagues and doctor friends about his deaf patient. “They all said, ‘If I ever get a call from someone like that, I’ll never see her,’ ” he says. This led him to wonder if the A.D.A. had a dark side. “It’s got to be widely pervasive and probably not talked about, because doctors are just getting squeezed further and further. This kind of patient will end up getting passed on and passed on, getting the runaround, not understanding why she’s not getting good care.”

So does the A.D.A. in some cases hurt the very patients it is intended to help? That’s a hard question to answer with the available medical data. But the economists Daron Acemoglu and Joshua Angrist once asked a similar question: How did the A.D.A. affect employment among the disabled?

Their conclusion was rather startling and makes Andrew Brooks’s hunch ring true. Acemoglu and Angrist found that when the A.D.A. was enacted in 1992, it led to a sharp drop in the employment of disabled workers. How could this be? Employers, concerned that they wouldn’t be able to discipline or fire disabled workers who happened to be incompetent, apparently avoided hiring them in the first place.

How long have such do-good laws been backfiring? Consider the ancient Jewish laws concerning the sabbatical, or seventh year. As commanded in the Bible, all Jewish-owned lands in Israel were to lie fallow every seventh year, with the needy allowed to gather whatever food continued to grow. Even more significant, all loans were to be forgiven in the sabbatical. The appeal of such unilateral debt relief cannot be overestimated, since the penalties for defaulting on a loan at the time were severe: a creditor could go so far as to take a debtor or his children into bondage.

So for a poor Jewish sandal maker having trouble with his loan payments, the sabbatical law was truly a godsend. If you were a creditor, however, you saw things differently. Why should you lend the sandal maker money if he could just tear up the loan in Year Seven? Creditors duly gamed the system, making loans in the years right after a sabbatical, when they were confident they would be repaid, but then pulling tight the purse strings in Years Five and Six. The resulting credit drought was so damaging to poor people that it fell to the great sage Hillel to fix things.

His solution, known as prosbul, allowed a lender to go to court and pre-emptively declare that a specific loan would not be subject to sabbatical debt relief, transferring the debt to the court itself and thereby empowering it to collect the loan. This left the law technically intact but allowed for lenders to once again make credit available to the poor without taking on unwarranted risk for themselves.

The fallow-land portion of the sabbatical law, meanwhile, was upheld for centuries, but it, too, finally gained a loophole, called heter mechira. This allowed for a Jew to temporarily “sell” his land to a non-Jew and to continue farming it during the sabbatical year and then “buy” it back immediately afterward — a solution that helped the modern state of Israel keep its agricultural economy humming.

The trouble is that many of the most observant Israeli Jews reject this maneuver as a sleight of hand that violates the spirit of the law. Many of these traditionalists are also extremely poor. And so this year, which happens to be a sabbatical year, the poorest Jews in Israel who wish to eat only food grown on non-Jewish land are left to buy imported goods at double or triple the regular price — all in order to uphold a law meant to help feed the poorest Jews in Israel.

Such well-meaning laws surely don’t end up harming animals as well, do they?

Consider the Endangered Species Act (E.S.A.) of 1973, which protects flora and fauna as well as their physical habitats. The economists Dean Lueck and Jeffrey Michael wanted to gauge the E.S.A.’s effect on the red-cockaded woodpecker, a protected bird that nests in old-growth pine trees in eastern North Carolina. By examining the timber harvest activity of more than 1,000 privately owned forest plots, Lueck and Michael found a clear pattern: when a landowner felt that his property was turning into the sort of habitat that might attract a nesting pair of woodpeckers, he rushed in to cut down the trees. It didn’t matter if timber prices were low.

This happened less than two years ago in Boiling Spring Lakes, N.C. “Along the roadsides,” an A.P. article reported, “scattered brown bark is all that’s left of once majestic pine stands.” As sad as this may be, it isn’t surprising to anyone who has examined the perverse incentives created by the E.S.A. In their paper, Lueck and Michael cite a 1996 developers’ guide from the National Association of Home Builders: “The highest level of assurance that a property owner will not face an E.S.A. issue is to maintain the property in a condition such that protected species cannot occupy the property.”

One notable wrinkle of the E.S.A. is that a species is often declared endangered months or even years before its “critical habitats” are officially designated. This allows time for developers, environmentalists and everyone in between to have their say at public hearings. What happens during that lag time?

In a new working paper that examines the plight of the cactus ferruginous pygmy owl, the economists John List, Michael Margolis and Daniel Osgood found that landowners near Tucson rushed to clear their property for development rather than risk having it declared a safe haven for the owl. The economists make the argument for “the distinct possibility that the Endangered Species Act is actually endangering, rather than protecting, species.”

So does this mean that every law designed to help endangered animals, poor people and the disabled is bound to fail? Of course not. But with a government that is regularly begged for relief — these days, from mortgage woes, health-care costs and tax burdens — and with every presidential hopeful making daily promises to address these woes, it might be worth encouraging the winning candidate to think twice (or even 8 or 10 times) before rushing off to do good. Because if there is any law more powerful than the ones constructed in a place like Washington, it is the law of unintended consequences.

Stephen J. Dubner and Steven D. Levitt are the authors of the book “Freakonomics.” More information on the research behind this column is online at Freakonomics - Opinion - New York Times Blog.

gunnut · 02-12-2008, 19:10 PM

Here's an "unintended consequences" resulted from the ban of gun magazines with greater than 10 round capacity. We now see a number of pistols packing the largest caliber possible in the smallest package possible while still achieving the 10 round limit. The result is pocket pistols with 10 rounds of 45ACP or even smaller pistols carring 10 rounds of 9mm. These guns are easier to hide and just as deadly.

I have no studies or any statistics to back this up. This is just my own personal observation.

**Ironduke** · 02-13-2008, 01:18 AM

New York rent controls, anyone?

FlyingCaddy · 02-14-2008, 16:35 PM

Quote:

Originally Posted by captain

Yep, interesting.
Another story re smoking, from Australia.

About 15 years ago the Victoriian State Health Commission decided to commission a report on the cost to the community of smoking related illness.
The Health Commission zealots at the time expected a damming report on smokers and tried to make sure of that by using government statiticians and health researchers.
When the report was finished the Victrian government tried to supress the findings but it leaked and was widely circulated.

At the time of the report the total government taxes and excise on a packet of cigarettes amounted to about 40% of the wholesale price of a packet.

What the report found was that the total taxes and excise paid by the average smoker in his/her lifetime covered the cost of medical care from the discovery of terminal illness to death, four times over.
They also indicated that the average smoker with lung cancer could expect to live about twelve months from the time of discovery and initial medical intervention.
Those who had smoking related heart attacks often did not expend any of their "paid for credit".

At the time of the report, 25% of Australia's population smoked therefore, by extrapalation the smokers had funded the health care of 100% of that part of the population that was in permanent health care and hospices etc for at least 12 months.

Today, 16% of the population smoke and the tax/excise component has risen to approx 90% of the wholsale price of a packet of cigarettes and the revenue to government from smokers is currently about $8.5 billion a year.

The average Australian is living longer than they did 15 years ago but more significantly a far greater percentage of the population eventually die of diseases other than those caused by smoking.
Those other diseases take far longer to run their course before fatality and therefore the health budgets in the entire country are constantly blowing out and increasing at alarming rates.

Eg. My own father developed Parkinson's disease and had it for 12 years, the last 5 years of which he was in a nursing home and required complete 24/7 care before he passed away.

So,,a type of consequence of the anti smoking push is a vastly increased health care cost and as the government stack on even higher taxes on tobacco, more people quit, live longer, die slower and the govt gets less revenue.

Not sure that the above was unintended consequence but what is, is the fact that one of the best investment opportunities in Australia today is aged care facilities because they are largely goverment funded, and you will have a never ending and increasing client base.

Cheers.

With every pension check should come a carton of unflitered camels and a card saying "Retirement Sucks, Smoke Up."

Bigfella · 02-15-2008, 04:09 AM

I recall a story from Korea in the late 1980s relating to Hyundai. There was a lengthy & bitter strike by employees for higher pay. With Korea making a turn toward democracy the old option of calling in the police to beat the stikers into submission was gone, so the company granted a significant pay rise.

This is the sort of think that sends neo-liberal economists into apoplectic fits. Surely doom would follow. Actually, the company boomed. It turned out that many of the employees put their new-found largess toward the purchase of new cars - Hyundai cars.

**Shek** · 03-30-2008, 21:18 PM

Another installment. Here's the abstract from the actual paper.

Quote:

http://people.rwj.harvard.edu/~riyen...ee_strikes.pdf

Strong sentences are common “tough on crime” tool used to reduce the incentives for individuals to participate in criminal activity. However, the design of such policies often ignores other margins along which individuals interested in participating in crime may adjust. I use California’s Three Strikes law to identify several effects of a large increase in the penalty for a
broad set of crimes. Using criminal records data, I estimate that Three Strikes reduced participation in criminal activity by 20 percent for second-strike eligible offenders and a 28 percent decline for third-strike eligible offenders. However, I find two unintended consequences of the law. First, because Three Strikes flattened the penalty gradient with respect to severity, criminals were more likely to commit more violent crimes. Among third-strike eligible offenders, the probability of committing violent crimes increased by 9 percentage points. Second, because California’s law was more harsh than the laws of other nearby states, Three Strikes had a “beggar-thy-neighbor” effect increasing the migration of criminals with second and third-strike eligibility to commit crimes in neighboring states. The high cost of incarceration combined with the high cost of violent crime relative to non-violent crime implies that Three Strikes may not be a cost-effective means of reducing crime.

Here's the Slate article on the paper.

Quote:

Do three-strikes laws make criminals more violent? - By Ray Fisman - Slate Magazine

On Oct. 1, 1993, a man named Richard Allen Davis kidnapped 12-year-old Polly Klaas during a slumber party at her home in Petaluma, Calif. At the time, Davis was on parole after serving half of a 16-year sentence for a prior kidnapping and had accumulated a 25-year rap sheet with charges ranging from burglary to auto theft to public intoxication. Polly was found raped and murdered a couple of months later, and the public outcry that ensued led to the passage of a California law that mandated stiff prison sentences for convicted felons on their third offense. Davis had more than a dozen convictions when he abducted Polly Klaas.

"Three-strikes" laws have now been enacted in 26 states, often with the stated purpose of keeping society safe from violent criminals like Richard Davis. But a new study released by the National Bureau of Economic Research finds that three-strikes laws like California's, while discouraging criminals from doing things like smoking pot or shoplifting, may push those who do continue in a life of crime to commit more violent offenses. The study's author, Radha Iyengar, argues that this is because under such laws, felons with a pair of strikes against them have little to lose (and often much to gain) by committing serious crimes rather than minor offenses.

Why would stiffer penalties increase violent crime? To understand this seeming paradox, you first need to understand the nature of California's three-strikes law. Not just any offense gets you a first strike. It must be a so-called "record-aggravating" offense, which includes violent crimes like assault and rape as well as serious nonviolent crimes such as burglary or drug sales to minors. But after strike one, strikes two and three can come from any felony, including minor offenses like possession of marijuana or even stealing golf clubs or videotapes. A third strike carries with it a mandatory sentence of at least 25 years in prison.

Now, put yourself in the shoes of a two-strike criminal. The prospect of 25 years behind bars for a third offense is likely to give even a hardened criminal pause before he or she crosses the street against the lights. So we'd expect two-strike felons to commit fewer crimes. But suppose you've already decided to break the law—maybe you need to make a quick buck. Are you going to lift a few golf clubs from the local pro shop? Or are you going to hold up a bank? The potential haul from a bank robbery is obviously much greater, and the penalty is the same: Bank robbery will get you decades in the slammer, but if it's your third offense, so will shoplifting.

Even if you don't quite have the chutzpah to pull off a bank job, you still might end up committing a more violent crime if you're in a 0-2 hole. Let's say you opt for the golf club caper, but as you're making your getaway, you're cornered by a store security guard. Do you surrender quietly or pull out a gun? If strike three is looming, it's all the same to you whether you end up on trial for shoplifting or armed assault, so why not try to shoot your way out of an arrest?

Proponents of three-strikes laws point to declines across the board in crime rates in California during the 1990s, following the passage of the three-strikes law—including rates of violent crime. But crime was dropping around the country during that period, with explanations ranging from new policing tactics to the legalization of abortion. With so much going on, it's hard to know how much, if any, of the decline comes from fear of a third strike. Instead of analyzing aggregate crime data, Iyengar looks at the lawbreaking choices of individual criminals. She examines how their lawbreaking activities change when the three-strikes law is on the books and also how their lawbreaking activities change depending on how many strikes they have against them.

Using data from all criminal convictions during 1990 through 1999 in California's three biggest cities—Los Angeles, San Francisco, and San Diego—Iyengar finds that the three-strikes law did indeed have a large effect on the likelihood of recidivating (committing a crime after release from prison) in the two years following a prior offense. For those with one strike, the law reduced recidivism by 14 percent; this doubled to a 28 percent reduction for two-strikers, whose next crime would trigger the minimum 25-year prison term.

But that's where the good news ends. Three-strike-eligible criminals who actually do get arrested for a third offense commit more serious crimes. Burglars, for example, become robbers—these are both offenses that involve stealing, but robbery has the added element of force. Similarly, while thefts decline overall, assaults during thefts go up under three strikes, suggesting that an increasing number of thieves may, in desperation, be trying to muscle their way out of a third arrest (as in our golf club example). In general, arrests of three-strike-eligible felons are 20 percent more likely to be violent crimes (relative to no-strike criminals).

(A Californian burglar on the verge of a third strike has an even safer option for his next act—take his activities out of state. Just across the border in Arizona, there's no three-strikes law at all, and in neighboring Nevada, the law is rarely invoked. So rather than breaking and entering in Los Angeles, why not take a road trip to Las Vegas or Phoenix instead? It seems that many criminals do. Iyengar finds that a larger fraction of repeat offenders recidivate out of state after the three-strikes law's passage.)

Overall, the three-strikes law did have the desired effect of deterring repeat offenders from striking again. But the law's original intent—motivated as it was by Polly Klaas' tragic story—was to avert further violent tragedies by putting habitual criminals away for a good, long time. It's putting away violent criminals, but Iyengar's study suggests it's also making criminals more violent. It's tempting to invoke the law of unintended consequences in thinking about what was perhaps a well-intentioned but flawed piece of legislation. But these consequences could have been entirely anticipated if legislators recognized that criminals, like all of us, often make decisions by rationally weighing the costs and benefits of their actions.

02-12-2008, 10:23 AM	#2 (permalink)
T_igger_cs_30 *Military Professional* Join Date: 01-04-07 Location: Canada Posts: 1,943 Country:	*Interesting* __________________ $<img src=http://C:\Documents and Settings\Wayne Smith\My Documents\002...My Pictures border=0 alt= />$ FEAR NAUGHT I don't work here ...I am an analyst!

02-12-2008, 19:10 PM	#9 (permalink)
gunnut *Senior Contributor* Join Date: 01-27-06 Location: DPRK, Democratik People's Republik of Kalifornia Posts: 9,365 Country:	Here's an "unintended consequences" resulted from the ban of gun magazines with greater than 10 round capacity. We now see a number of pistols packing the largest caliber possible in the smallest package possible while still achieving the 10 round limit. The result is pocket pistols with 10 rounds of 45ACP or even smaller pistols carring 10 rounds of 9mm. These guns are easier to hide and just as deadly. I have no studies or any statistics to back this up. This is just my own personal observation. __________________ "Only Nixon can go to China." -- Old Vulcan proverb.

02-13-2008, 01:18 AM	#10 (permalink)
Ironduke Burgomaster Join Date: 08-02-03 Location: Minneapolis Posts: 6,802 Country:	New York rent controls, anyone? __________________ The Buck Stops Here

02-15-2008, 04:09 AM	#12 (permalink)
Bigfella *Senior Contributor* Join Date: 01-12-07 Location: Melbourne Posts: 785 Country:	I recall a story from Korea in the late 1980s relating to Hyundai. There was a lengthy & bitter strike by employees for higher pay. With Korea making a turn toward democracy the old option of calling in the police to beat the stikers into submission was gone, so the company granted a significant pay rise. This is the sort of think that sends neo-liberal economists into apoplectic fits. Surely doom would follow. Actually, the company boomed. It turned out that many of the employees put their new-found largess toward the purchase of new cars - Hyundai cars. __________________ Win nervously lose tragically - Reds C C

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02-12-2008, 11:35 AM	#3 (permalink)
Exarecr *Military Professional* Join Date: 10-18-07 Location: Kingston Ontario Canada Posts: 426 Country:	What happens to the stats if the smoker walks ?

02-12-2008, 12:57 PM	#5 (permalink)
Adux Banished Join Date: 07-29-05 Location: Cochin Posts: 2,931 Country:	"Department of Unintended Consequences" brilliant!!!!!!!!

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