Last Monday I was at a panel discussion on Guaranteed Annual Income.  An economist on the panel used ‘unintended consequences’ as a justification not to implement a Guaranteed Annual Income, an initiative that would ensure that every person in Canada does not live in poverty. Beware, often unintended consequences are just a ruse used by economists to justify the way things are.

What are unintended consequences? “Any intervention in a complex system may or may not have the intended result, but will inevitably create unanticipated and often undesirable outcomes”. My favourite is when economists use lingo like ‘the law’ of unintended consequences as if it is a law of gravity, as opposed to a hypothesis in a field that is not even a real science.

Unintended consequences have been used by economists to justify that governments should just let the free market decide.  Essentially let democracy be damned, the market always makes the best decision. The theory of unintended consequences fiercely believes that there should be no government interference. It is best that government not regulate or reform. The defence that zealot economists love pulling out of the bag is that ‘the road to hell is paved with good intentions’. Is it? The truth of this is highly questionable, just like economic theory.

Examples of unintended consequences are used in ad nausea by economists. The Community Reinvestment Act of 1977 is one of the most recent examples. This Act was created by the US government to prevent banks from “redlining” black communities, areas where banks would not lend mortgages to wannabe homeowners. Some economists contend that the unintended consequence of the US government forcing banks to increase loans to poor people was the recent financial crisis.

We are supposed to believe that this culprit trickled down over 30 years to create the financial disaster. What economists don’t often mention is that no one was forcing banks to issue 40% of the total mortgages in the US in the form of subprime loans. These loans just happened to have the highest profit margins in the industry and banks got greedy, but they still blame the government. Of course, the consequence of de-regulation, something that was enthusiastically endorsed by most economists, was the financial meltdown.

Did the financial industry suffer the unintended consequences of their greed? Nope taxpayers did. The ‘law’ of unintended consequences forbids government intervention, except I guess to bail out free market supporters. Obviously classical economic terms such as unintended consequences are just shields to defend profits when it is selectively convenient.

Economists are so concerned with unintended consequences, but seemingly are not concerned with the largest consequence of all, global warming. Classical economists are up in arms and foaming at the mouth to ensure there is still poverty, but give barely a glance to the unintended consequence of economic growth - global warming, which is threatening life as we know it.

Of course you should think of what the potential consequences of a decision are, but it should not paralyse or prevent governments from implementing regulations and reforms, often to clean up the unintended consequences of the market. Governments should implement policies with the intended benefit of protecting people and other species on earth from the unintended consequences of the market. For the ‘law’ of unintended consequences is pure hypocrisy.