Author:  Lori Alden

Audience:  High school and college economics students

Time required:  About 10 minutes of classroom discussion per example

NCEE Standards:  Incentives, supply and demand

Summary:  Policies sometimes have consequences that lawmakers or the public either ignored or didn't anticipate.  This exercise asks students to use economic principles to identify the unintended consequences of several policies.  


1.  Three strikes laws

Several states have enacted laws requiring judges to impose tough sentences for a third felony conviction.  The result?  An increase in the murder rate.  Explain.

Solution:  According to this article, two University of Alabama criminologists found that the murder rate went up in areas that had enacted "three strikes" laws.  A robber with two strikes who's committing a robbery, for example, will get roughly the same punishment whether or not the victim is killed.  The criminologists believe that felons facing a third conviction have a stronger incentive under three strikes laws to kill anyone who can serve as a potential witness against them.  

2.  Seat belt laws

There's no question that wearing seat belts helps protect drivers and passengers.  But seat belts have led to an increase in pedestrian and cyclist deaths.  Why?

Solution:   Several economists have argued that wearing seat belt makes drivers feel more secure, so they drive more aggressively.   This article reviews some research about the unintended consequences of seat belt laws.  

3.  Banning DDT in Less Developed Countries

In the early 1970s, the Audubon Society and the Natural Resources Defense Council, spurred on by Rachel Carson's book Silent Spring, successfully pressed the US government to stop foreign aid to any country using the insecticide DDT, arguing that the insecticide caused cancer and harmed wildlife.  The government relented, and many third world countries stopped using DDT.  But banning this insecticide almost certainly led to more, not fewer, deaths.  Why?

Solution:  According to this article, the incidence of malaria increased dramatically in countries that had stopped using DDT, since the insecticide had been previously very effective in killing the mosquitoes that carry the disease.  This article claims that tens of millions have died over the past few decades because of the DDT ban, which remains in place.  What's worse, this paper argues that the ban was based on dubious evidence.  

4.  Don't talk to strangers

Parents and teachers often instruct children not to talk to strangers.  Some have suggested, though, that the "stranger danger" campaign may be making children less safe.  Why?

Solution:  Talking to strangers can be a good survival strategy for children who are lost or in danger.  A Utah cub scout, for example, remained lost in the woods for four days because he hid from search and rescue volunteers out of fear they would steal him.  This article argues that warning children about strangers doesn't protect them much anyway, since it's more likely that they'll be abducted by someone they already know.  This article claims that discouraging interaction with strangers inhibits social development, making it more difficult for children to spot dangerous people or situations.

5.  FDA drug approvals

The Food and Drug Administration (FDA) is charged with approving drugs and medical devices before they can be marketed to the public.  In 2004, the FDA was criticized for having been too quick to approve the arthritis drug Vioxx, which was later discovered to cause heart attacks.  Some say the FDA should spend more time testing drugs before it gives them its stamp of approval.  But doing so might cause more, not fewer, deaths.  Why?

Solution:  One of the opportunity costs of the FDA drug approval process is that people may die while waiting for the drug.  This article, for example, claims that 3,000 people with advanced kidney disease could have been saved by the drug Interleukin-2 during the three years it took the FDA to approve it.      

6.  Reduced logging in the National Forests

To protect the threatened northern spotted owl, Judge William Dwyer issued an injunction in 1991 that greatly reduced logging on the national forests in the Pacific Northwest.  Yet this policy may have resulted in more, not fewer, acres of forest being harvested worldwide.  Why?

Solution:  This article (written by me) argues that timberlands in the Pacific Northwest are among the most productive in the world.  When Judge Dwyer ordered a decrease in logging there, the supply of timber worldwide decreased.  That raised the price, inducing producers elsewhere to increase logging.  Some of the forests that have taken up the slack are less productive, requiring that more acres be cut in order to produce the same amount of lumber.  See also this article by Gregg Easterbrook. 

7.  Cigarette taxes

Between 1992 and 2000, the average state cigarette tax rose by 64% but gross state tax revenue from cigarette taxes only rose 35%.  Part of the decline in revenue was due to a decrease in cigarette smoking, which was one of the intended consequences of the tax increase.  But state legislatures had expected to make much more revenue from the cigarette taxes.  What went wrong?

Solution:  According to this article by Bruce Bartlett, smugglers have a stronger incentive now to buy cigarettes in low-tax states and sell them in high-tax states.  Organized crime and terrorists are increasingly involved in this business.   

8.  Steel tariffs

In 2002, President Bush imposed a tariff on steel imports in order to protect the steel industry from foreign competition.  He ended the tariff in 2003, partly because of evidence that the tariff was costing more American jobs than it was saving.  Explain how that could happen.

Solution:  The tariff raised the price of steel in America, making it more difficult for our domestic steel-consuming industries (like the auto industry) to compete with foreign producers.  This report predicted that if the tariff had remained in place, 8 steel-using jobs would have been lost for every steel-producing job saved.  

9.  Vegetarians and animal rights

Philosophy professor and animal rights activist Tom Regan argues that there's an ethical reason for becoming a vegetarian or vegan:  it does the least harm to animals.  But there's evidence that vegetarianism has led to an increase in animal deaths.  Why?

Solution:  According to Steven Davis of Oregon State, many small animals are killed when tractors and other farm equipment go through fields.  Davis believes that fewer animals would be killed if vegetarians included beef and dairy products in their diets.   

10.  Saving horses from slaughter

Thanks to the efforts of animal rights activists, horse slaughter is now banned in Texas and Illinois, home to the last three horse slaughterhouses in the United States.  Some argue that this was bad news for horses.  Why?

Solution:  According to this New York Times article, many of the horses that would have been slaughtered in those states are now being transported to Canada and Mexico.  The animals now must make a grueling journey before they're slaughtered, and the methods of slaughter are often less humane than those formerly practiced in the United States.    




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