The Law of Unintended Consequences

The government just doesn’t learn that everything they institute has effects that reverberate for months and years after their interventions. Even though they are done with good intentions, ultimately they often have long term effects which are detrimental and end up with the exact opposite result which was intended. I understand the government believes they are doing what is in the best interest of the American people but the truths are they overreach and micromanage and meddle in areas where they should not. Two examples are the mortgage mess and the oil spill.

The desire of the government to promote every American to own a home was a goal that seemed quite noble. The government created a situation where mortgages could be originated with minimal chances of them being paid back. FNMA and Freddie Mac would purchase these loans taking the risk away from the lenders and placing it on the taxpayer. If the lender had to keep these loans the lending standards would never had been so lax and so many bad mortgages would never had been originated. So as things turned out many people lost their homes through foreclosure and the American taxpayer is in the hole for billions through FNMA losses. Good intentions turned into disaster for so many individuals and the country as a whole.

The government in their desire to be sensitive to the environment decided that drilling on-shore or on the outer continental shelf or in ANWAR was not acceptable. The oil companies were forced to drill in the ocean or in the Gulf of Mexico and drill down a mile to reach oil. Now that there is a problem so far down it is looking as though we will be unable to plug the leak. Now we have an environmental disaster much greater than any impact that would have been created with drilling in ANWAR. Again, good intentions from the government resulting in an outcome exactly the opposite of what was intended.

In both of these cases it is not the government that is entirely at fault. With the oil spill human error and greed by BP played a role and with the mortgage crisis greed by banks, mortgage brokers, and individuals were a major factor. But it was the government that set the stage for theses crises. Human greed and human error are constants and will always exist but government is the enabler that allowed them to manifest. The government distorts market forces as well as natural incentives and disincentives which often promotes greedy behavior. There is a role for government, but by overreaching, even if well-intended, leads to consequences that can be disastrous.