Sunday, October 25, 2009

The road to hell is paved with good intentions...

I remember my father saying, "the road to hell is paved with good intentions." Now my dad didn't make up the line (A Google search revealed that Saint Bernard of Clairvaux said something along those lines in the 1100's) but the wisdom of that line can not be overstated. The line captures the blow- or unintended consequences - of well intentioned government decisions.

Smoking before sex.
It's not that long ago when governments started restricting tobacco advertising. I am not making the case that this restriction is a bad thing. After all, we don't want kids picking up the habit. And, the restrictions make economic sense especially in countries where health care cost is "picked up by the government" (assuming the health care costs of treating the incremental diseases caused by tobacco exceed the incremental revenue from the tobacco taxes).

Originally, the anti-tobacco legislation stated that tobacco brands could not promote their brands in any place that a minor might be exposed to it. What was the result? Big Tobacco shifted their promotional budgets to adult industries. That's right. The legislation helped to subsidize the smut industry.

Remember luxury tax on Monopoly?
There's no tax that could be more popular than a luxury tax. After all, who could oppose a special tax on the consumption of extravagant luxury items like a 100 foot yacht or Gulfstream jet? When this happened in the 90s, rich folks shifted their spending away from the taxed items and the folks who made the yachts lost their jobs. (An additional 1% tax on a $50 million jet is still $500,000 and a rich man stupid enough to snag trophy wife #4, is smart enough to know that the 500k can cover some part of alimony.)

A real road to hell.
Here's a favorite of Reuven Brenner. When governments got in to the business of highways and roads, the idea was that road building would create a lot of jobs. More roads would further stimulate car sales as drivers would have more places to go. This makes sense. But the blow here is crazy. Prior to the widespread access to free roads, people lived close to where they worked, partied, worshiped, and shopped. When the highways out of town got built, the rich and middle classes drove their cars and moved to the 'burbs. So, as the inner city was gutted of the key property stakeholders, crime rates rose. As the highways extended, cities sprawled. Traffic congestion emerged contributing to pollution, driver stress, accidental deaths, and years of lives wasted on highways. The average Torontonian commutes just under 80 minutes a work day. That's about 550 days of life on the real road to hell of good intentions.

So what's the so what? Coming soon... :-)

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