One of the funny little amendments that Connecticut’s legislative Republicans proposed this summer would have required that most bills include an analysis of their impact on jobs.
The subtext, one suspects, is that almost everything proposed by the Democratic majority unleashes a fleet of moving vans shipping Connecticut businesses to places warm and sunny and low-tax.
The funny little amendment didn’t pass, to the surprise of no one. But beyond the particulars of the GOP practical joke, there is a thimble-full of wisdom that shouldn’t be forgotten.
Actions do have consequences. Incentives — even perverse incentives — do, in fact, have the ability to motivate.
Legislators, giddy with the power of spending other people’s money and regulating other people’s commerce and liberty, often create unintended and unfortunate incentives.
Whether you, in fact, require a formal analysis of impacts (as the GOP amendment suggested), or whether you simply sit back and take 14 seconds to ponder unintended consequences, the results would be more sanity and fewer unpleasant surprises coming out of Connecticut’s General Assembly — or virtually any other government body.
In Oklahoma, two legislators have proposed exempting overtime pay from the state’s income tax. There would be a presumed benefit in that hardworking Oklahomans would be more inclined to, and more enthusiastic about, working real hard. But the argument could be made that such legislation would dampen the enthusiasm of employers for hiring new workers, given the indirect tax incentive offered up to make existing workers extra-happy with their tax-free overtime.
These kinds of analyses are rarely perfect or totally convincing, but the practice of considering alternative consequences is good for the soul and good for public policy.
A recent study from a researcher at the National Bureau of Economic Research suggested that the unintended consequence of much higher taxes on workers in Germany, Italy and France is that those workers are less willing to work long hours — because they don’t have enough extra money to pay for child care and housecleaning and other such services that the lower-taxed Americans are better able to afford.
Changing Behavior
Economists have long despaired of politicians who are so enamored by the power to bludgeon the unwashed with law and regulation, that they fail to consider the unintended or perverse incentives that often crop up.
A new book by economist Tyler Cowen, “Discover Your Inner Economist: Use Incentives to Fall in Love, Survive Your Next Meeting, and Motivate Your Dentist,” offers up a taste of how incentives can make the world go round, if not always as we intend.
One of the saddest incentive surprises popped up this summer in Boston, where police reported that tougher laws and enforcement against gun crimes led to an increase in knifings. The incentive to avoid gun violence worked. Sort of.
The Boston scenario is similar to a classic academic classroom example.
If you want to reduce the number of armed robberies, and you make the maximum punishment the death penalty, then the number of murders will go up, because the robbers will have no incentive to let potential witnesses survive the crime.
In Los Angeles, a recent crackdown on the homeless, drunk, addicted and crazy living downtown has succeeded in reducing their numbers and their crimes, but, as the Los Angeles Times reported, police concede that the campaign “essentially has shifted some of downtown’s homeless and mentally ill residents to other parts of Los Angeles.” There go those unintended consequences. Again.
Not all of these kinds of consequences can be passed off as unintended accidents. Many academics have long criticized such things as economic development subsidies and sports stadium expenditures (not that a Hartford audience would know anything about those) because of the “opportunity cost” of such spending. A state dollar spent pretending that Hartford has a real downtown is a state dollar that isn’t being spent hiring state police or parole officers or highway signs directing travelers to West Hartford Center, which does have a real downtown. In a sense, the misdirection of spending is an intended consequence, however foolish.
So, say a little prayer in memory of the funny little Republican amendment that would have demanded an evaluation of job-destroying potential, before a bill could become law. Ideas have consequences. Legislation has consequences.
But not always the consequences that we imagine.
Laurence D. Cohen is a freelance writer.