PEOPLE respond to incentives. That's obvious, yet it continues to catch policymakers by surprise. The validity of this concept could be seen in December when countless businesses issued dividends and took other steps to maximize profits in advance of the January tax increases enacted at President Barack Obama's insistence.
Another obvious truism often ignored by politicians is that actions can have unintended consequences. This can be seen in the response to Obama's demand for gun control. Americans reacted by purchasing weapons and ammunition — particularly the AR-15 model used in the Newtown shooting. The unintended consequence of gun control proponents' zeal was to encourage people to stockpile weapons.
After Newtown, lawmakers in New York rushed to enact gun control laws. They're now dealing with the unintended consequences. Mental health doctors object to a provision requiring them to report patients they consider a risk, saying this may cause fewer people to seek needed treatment and ultimately increase the likelihood of tragedy.
The New York law banned magazines holding more than seven bullets, putting police in violation of the law. The legislation also banned carrying guns on school grounds. Under the letter of the law, should a school shooting occur, police might be required to disarm on school grounds even if the shooter remains active. Apparently, New York's politicians didn't bother to consider what behavior may be incentivized by that provision, but it's safe to say the unintended result isn't necessarily a deterrent to school shootings.
In Oklahoma, restrictions on drugs with pseudoephedrine briefly reduced the number of local meth labs, but incentivized an increase in meth imported by international cartels — and also incentivized meth cooks to develop a “shake and bake” formula requiring smaller quantities of precursor drugs.
The biggest case of incentives impacting behavior is likely to occur in 2014, when many Obamacare provisions take effect. Numerous companies are already preparing for the law in ways the bill's supporters should have expected, but didn't. Since companies with more than 50 workers face penalties if they don't provide the government-sanctioned level of coverage, many businesses are reasonably reducing the number of full-time workers to avoid the penalty. The incentives of Obamacare often mean reducing the number of full-time jobs instead of increasing insurance coverage.
Unintended consequences accompany not only half-baked laws, but well-reasoned measures such as Michigan's new right-to-work law. The legislation's short-term impact has been to incentivize unions to lock in long-term contracts before it takes effect. Wayne State University in Detroit negotiated an eight-year agreement with its faculty union. In Washtenaw County, an area dominated by Democrats, the county board of commissioners expedited negotiations and approved 10-year agreements. In response, the Michigan legislature is advancing a bill to reduce state aid for government entities with new collective bargaining agreements that fail to significantly reduce costs. Right to work remains good policy, but its full benefits may not be seen for years due to union reaction.
One of Newton's laws applies not just to physics, but to politics: For every action there is an equal and opposite reaction. This doesn't mean the initial action isn't worth taking, but policymakers should always be cautious when contemplating significant new laws, particularly those requiring a dramatic change in citizens' behavior.
Too often, government policies just speed up a targeted activity — or actually encourage people to engage in it.