Most people understand the role of incentives. Pay me to stop working and I will happily quit my job and take the check. Penalize me for working and I also will quit, if not quite so happily, since there’s no check involved.
The government routinely creates perverse incentives without thinking. Decades ago Washington put price controls on domestic oil. Great idea. So producers invested less to find new sources; energy companies imported more foreign oil, which was not subject to price regulation; consumers used more energy since it was cheap; and gas lines developed across America, since you can’t supply less while demanding more without having, er, “problems.”
Economists Stephen Dubner and Steven Levitt point out that similarly perverse incentives afflict everything from the Americans with Disabilities Act to the Endangered Species Act. For instance, regarding the ADA, they write:
economists Daron Acemoglu and Joshua Angrist once asked a similar question: How did the A.D.A. affect employment among the disabled?
Their conclusion was rather startling and makes Andrew Brooks’s hunch ring true. Acemoglu and Angrist found that when the A.D.A. was enacted in 1992, it led to a sharp drop in the employment of disabled workers. How could this be? Employers, concerned that they wouldn’t be able to discipline or fire disabled workers who happened to be incompetent, apparently avoided hiring them in the first place.
The counterproductive impact of the ESA long has been known. No property owner with an ounce of sanity will allow habitat conducive to an officially endangered species to develop that would allow the federal government to takeover control of his land. Explain Dubner and Levitt:
In a new working paper that examines the plight of the cactus ferruginous pygmy owl, the economists John List, Michael Margolis and Daniel Osgood found that landowners near Tucson rushed to clear their property for development rather than risk having it declared a safe haven for the owl. The economists make the argument for “the distinct possibility that the Endangered Species Act is actually endangering, rather than protecting, species.”
Such cases would be worth remembering the next time a politician declares that he or she has a grand new scheme for reforming America.