The Law of Unintended Consequences

There is a golden rule which says that when the State does something to improve your lot, protect you from yourself, make sure that your children come to no harm, prevent you from getting fat (and so on and so on) the actual results will not only be unexpected, but perversely, may result in the opposite.

I'll kick off with an agricultural example from rural France. I think you will recognise that the agricultural lobby, in the West anyway, has done very well since WWII. They have enjoyed subsidies, protective tariffs, guaranteed prices, and compensation when things go wrong with their businesses.

There is one extraordinary bit of protective legislation that I know about, since it directly affected us (though we have been able to resolve it). It is an ideal illustration of the Law of Unintended Consequences.

Because farming operates on an annual cycle, farmers, reasonably enough, want as much notice as possible of changes that will affect them - like the reallocation of land they might be renting.

Now this can be safely left to the free market. People with land to let, but who are unreasonable about time frames, will find it more difficult to let that land, and will find that they can charge less for it. In like vein, farmers who are prepared to take land for one, two or three years will find more land available to them than those who are looking to tie someone into a 20 year contract.

However, in France, the State likes to protect agriculture, and this is how they have "helped" farmers in their struggle with unreasonable landlords.

First, land is now let for a minimum nine year period. That is hefty enough. However, at the end of that nine year period, the renting farmer has the option, by right, to extend the contract for a further nine years, for nine years after that, and so on to perpetuity. Which is pretty scary for the landlord.

It makes no difference if the land is sold in the meantime. For a start, the farmer is protected for the nine years anyway. At the end of the nine years you, the new owner, can petition to get the land back, but if you're a townie say, you can kiss your chances goodbye. Even if you wanted to farm it, it would likely go to a tribunal that could easily rule against you. So you can end up owning, and paying taxes on, as asset that you have no reasonable chance of ever getting back.

OK, let's get to the unintended (but by now quite predictable) consequence. Farmers are kicking and screaming because they can't find land to rent. Oh, the land is there alright, and there are people who would love to rent it out. But because some functionaire can't trust two adults to work out a reasonable contract between them no one dares to let their land.

Another. What turned the British into a nation of home owners, rather than tenants (which many were happy to be)? And in the process turned them into one of the most indebted nations on earth who measure their happiness almost entirely in terms of house prices?

The desire to "protect" tenants against landlords.

This took many forms, almost all of which deterred people from letting property and so ultimately hurting the rented sector. When rents are controlled, the sector gets less profitable and shrinks. When you cannot terminate rental agreements, the sector is less attractive and shrinks. When tenants can be more easily removed from furnished properties than unfurnished ones, the unfurnished sector shrinks so you can only rent something with the cheapest and most hideous furniture imaginable (I did). All the above happened in the UK in the 60s, 70s and 80s.

I know there are unreasonable landlords, but the free market will punish them. They will find it harder to get tenants and will have to charge less for their rentals. As it happened the government played right into their hands by (unintentionally!!) shrinking the sector so that the remaining landlords had people grovelling to get a place, any place.

I confine myself to one more example, road straightening to reduce accidents. Well, you guessed it. Drivers increase their speeds which increases the accident rate, and increases the chance of fatalities among cyclists and pedestrians.

There are many other examples of the Law of Unintended Consequences, but rather than bore you I will invite you to look out for them, and maybe post them in comment form. The key characteristic almost without fail is the state doing something to protect someone, but hurting them by so doing.