In the late 1700s, economist Adam Smith introduced the Law of Unintended Consequences to describe a situation where an economic action has an unforeseen impact on society.

A local example of the Law of Unintended Consequences is the slated fall closing of Roundy's distribution center in Stevens Point. The loss of jobs and the direct impact of the pending closure were widely reported in the local media. However, the closure will have another impact on the community that has not been discussed. What could that be?

Operation Bootstrap in Stevens Point is one of the largest food banks in central Wisconsin for the economically disadvantaged. A major source of food for Operation Bootstrap has been the donations of distressed food items from the Roundy's distribution center, such as dented canned goods, close-to-expiration products, over-ordered fresh fruits, vegetables, dairy items, and other staples. Operation Bootstrap director Roseann DeBot estimates the value of lost food donations will be in the $150,000 to $200,000 range.

Unless this amount is made up elsewhere, the ability of Operation Bootstrap to provide needed food to the area's disadvantage will be reduced. Like the Law of Unintended Consequences suggests, it is highly unlikely that many people understood the decision's impact on a local charitable institution and on the most economically vulnerable people in our community.

The Law of Unintended Consequences also can refer to the unintended benefits of some actions. For example, the sinking of ships in shallow water might create artificial reefs. This of course is good for a variety of marine life. In a similar vein, taking land out of production helps expand habitat for wildlife. Most drugs have negative side effects, but aspirin is thought to have some positive side effects which might reduce the probability of a heart attack or stroke.

Some politicians have unwittingly invoked the Law of Unintended Consequences as a rationale for limiting certain programs by government or activities of business. The argument is that some government programs, such as the Affordable Health Care Act, or business endeavors, such as corporate expansions, are so complicated that we cannot possibly know all of the ramifications. They also assume that the unintended consequences always are going to be negative. Thus, it is argued that society will be better off by not allowing these activities to take place.

A problem with this approach to economic policy is that we would end up living in a stagnant world where innovation and change are discouraged. And even if such an approach were to become the norm for a society, it would not succeed in the long run. The great Austrian economist Joseph Schumpeter talked of creative destruction. Essentially, what he was saying is that the world is a dynamic place, that change in the way that we do things is inevitable, and that existing institutions will be modified or even destroyed in the process. The implication is that we live in a world that is in constant ferment, and like it or not, we will always have to deal with the unintended consequences of change.

For additional examples and discussion of the Law of Unintended Consequences please go to Consequences.html.


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