The law of unintended consequences, often cited but rarely defined, is that actions of people, and especially of governments, always have effects that are unanticipated or “unintended.” We live in a world that is a complex system with interconnections we do not know, can’t or have not yet imagined, or as the American naturalist John Muir offered: “When we try to pick out anything by itself, we find it hitched to everything else in the universe.”

A well-known example is when the British government in India offered financial rewards for people who killed and turned in cobras. People, reacting to incentives, began breeding the snakes. Once the reward program was scrapped, the population of cobras in India rose as people released the ones they had raised. This event gave birth to the term “the cobra effect” which describes an incentive that has an unintended and undesirable result that is contrary to the intentions of its designers. In other words, an unintended consequence.

In the wake of the Exxon Valdez oil spill in 1989, many coastal States enacted laws placing unlimited liability on tanker operators. What were their intentions? Among many intentions, to insert huge financial penalties for unsafe operation of the tankers by the major oil companies. But as a result the Royal Dutch/Shell group, rather than face such unquantifiable risk, began hiring independently owned and operated ships to deliver oil to the United States instead of using its own forty-six-tanker fleet. They were joined by reputable shippers leaving the field to independent operators. Thus, the probability of spills increased and the likelihood of collecting damages decreased as a consequence of the new laws.

When the Prohibition era in the United States began on January 19, 1920, banning the production, sale, transport, etc of alcoholic beverages, legislators should have known it would not go well. Previous attempts to outlaw the use of alcohol in American history had fared poorly. When a Massachusetts town banned the sale of alcohol in 1844, an enterprising tavern owner took to charging patrons for the price of seeing a striped pig. The town leaders did not expect that particular consequence.

What were the expectations of the legislators, federal and state, when passing the Eighteenth Amendment and the Volstead Act (the federal law implementing the constitutional amendment) which prohibited the manufacture, sale and transportation of intoxicating beverages? When the law went into effect, with more household income available the legislators expected increases in household goods and services, non-alcoholic beverage sales, clothing, and a whole host of consumer products. Real estate developers and landlords expected rents to rise as bars and saloons closed and neighborhoods improved. A whole range of business sectors expected to see economic growth. None of it came to pass. The first wave of indicators that something was amiss was a decline in amusement and entertainment industries across the board. Soon after restaurants failed as they could no longer make a profit without legal liquor sales. Few of the economic benefits that had been predicted came to pass.

The unintended economic consequences of Prohibition didn’t stop there. One of the most profound effects of Prohibition was on government tax revenues. Before Prohibition, many states relied heavily on excise taxes in liquor sales to fund their budgets. With Prohibition in effect, that revenue was immediately lost. At the national level, Prohibition cost the federal government a total of $11 billion in lost tax revenue, while costing over $300 million to enforce. And these are in 1920 dollars.

Did I mention the Eighteenth Amendment and the Volstead Act did not outlaw the possession or consumption of alcohol in the United States? Unintended consequences appear because we sometimes wilfully ignore the inventiveness and ingenuity of people. One of the legal exceptions to the Prohibition law was that pharmacists were allowed to dispense whiskey by prescription for any number of ailments, ranging from anxiety to influenza. Bootleggers quickly discovered that running a pharmacy was a perfect front for their trade. As a result, the number of registered pharmacists in New York State tripled during the Prohibition era.

The law was unclear when it came to Americans making wine at home. With a wink and a nod, the American grape industry began selling kits of juice concentrate with warnings not to leave them sitting too long or else they could ferment and turn into wine. Home stills were technically illegal, but Americans found they could purchase them at many hardware stores, while instructions for distilling could be found in public libraries in pamphlets issued by the U.S. Department of Agriculture. The law that was meant to stop Americans from drinking was instead turning many of them into experts on how to make it.

Nine years after the introduction of Prohibition the Mayor of Berlin, Gustav Boess, visited New York City. The visiting mayor asked the host mayor James J. Walker, when was it that Prohibition was to go into effect. The question tells you how well it was working.

For a while now I have been thinking about unintended consequences. I will keep musing and post more in the future… at least, that is my intention.