Unintended Policy Consequences Flashcards

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What are unintended policy consequences?

Side effects of a policy that were not planned. They can make the problem worse or create new problems.

People change behaviour to avoid rules or costs. Government may not have full information. Markets are complex and change over time.

A low legal price can cause a shortage. Some sellers then trade in secret at higher prices.

They raise prices. Some people may buy abroad, smuggle, or switch to unsafe, cheaper goods.

When a rule or subsidy makes something cheaper to use. People then use it more, so the total saving is smaller.

A policy cuts harm in one place or time. The harm moves to another area or time instead, for example traffic moves to nearby roads.

Subsidies cut costs and raise output. This can cause waste or extra pollution.

Taxes or rules can hit low-income households harder. They take a larger share of their income.

People may ignore or dodge the rules. The policy then works less well and costs more to police.

When a policy’s unintended effects and costs make society worse off than before.

There is a delay between a policy and its effects. By then, the market may have changed, so the result is too weak or too strong.

A reward or rule that backfires. It makes people behave in a way that worsens the problem.