The Law of Unintended Consequences

One of the primary problems in any policy question is how to deal with externalities, the non price costs/benefits of enacting a policy. Some examples include pollution, noise, increased or decreased value, etc. Well while riding my bike I came across a perfect example of an externality and the problem with policy's not truly reflecting the costs versus the benefits.

Here in San Antonio, the city decided last year to stop euthanizing dogs at the pound. This movement was headed up by wealthy women from areas where dogs are strictly regulated such as the posh old money nighborhood of Alamo Heights. So these women, who I will refer to as party A, the benefit of being able to appease their morality is greater than the cost to them, which is close to zero. On the other side of town, in the poor areas of the southwest, citizens who wish to walk or ride their bike encounter feral dogs on a regular basis. For these people, let's call them party B, the benefit to the policy is close to zero and the cost is much higher due to their being no space to put newly found strays in the shelter since the space that would be freed up by euthanization is taken.

Why is it that party A is able to pass a law which helps a very tiny minority of people while hurting most individuals? Simple, the role of money internalizes the cost for the city councilors representing the poor areas. The money from party A offsets the costs in potential lost voters from party B, so the MB>MC so the motion passes. The second reason is that while many poor people are adversely affected by having rabid dogs wandering their neighborhoods, they do not vote to reflect this. Thus the sum of all MB>sum of all MC when it comes to voting.

As a result, poor policy decisions occur which hurt most individuals, but politically make sense. This often leads to the titular law of unintended consequences as the poor decisions spill over into other areas such as the increased number of strays from a no kill policy, increased housing prices due to homeownership programs, and increased health care costs due to insurance.