Stephen Dubner and Steve Levitt have an article in The New York Times that reminded me a lot about the pitfalls of public policy in India.
When a powerful urge to do good crowds out hard thinking, the results are often different from what might have been intended. Their article has two interesting examples:
- The `Americans With Disabilities Act' in the US involves all kinds of privileges for disabled people. E.g. it allows a patient to place the costs of a sign-language interpreter on the doctor. A paper by Acemoglu and Angrist found that when the law was enacted in 1992, employment of disabled workers went down sharply. Employers were concerned that the law would limit their ability to discipline or sack disabled people who happened to be incompetent, and chose to avoid recruiting them in the first place.
- The `Endangered Species Act' in the US allows the notification of `critical habitats' for endangered species. As a consequence, when a landowner feels that endangered species are possibly inhabiting his privately owned forest land, he often takes care to raze the trees to make sure that he is not expropriated. This leads to more habitat destruction, not less. They describe the cactus ferruginous pygmy owl, studied in a paper by List, Margolis and Osgood: landowners near Tucson, Arizona `rushed to clear their property for development rather than risk having it declared a safe haven for the owl'.
As Dubner and Levitt summarise:
So does this mean that every law designed to help endangered animals, poor people and the disabled is bound to fail? Of course not. But with a government that is regularly begged for relief these days, from mortgage woes, health-care costs and tax burdens and with every presidential hopeful making daily promises to address these woes, it might be worth encouraging the winning candidate to think twice (or even 8 or 10 times) before rushing off to do good.