There was an old lady who...

...taught me about unintended consequences.

There’s a children’s song that often comes to mind when I’m analyzing government intervention and its ill effects on society. Yeah, really. A children’s song:

“There was an old lady who swallowed a fly. I don’t know why she swallowed a fly — perhaps she’ll die!

There was an old lady who swallowed a spider, that wriggled and jiggled and tickled inside her. She swallowed the spider to catch the fly. I don’t know why she swallowed the fly — perhaps she’ll die.”

The song proceeds in a cumulative fashion, with the old lady swallowing progressively larger animals in an attempt to catch the one before. With each new animal, the fresh verse is followed by singing all the previous verses, ending with “perhaps she’ll die”.

Bird, cat, dog, goat, cow. Pick any series of animals you like, really. And when tired of singing the song, the final line:

“There was an old lady who swallowed a horse — she’s dead, of course!”

Good stuff. Dead old lady. Kids all laugh. It’s a nice, morbid, children’s song with visions of bad choices and lethal consequences. Singing it is probably banned in our modern society. Too bad if it is, though. Because like most old things, the song is a subtly excellent teacher.

With this silly song, kids incorporate a powerful metaphor for many situations that seem simple but can become complicated (and catastrophically so) if we apply inappropriate solutions to them.

Which brings me to government.

It’s long been well understood by good economists that government intervention into the peaceful affairs of market participants can have disastrous unintended consequences. Here’s a great article by FEE demonstrating this principle with several great examples.

If dry economics articles aren’t your thing, check out this hilarious short video series by ReasonTV called, “Great Moments in Unintended Consequences”. It has 15 short (two or three minute) episodes at the time I write this. They are all awesome. Very entertaining and illuminating.

Combine this insight with the one from Public Choice theory that reveals that government agents act according to personal incentives just like the rest of us, and you’ll quickly realize why government solutions tend to be counter-productive and everlasting.

“Nothing is so permanent as a temporary government program.”

— Milton Friedman

But before ReasonTV, Public Choice theory, or even Milton Friedman, the greatest economist of them all, Ludwig von Mises, told us all very plainly:

“Every government intervention [in the marketplace] creates unintended consequences, which lead to calls for further government interventions.”

— Ludwig von Mises

Perhaps he wrote that awesome nursery rhyme, too?

Probably not. But we should heed him, and it, or what happened to that fictional old lady could happen to us. Perhaps we’ll die.

Naturally,

Adam