The Perils of Government Intervention

As someone who has spent nearly all his working life in the public service, the above heading is heretical.  Medical students are taught “First, do No Harm” but public servants and politicians too often strive to do something, anything, when a problem arises.  Often the best course is to let things work out for themselves.  Markets have an uncanny knack of correcting themselves (often precipitously), but within certain bounds, effectively. 

Now this is not a piece on Government Bad, Markets Good.  Government intervention in many instances is warranted, effective and applauded.  But if there is one thing that the Cynefin framework has taught me is that people are not machines, societies are not aggregations of machines, and that unintended consequences of government actions can often be worse than inaction. 

A recent article in the Washington Post (thanks Andrew Leigh for the link) points out areas where government intervention has failed because people “regularly respond to those interventions in contrarian, paradoxical and unpredictable ways”.  The article further notes that policies that make people feel safer actually encourage more risk taking behaviour (citing driver airbags, bike helmets, drugs and obesity, etc) suggesting that targeted interventions aimed at particular sections of the population will have a greater effect.  One size fits all does not work in clothing stores – and it does not work with public policy either. 

Systemic interventions require trial and evaluation – something that policy experts are notoriously poor on.  At the very least, they require a fundamental reflection about the unintended consequences of the actions rather than simplistic cause-effect models.  Foresight tools can really help in this area.   

Generally, government regulation is in response to market failure.  Sometimes that direction reverses with market failure the result of government regulation.  Investigating these system dynamics and how they change over time is key.  Too often, regulation is aimed at garnering equilibrium in markets rather than allowing for innovation which may overcome the initial problem.

Food for thought for all you policy wonks out there.


One Response to The Perils of Government Intervention

  1. Henry Pym says:

    “Working life in the public service” is there an oxymoron in there somewhere ?

    On a less serious note … Your not suggesting are you that Government tends to be reactive and feels the need to be seen to be doing something, even if that something is totally ineffectual ? The recent alcopop tax springs to mind along with the “fuel watch” initiative. Guess work cause-effect policy on the run.

    If thought was in fact food for our “policy wonks” they’d starve very quickly.

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