Unintended Consequences
This story in the Nation was a pretty classic example of intended consequences at work: (via the Anti-Planner)
Thanks to an obscure tax provision, the United States government stands to pay out as much as $8 billion this year to the ten largest paper companies. And get this: even though the money comes from a transportation bill whose manifest intent was to reduce dependence on fossil fuel, paper mills are adding diesel fuel to a process that requires none in order to qualify for the tax credit. In other words, we are paying the industry--handsomely--to use more fossil fuel. "Which is," as a Goldman Sachs report archly noted, the "opposite of what lawmakers likely had in mind when the tax credit was established."
As I understand it, the paper companies had a process that has for decades been 100% biofuel powered, but if they now mix in some diesel fuel, they can get a tax credit under a provision that gives such credits for using a 50/50 diesel/biofuel mix. Obviously, the indended consequence were to get 100% diesel fuel users to mix in some biofuel, but the law was not written in a way to preclude the opposite.
I found nothing particularly new or unique about this example, but I did find the author's reaction depressing. Apparently, for Christopher Hayes, this is a failure of private enterprise, not of government:
I've come to expect that even nobly conceived laws will be manipulated and distorted for private ends. But once in a while I hear a story that gives me the queasy feeling that I'm nowhere near cynical enough...
the episode is a useful reminder of the persistently ingenious ways the private sector can exploit even well-intentioned legislation
First, the notion that the whole bio-diesel law was "nobly conceived" is a total hoot. Basically this law was originally a politically-motivated subsidy of a powerful political lobby (farmers and agribusiness) that most science has demonstrated to have zero impact on its nominal target (CO2 production). So all that is happening here is that one narrow business interest has hijacked the subsidy intended for a different narrow business interest. Seriously, I probably should know who this author is, but can anyone who has covered Washington for, say, a week or more really attach "noble" and "well-intentioned" as modifiers to "legislation" with a straight face?
Second, as a back-check on all the "well-intentioned" stuff, note that there has been no movement to change the original law now that this exploit is understood. Why? Because, Mr. Hayes says, the paper industry has a powerful political lobby. I am having a hard time reconciling the picture of a group of folks in Congress failing to fix an expensive exploit in a law due to political pressure from 8-10 corporations with the view that these same guys passed the original law nobly and with the best of intentions.
Finally, there seems to be a general reaction, particularly on the left, that if Congress were just smarter then this would never happen. But it HAS to happen. It is a mathematic certainty. No one, no matter how smart, can make changes to a single variable in a nearly infinitely large, chaotic, and multi-variate system like the economy and understand fully what the consequences will be. It's absurd hubris to think otherwise.
