law-of-unintended-consequences

Law of Unintended Consequences

Business / By / October 25, 2023

The law of unintended consequences was first mentioned by British philosopher John Locke when writing to parliament about the unintended effects of interest rate rises. However, it was popularized in 1936 by American sociologist Robert K. Merton who looked at unexpected, unanticipated, and unintended consequences and their impact on society.

AspectExplanation
Law of Unintended ConsequencesThe Law of Unintended Consequences is a concept in social science and economics that suggests that actions or decisions, even when well-intentioned, can result in unexpected and often undesirable outcomes. These outcomes may be unforeseen and indirect, and they can occur when individuals or organizations implement policies, technologies, or interventions.
Characteristics– Unintended Outcomes: Actions can lead to consequences that were not initially anticipated or intended.
– Complex Systems: Outcomes are influenced by complex and interconnected systems.
– Human Behavior: It often involves the behavior and responses of individuals or groups.
– Positive or Negative: Unintended consequences can be positive, negative, or both.
– Long-Term Effects: Effects may manifest over time, and they can persist.
Examples– Prohibition: The U.S. alcohol prohibition in the 1920s led to unintended consequences, including the rise of organized crime.
– Environmental Regulations: Some environmental regulations can lead to unintended pollution shifts or increased energy consumption.
– Government Policies: Economic policies may have unforeseen impacts on markets and employment.
– Technology Adoption: The introduction of new technologies can have unexpected social and economic consequences.
Causes– Complexity: Complex systems and interactions can make it difficult to predict outcomes.
– Limited Information: Lack of complete information can lead to unforeseen effects.
– Behavioral Responses: People may adapt and change behavior in response to policies or actions.
– External Factors: External events can influence outcomes.
– Time Lag: Effects may not be immediately evident.
Mitigation and Management– Scenario Planning: Consider potential outcomes and plan accordingly.
– Feedback Loops: Monitor and adapt based on feedback.
– Stakeholder Involvement: Engage stakeholders to anticipate impacts.
– Continuous Evaluation: Regularly assess the effects of actions or decisions.
– Flexibility: Be prepared to adjust strategies as needed.
SignificanceThe Law of Unintended Consequences highlights the importance of careful planning, analysis, and consideration of potential impacts when making decisions or implementing policies. It underscores the need for policymakers, organizations, and individuals to be aware of the complexity of systems and the potential ripple effects of their actions.
ConclusionThe Law of Unintended Consequences serves as a reminder that actions can have far-reaching and unexpected effects. It underscores the importance of thoughtful decision-making, ongoing evaluation, and adaptability to address unforeseen outcomes and minimize negative consequences.

Understanding the law of unintended consequences

The law of unintended consequences posits that any action has outcomes that are not intended or anticipated by the actor.

Merton noted that these consequences could be construed as positive or negative with the desirability of either based on context.

While rooted in societal impact, the law of unintended consequences is relevant to almost any scenario but is commonly associated with economic decisions, government policy, disasters, and the environment.

The three types of unintended consequences

The three types of unintended consequences are described below.

1 – Unexpected drawbacks 

These are undesirable consequences that occur at the same time as those deemed desirable. 

When the US government developed its freeway network in the 1950s, rail as a transport option became overlooked in favor of road transportation.

Car ownership reached such an extent in the 1990s that heavy traffic forced many to look at rail transport, but the infrastructure wasn’t there to meet demand.

2 – Unexpected benefits 

Otherwise referred to as serendipity or luck. When the Korean Demilitarized Zone was created it preserved a tract of forest habitat for native wildlife.

Aspirin, developed to be a pain reliever, was discovered to have anticoagulant properties that lowered the risk of a heart attack.

3 – Perverse results 

Perverse results are consequences that are contrary to the original intention. In other words, when a solution exacerbates the problem.

When vehicle manufacturers introduced airbags as a safety feature in the 1990s, they caused an increase in mortalities among children who were hit as the airbag deployed in a collision.

What causes unintended consequences?

In his work, Merton discovered five core reasons for unintended consequences:

  1. Mistakes, no matter how simple, can hinder the accurate prediction of an outcome. These mistakes result from a lack of knowledge of a specific situation.
  2. The assumption that repeating past actions will produce the same results in the future.
  3. Rushed or hastily considered actions based on the need for an immediate solution.
  4. Actions stemming from what Merton calls “basic values”. These are pervasive, entrenched beliefs, norms, and values that prevent proper consideration of the impact of an action on individuals or society.
  5. The self-fulfilling prophecy. This is a term Merton coined to describe a scenario where an incorrect definition of the situation evokes behavior that causes the original false conception to come true.

Case Studies

  • Prohibition in the 1920s:
    • Intended Consequence: The U.S. government hoped to reduce crime and corruption by banning the production and sale of alcoholic beverages.
    • Unintended Consequence: The prohibition era saw a rise in organized crime, speakeasies, and illegal trade of alcohol.
  • Introduction of Rabbits in Australia:
    • Intended Consequence: Rabbits were introduced in Australia for hunting purposes.
    • Unintended Consequence: With no natural predators, the rabbit population exploded, causing ecological damage and the loss of native species.
  • D.A.R.E. Program:
    • Intended Consequence: The Drug Abuse Resistance Education program aimed to educate young students about the dangers of drug use.
    • Unintended Consequence: Some studies suggested that exposure to the program actually increased the curiosity and subsequent drug use among students.
  • Government Subsidies for Biofuels:
    • Intended Consequence: In an effort to reduce dependence on fossil fuels, governments provided subsidies to promote the production of biofuels.
    • Unintended Consequence: Increased demand for biofuel crops led to deforestation and food shortages in some areas.
  • Economic Sanctions:
    • Intended Consequence: Sanctions are often imposed to change a particular behavior of a country.
    • Unintended Consequence: While the ruling elite may remain unaffected, the general populace often suffers from shortages, inflation, and other economic hardships.
  • Cane Toads in Australia:
    • Intended Consequence: Cane toads were introduced in Australia to control pests in sugarcane crops.
    • Unintended Consequence: The toads became pests themselves, poisoning native species and harming local ecosystems.
  • Urban Planning and Highways:
    • Intended Consequence: Cities built highways intending to facilitate transportation and reduce traffic congestion.
    • Unintended Consequence: The construction of highways often divided communities and led to increased reliance on cars, further exacerbating urban sprawl and congestion.
  • Plastic Bag Bans:
    • Intended Consequence: Many regions banned single-use plastic bags to reduce environmental pollution.
    • Unintended Consequence: Some people began purchasing thicker garbage bags, which might have a more significant environmental impact.
  • Rent Control Policies:
    • Intended Consequence: Rent control was introduced in some cities to make housing more affordable.
    • Unintended Consequence: Property owners, seeing limited profitability, might reduce maintenance of rent-controlled properties, leading to degradation of housing quality.
  • Pesticide Use in Agriculture:
    • Intended Consequence: Pesticides were used to increase crop yields by eliminating pests.
    • Unintended Consequence: Over-reliance on pesticides led to the evolution of pesticide-resistant pests and harmed beneficial insects, impacting biodiversity.

Key takeaways:

  • The law of unintended consequences posits that any action has outcomes that are not intended or predicted by the actor.
  • The three types of unintended consequences are unexpected drawbacks, unexpected benefits, and perverse results.
  • American sociologist Robert K. Merton believed there were five core drivers of unintended consequences. Chief among these is the notion that mistakes due to ignorance can skew outcome predictions and the assumption that past actions will produce the same results in the future.

Key Highlights

  • Understanding the Law of Unintended Consequences: The law of unintended consequences suggests that any action may lead to outcomes that were not intended or foreseen by the actor.
  • Three Types of Unintended Consequences:
    1. Unexpected Drawbacks: Undesirable consequences that occur alongside desired ones. For example, the development of freeways led to increased car ownership but overlooked the need for rail transport, leading to traffic congestion later on.
    2. Unexpected Benefits: Also known as serendipity, these are positive consequences that were not initially intended. For instance, the creation of the Korean Demilitarized Zone preserved a habitat for native wildlife.
    3. Perverse Results: Consequences that are contrary to the original intention, often making the problem worse. For instance, the introduction of airbags for vehicle safety resulted in an increase in child fatalities when airbags deployed in collisions.
  • Causes of Unintended Consequences: Robert K. Merton identified five core reasons for unintended consequences:
    1. Mistakes and Lack of Knowledge: Simple mistakes or lack of knowledge can hinder accurate outcome predictions.
    2. Assumption of Repetition: Assuming that repeating past actions will yield the same results in the future.
    3. Hasty Actions for Immediate Solutions: Rushed actions taken to address immediate problems.
    4. Actions Based on Basic Values: Pervasive beliefs and values that prevent proper consideration of the impact of actions on individuals or society.
    5. Self-Fulfilling Prophecy: A scenario where an incorrect definition of a situation causes behavior that makes the false conception come true.

Connected Thinking Frameworks

Convergent vs. Divergent Thinking

convergent-vs-divergent-thinking
Convergent thinking occurs when the solution to a problem can be found by applying established rules and logical reasoning. Whereas divergent thinking is an unstructured problem-solving method where participants are encouraged to develop many innovative ideas or solutions to a given problem. Where convergent thinking might work for larger, mature organizations where divergent thinking is more suited for startups and innovative companies.

Critical Thinking

critical-thinking
Critical thinking involves analyzing observations, facts, evidence, and arguments to form a judgment about what someone reads, hears, says, or writes.

Biases

biases
The concept of cognitive biases was introduced and popularized by the work of Amos Tversky and Daniel Kahneman in 1972. Biases are seen as systematic errors and flaws that make humans deviate from the standards of rationality, thus making us inept at making good decisions under uncertainty.

Second-Order Thinking

second-order-thinking
Second-order thinking is a means of assessing the implications of our decisions by considering future consequences. Second-order thinking is a mental model that considers all future possibilities. It encourages individuals to think outside of the box so that they can prepare for every and eventuality. It also discourages the tendency for individuals to default to the most obvious choice.

Lateral Thinking

lateral-thinking
Lateral thinking is a business strategy that involves approaching a problem from a different direction. The strategy attempts to remove traditionally formulaic and routine approaches to problem-solving by advocating creative thinking, therefore finding unconventional ways to solve a known problem. This sort of non-linear approach to problem-solving, can at times, create a big impact.

Bounded Rationality

bounded-rationality
Bounded rationality is a concept attributed to Herbert Simon, an economist and political scientist interested in decision-making and how we make decisions in the real world. In fact, he believed that rather than optimizing (which was the mainstream view in the past decades) humans follow what he called satisficing.

Dunning-Kruger Effect

dunning-kruger-effect
The Dunning-Kruger effect describes a cognitive bias where people with low ability in a task overestimate their ability to perform that task well. Consumers or businesses that do not possess the requisite knowledge make bad decisions. What’s more, knowledge gaps prevent the person or business from seeing their mistakes.

Occam’s Razor

occams-razor
Occam’s Razor states that one should not increase (beyond reason) the number of entities required to explain anything. All things being equal, the simplest solution is often the best one. The principle is attributed to 14th-century English theologian William of Ockham.

Lindy Effect

lindy-effect
The Lindy Effect is a theory about the ageing of non-perishable things, like technology or ideas. Popularized by author Nicholas Nassim Taleb, the Lindy Effect states that non-perishable things like technology age – linearly – in reverse. Therefore, the older an idea or a technology, the same will be its life expectancy.

Antifragility

antifragility
Antifragility was first coined as a term by author, and options trader Nassim Nicholas Taleb. Antifragility is a characteristic of systems that thrive as a result of stressors, volatility, and randomness. Therefore, Antifragile is the opposite of fragile. Where a fragile thing breaks up to volatility; a robust thing resists volatility. An antifragile thing gets stronger from volatility (provided the level of stressors and randomness doesn’t pass a certain threshold).

Systems Thinking

systems-thinking
Systems thinking is a holistic means of investigating the factors and interactions that could contribute to a potential outcome. It is about thinking non-linearly, and understanding the second-order consequences of actions and input into the system.

Vertical Thinking

vertical-thinking
Vertical thinking, on the other hand, is a problem-solving approach that favors a selective, analytical, structured, and sequential mindset. The focus of vertical thinking is to arrive at a reasoned, defined solution.

Maslow’s Hammer

einstellung-effect
Maslow’s Hammer, otherwise known as the law of the instrument or the Einstellung effect, is a cognitive bias causing an over-reliance on a familiar tool. This can be expressed as the tendency to overuse a known tool (perhaps a hammer) to solve issues that might require a different tool. This problem is persistent in the business world where perhaps known tools or frameworks might be used in the wrong context (like business plans used as planning tools instead of only investors’ pitches).

Peter Principle

peter-principle
The Peter Principle was first described by Canadian sociologist Lawrence J. Peter in his 1969 book The Peter Principle. The Peter Principle states that people are continually promoted within an organization until they reach their level of incompetence.

Straw Man Fallacy

straw-man-fallacy
The straw man fallacy describes an argument that misrepresents an opponent’s stance to make rebuttal more convenient. The straw man fallacy is a type of informal logical fallacy, defined as a flaw in the structure of an argument that renders it invalid.

Streisand Effect

streisand-effect
The Streisand Effect is a paradoxical phenomenon where the act of suppressing information to reduce visibility causes it to become more visible. In 2003, Streisand attempted to suppress aerial photographs of her Californian home by suing photographer Kenneth Adelman for an invasion of privacy. Adelman, who Streisand assumed was paparazzi, was instead taking photographs to document and study coastal erosion. In her quest for more privacy, Streisand’s efforts had the opposite effect.

Heuristic

heuristic
As highlighted by German psychologist Gerd Gigerenzer in the paper “Heuristic Decision Making,” the term heuristic is of Greek origin, meaning “serving to find out or discover.” More precisely, a heuristic is a fast and accurate way to make decisions in the real world, which is driven by uncertainty.

Recognition Heuristic

recognition-heuristic
The recognition heuristic is a psychological model of judgment and decision making. It is part of a suite of simple and economical heuristics proposed by psychologists Daniel Goldstein and Gerd Gigerenzer. The recognition heuristic argues that inferences are made about an object based on whether it is recognized or not.

Representativeness Heuristic

representativeness-heuristic
The representativeness heuristic was first described by psychologists Daniel Kahneman and Amos Tversky. The representativeness heuristic judges the probability of an event according to the degree to which that event resembles a broader class. When queried, most will choose the first option because the description of John matches the stereotype we may hold for an archaeologist.

Take-The-Best Heuristic

take-the-best-heuristic
The take-the-best heuristic is a decision-making shortcut that helps an individual choose between several alternatives. The take-the-best (TTB) heuristic decides between two or more alternatives based on a single good attribute, otherwise known as a cue. In the process, less desirable attributes are ignored.

Bundling Bias

bundling-bias
The bundling bias is a cognitive bias in e-commerce where a consumer tends not to use all of the products bought as a group, or bundle. Bundling occurs when individual products or services are sold together as a bundle. Common examples are tickets and experiences. The bundling bias dictates that consumers are less likely to use each item in the bundle. This means that the value of the bundle and indeed the value of each item in the bundle is decreased.

Barnum Effect

barnum-effect
The Barnum Effect is a cognitive bias where individuals believe that generic information – which applies to most people – is specifically tailored for themselves.

First-Principles Thinking

first-principles-thinking
First-principles thinking – sometimes called reasoning from first principles – is used to reverse-engineer complex problems and encourage creativity. It involves breaking down problems into basic elements and reassembling them from the ground up. Elon Musk is among the strongest proponents of this way of thinking.

Ladder Of Inference

ladder-of-inference
The ladder of inference is a conscious or subconscious thinking process where an individual moves from a fact to a decision or action. The ladder of inference was created by academic Chris Argyris to illustrate how people form and then use mental models to make decisions.

Goodhart’s Law

goodharts-law
Goodhart’s Law is named after British monetary policy theorist and economist Charles Goodhart. Speaking at a conference in Sydney in 1975, Goodhart said that “any observed statistical regularity will tend to collapse once pressure is placed upon it for control purposes.” Goodhart’s Law states that when a measure becomes a target, it ceases to be a good measure.

Six Thinking Hats Model

six-thinking-hats-model
The Six Thinking Hats model was created by psychologist Edward de Bono in 1986, who noted that personality type was a key driver of how people approached problem-solving. For example, optimists view situations differently from pessimists. Analytical individuals may generate ideas that a more emotional person would not, and vice versa.

Mandela Effect

mandela-effect
The Mandela effect is a phenomenon where a large group of people remembers an event differently from how it occurred. The Mandela effect was first described in relation to Fiona Broome, who believed that former South African President Nelson Mandela died in prison during the 1980s. While Mandela was released from prison in 1990 and died 23 years later, Broome remembered news coverage of his death in prison and even a speech from his widow. Of course, neither event occurred in reality. But Broome was later to discover that she was not the only one with the same recollection of events.

Crowding-Out Effect

crowding-out-effect
The crowding-out effect occurs when public sector spending reduces spending in the private sector.

Bandwagon Effect

bandwagon-effect
The bandwagon effect tells us that the more a belief or idea has been adopted by more people within a group, the more the individual adoption of that idea might increase within the same group. This is the psychological effect that leads to herd mentality. What in marketing can be associated with social proof.

Moore’s Law

moores-law
Moore’s law states that the number of transistors on a microchip doubles approximately every two years. This observation was made by Intel co-founder Gordon Moore in 1965 and it become a guiding principle for the semiconductor industry and has had far-reaching implications for technology as a whole.

Disruptive Innovation

disruptive-innovation
Disruptive innovation as a term was first described by Clayton M. Christensen, an American academic and business consultant whom The Economist called “the most influential management thinker of his time.” Disruptive innovation describes the process by which a product or service takes hold at the bottom of a market and eventually displaces established competitors, products, firms, or alliances.

Value Migration

value-migration
Value migration was first described by author Adrian Slywotzky in his 1996 book Value Migration – How to Think Several Moves Ahead of the Competition. Value migration is the transferal of value-creating forces from outdated business models to something better able to satisfy consumer demands.

Bye-Now Effect

bye-now-effect
The bye-now effect describes the tendency for consumers to think of the word “buy” when they read the word “bye”. In a study that tracked diners at a name-your-own-price restaurant, each diner was asked to read one of two phrases before ordering their meal. The first phrase, “so long”, resulted in diners paying an average of $32 per meal. But when diners recited the phrase “bye bye” before ordering, the average price per meal rose to $45.

Groupthink

groupthink
Groupthink occurs when well-intentioned individuals make non-optimal or irrational decisions based on a belief that dissent is impossible or on a motivation to conform. Groupthink occurs when members of a group reach a consensus without critical reasoning or evaluation of the alternatives and their consequences.

Stereotyping

stereotyping
A stereotype is a fixed and over-generalized belief about a particular group or class of people. These beliefs are based on the false assumption that certain characteristics are common to every individual residing in that group. Many stereotypes have a long and sometimes controversial history and are a direct consequence of various political, social, or economic events. Stereotyping is the process of making assumptions about a person or group of people based on various attributes, including gender, race, religion, or physical traits.

Murphy’s Law

murphys-law
Murphy’s Law states that if anything can go wrong, it will go wrong. Murphy’s Law was named after aerospace engineer Edward A. Murphy. During his time working at Edwards Air Force Base in 1949, Murphy cursed a technician who had improperly wired an electrical component and said, “If there is any way to do it wrong, he’ll find it.”

Law of Unintended Consequences

law-of-unintended-consequences
The law of unintended consequences was first mentioned by British philosopher John Locke when writing to parliament about the unintended effects of interest rate rises. However, it was popularized in 1936 by American sociologist Robert K. Merton who looked at unexpected, unanticipated, and unintended consequences and their impact on society.

Fundamental Attribution Error

fundamental-attribution-error
Fundamental attribution error is a bias people display when judging the behavior of others. The tendency is to over-emphasize personal characteristics and under-emphasize environmental and situational factors.

Outcome Bias

outcome-bias
Outcome bias describes a tendency to evaluate a decision based on its outcome and not on the process by which the decision was reached. In other words, the quality of a decision is only determined once the outcome is known. Outcome bias occurs when a decision is based on the outcome of previous events without regard for how those events developed.

Hindsight Bias

hindsight-bias
Hindsight bias is the tendency for people to perceive past events as more predictable than they actually were. The result of a presidential election, for example, seems more obvious when the winner is announced. The same can also be said for the avid sports fan who predicted the correct outcome of a match regardless of whether their team won or lost. Hindsight bias, therefore, is the tendency for an individual to convince themselves that they accurately predicted an event before it happened.

Read Next: Biases, Bounded Rationality, Mandela Effect, Dunning-Kruger Effect, Lindy Effect, Crowding Out Effect, Bandwagon Effect.

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Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
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