Economists, especially those of us who criticize government interventionist policies, often point to bad unintended consequences that many of these policies lead to. Sometimes people say that we delight in pointing to such policies, but that verb certainly doesn’t apply to my attitude. There is typically nothing delightful at all in these consequences, many of them tragic. In this piece, I’ll cover six cases, but they’re a tiny fraction of the cases that exist and even a tiny fraction of the cases I know.
We need to distinguish between unintended and unpredicted consequences. Many unintended consequences can be easily predicted. Others might not be. An example of an unintended consequence that I never would have predicted, and that the highly paid “experts” at the Food and Drug Administration didn’t predict, came about because of an FDA regulation that, on its face, looked reasonable. The regulation was an FDA mandate that food containing sesame be labeled as such. Almost instantly, food producers predicted the consequences and acted accordingly.
This is from David R. Henderson, “Paved with Unintended Consequences,” Defining Ideas, October 5, 2023.
Another excerpt:
Ayanna Pressley (D-MA) and Rashida Tlaib (D-MI) have proposed federal legislation to prevent landlords from doing criminal background checks on prospective tenants. In the writeup on Pressley’s site, I can’t find her addressing why landlords would want to know whether potential tenants have a criminal record. Is it because they don’t want criminals no matter what those criminals did? Hard to believe. I own a small share of a large apartment complex and I know why I want the general partner to do criminal background checks: to see if there’s any evidence that they would fail to pay rent, wreck the apartment, or carry on illegal activities in the apartment. The virtue of a criminal background check is that you can find out specifically what crime the person committed. What if he smoked weed twenty years ago? Who cares? My guess is that the general partner doesn’t.
What would happen if this bill passes? Would landlords say, “Oh, well, I guess I’ll have to take all comers”? No. Instead, they would look for what statisticians call “noisier” data, data that are correlated with criminality. The result would be that some people with no criminal record would get turned down.
Who would be turned down? Two researchers, Marina Mileo Gorzig and Deborah Rho, did a study for the Federal Reserve Bank of Minneapolis to look for the answer. They chose a clever methodology. They sent fictitious e-mails to landlords using names that looked to be those of whites, blacks, and Somalis. After the Minneapolis government banned criminal background checks, they found, “discrimination against African-American and Somali-American men increased.” Moreover, found the researchers, discrimination increased in Minneapolis relative to discrimination in St. Paul, whose government had not imposed the policy.
I’m tempted to ask Reps. Pressley and Tlaib, “What do you have against blacks and Somalis?”
Read the whole thing.
READER COMMENTS
Richard Fulmer
Oct 6 2023 at 8:42am
When Thomas Sowell was just starting his career as a professor at Cornell, he was surprised at the large number of students who had signed up for his classes. He mentioned it to a colleague, who pointed out that Sowell was black. In the days before Affirmative Action, an African American had to overcome a lot of barriers to become a professor at a prestigious university. The students were intelligently looking for clues (noisy data?) indicating who the best professors were.
Nathan LaBrecque
Oct 6 2023 at 9:56am
If you do have a criminal record how are you suppose to find a place to live? Do you think it could possibly lead to increase homelessness among criminals and more likely to result in them becoming recidivist? Why do you want to make life harder on former criminals that have served their sentence so that land holders can make sure they have the perfect tenant?
robc
Oct 6 2023 at 10:27am
Find a landlord who doesnt care, or who doesnt care for a premium.
BS
Oct 6 2023 at 10:44am
“Big” landlords with lots of properties are in a position to afford the risk (cost) of occasional problem tenants. “Small” landlords with one or a few cannot, particularly those who might rent a single suite in their own dwelling or on their own property. Some of them get out of the game, and the stock of rental accommodation decreases and the cost of rentals increases. So another way to phrase the question is why should we make life harder for “good” renters in order to make things easier for “bad” renters?
David Henderson
Oct 6 2023 at 11:07am
You write:
On your first question, one way would be with a substantial security deposit. Another way would be to make it easier to get rid of a tenant who creates major problems. Then a criminal who really has reformed can more easily get an apartment. Both of these methods are hard to do in California, where the apartment complex of which I’m a limited partner is located. The law here is strongly biased against landlords: a good friend of mine who owns one condo and rented it to a woman with a criminal record and didn’t do due diligence beforehand, learned. I’m hoping you wouldn’t advocate these laws that make it harder for criminals, would you?
On your second question, yes, I do think so, at least marginally. The solution there is twofold: (1) allow more building so that prices and rents fall, making it easier for everyone; (2) get rid of the many restrictions that prevent criminals from getting jobs. On this latter point, it’s absurd that California’s uses prisoners to fight forest fires but when they have finished have finished their prison sentences, they are not allowed to do so.
You write:
One thing I’ve learned from reading the general partner’s monthly emails updating the limited partners is that we don’t look for “perfect tenants.” We look for tenants who will pay rent on time, will not disturb their fellow tenants too much, and won’t wreck the apartment. Are you saying that we shouldn’t care about those things?
I don’t know your situation, Nathan. Do you own any rental properties? If so, I have a further question. If not, I want to make a different point.
TMC
Oct 6 2023 at 1:36pm
I’ve had rentals for coming up on 30 years. David is correct. In fact, there’s such a thing as too good of a tenant. If the income and credit score are higher than what I see by a large margin, I’ll go with next best. The ‘too good’ tenant won’t be there long, they’ll be out buying a house soon. Turnover sucks.
vince
Oct 6 2023 at 5:22pm
Who said the landlord wanted a *perfect* tenant?
If you’re a landlord, how do you screen your tenants? If not, how would you?
Jose Pablo
Oct 7 2023 at 9:49am
The main problem is that the federal legislation proposed by Ayanna Pressley (D-MA) and Rashida Tlaib (D-MI), wouldn’t solve any of these issues for people with a criminal record.
Well, maybe for people with a criminal record that don’t look the part (by definition of “looking the part” a small share of criminals).
If you “look like having but don’t have” a criminal record, how are you supposed to find a place to live after the passing of this new federal legislation?
And, in any case, almost one third of Americans do have a criminal record and, since the homeless problem is not that bad even in California, people with criminal records seem to manage to find a place to live (own a house, live with a partner with no criminal record, …)
https://www.sentencingproject.org/app/uploads/2022/08/Americans-with-Criminal-Records-Poverty-and-Opportunity-Profile.pdf
And, in any case, less than 40% of actual crimes are cleared in America so a lot of “actual criminals” don’t have a criminal record and they manage to pass the background check. But they, very likely, do look as having a criminal record, for the most part, so the new legislation could even be actually more effective than background checks, in letting “actual criminals” out of the rental market.
Thomas L Hutcheson
Oct 6 2023 at 10:18am
The distinction probably should be
Cost benefit analysis of the decision was carried out and positive decision taken. Ex-post evacuation showed that negative consequences were in line with expectations.
Cost benefit analysis of the decision was carried out and positive decision taken. Ex-post evacuation showed that negative consequences were greater than expectations (maybe of a totally unexpected sort).
No cost benefit analysis of the decision was carried out. Any consequence, positive or negative is unexpected.
My guess is that the major problem is 3 not 2.
David Henderson
Oct 6 2023 at 11:09am
I think you mean “evaluation.”
I agree with you that it’s typically #3. There’s very little thought of any kind, let alone cost-benefit analysis, that is done before these regulations are imposed.
Jose Pablo
Oct 7 2023 at 2:24pm
How do you figure out the cost (or the benefits) of the new legislation on?:
Kadeem Jackson, who is a convicted fellow that looks like a convicted fellow when you examine his information (without recurring to the now forbidden criminal record check)
Omar Gutierrez, who is a tattooed Nicaraguan looking like a Nicaraguan, and honest hard worker that looks like having a criminal record
Peter Smith, who is a landlord renting a small portfolio of properties and working hard to expand it. He is very indebted to the point that a high eviction / low collection rate could lead him to bankruptcy.
….
And these are but just a few cases of infinite possibilities.
How do you estimate the impact of the new legislature of these cases IN US$ (or, if you want to do an even better cost-benefit analysis in “Utilitons”, the measure that should be developed to measure “utility”)
Or the duration in time of this impact
Or the discount rate that allows you to add impacts taking place at different points in time.
Which probability would you assign to a potential change in the situation of this individuals during your analysis period? What if Kadeem Jackson stops looking like a criminal? or, what if that Omar Gutierrez, fed up with low pay and employer abuse, does become a criminal?
I do believe that you severely overestimate (to say the least) your ability to do a meaningful cost-benefit analysis.
steve
Oct 6 2023 at 12:33pm
Having owned a rental property (jointly with a friend) I am in agreement. I do so knowing that it does create problems for former criminals. In theory we like to think that once you have served your sentence it is over. In reality by agreeing with you I am advocating for continuing to punish people after they have already completed their sentence. However, in this case I think my right to manage my property outweighs the rights of others to not have their punishment continue forever.
Steve
David Henderson
Oct 6 2023 at 12:48pm
Thanks, Steve.
I actually think you’re being too hard on yourself. Yes, you are punishing the former criminal but it’s not the way the state does. You aren’t coercing him (and it’s usually a him). You’re just exercising your freedom of association and your property rights. This doesn’t deny his right. He has a right not to be punished further by the state; he has no right to use your property.
robc
Oct 6 2023 at 12:49pm
I dont think of it as punishment. It is Freedom of Association.
Choosing to not associate with someone is not punishing them.
Jose Pablo
Oct 7 2023 at 3:15pm
However, in this case I think my right to manage my property outweighs the rights of others to not have their punishment continue forever.
Again, we are missing the point here. The new legislation will do nothing to stop the “punishment forever” thing for most people with a criminal record (for all the people with a criminal record that look like people with a criminal record).
And the new legislation will introduce a “punishment forever” for the people without a criminal record that “look” (when looking at the information legally available to the landlord) as having a criminal record.
Herb
Oct 21 2023 at 2:50pm
David,
Sometime in the last month you suggested a book by Conor Dougherty, Golden Gates. I picked up a copy & read it on my trip up north. We stayed in Carmel for two nights & I picked up The Carmel Pine Cone. Quite an interesting book (thank you) & apropos for reading the newspaper articles & editorial. I would say you may have had some influence on the editorial.
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