Friday, November 20, 2009

The Law of Unintended Consequences

Okay, so be well-informed that I am not writing any research paper on this particular law mentioned in the subject. This is a well established law of Economics. Well, I just started reading Superfreakonomics: from the authors of Freakonomics. Freakonomics was one of the first book I read besides, fiction and of course my course materials and comics.

Coming back to the topic, I was inspired by the new section on Freakonomics' blog called Applied Freakonomics. Here readers share their personal experiences of how different chapters in the book inspired them. They just started it today, and the first experience is a very good example of the Law of Unintended Consequences. You can read it here.

Also, if you need an another good example of this law, you can very well look at the Wikipedia entry. It exemplifies that World War II was an "Unintended Consequence" of harsh treatment on Germany as per the Treaty of Versailles.

From Superfreakonomics:
"People respond to incentives, although not necessarily in ways that are predictable or manifest. Therefore, the most powerful law in universe is the law of unintended consequences." And this is exactly what I realized after watching this bollywood movie "Dhoondte Reh Jaaogey."

The movie is about, two characters: a battered movie director and a honest ethical chartered accountant. They decide to siphon money from multiple financiers. Then they would create a low-budget super flop movie, and all the financiers will loose the money. But since they created a low-budget flop movie, they would not have to pay-back. Everything goes smoothly, and the movie is full of ingredients for disaster (at box-office). The climax too was decided such that India would loose against Pakistan, which definitely would not (never ever) fare well with the Indian masses.

Now, the law of unintended consequences strikes. The climax is changed, without the knowledge of the two main characters and hence the movie becomes a hit (super hit). Hence they end up paying profits to every financier and end up in jail. Though fictional and may be not exactly relevant to the law, I thought this movie was a good example.

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