Revenge effects

The overthrow of Gaddafi has led to the uncovering of evidence that the CIA colluded with him to torture their suspected opponents, among whom is one prominent rebel leader.
An apparently humanitarian policy by the west has, therefore,  exposed its earlier lack of humanitarianism. Pessimists might add that this could mean that in supporting the overthrow of Gaddafi, the west has helped install a regime which has a grudge against us.
These are examples of what Edward Tenner called the revenge effect - how our actions can rebound to bite us on the arse.
This is pretty well-known for technological changes. For example, the invention of powerful pesticides and antibiotics has led to the evolution of resistant pests and bacteria, or catalytic converters reduced smog but increased emissions of nitrous oxide. But it’s also true of policy generally. For example:
- US support for the opposition to the Soviet occupation of Afghanistan in the 1980s helped to strengthen Islamic extremism, and thus diminish US security in the long-run.
- Governments’ promise to maintain full employment in the 50s and 60s led to over-investment and wage militancy and hence to inflation and a profit squeeze in the 70s which led in turn to mass unemployment.
- The “great moderation” of the 90s and early 00s encouraged banks to take on more risk, which led to the crisis.
You can add other examples.
Note that revenge effects are a subset of unintended consequences. Unintended consequences can be benign or operate in different realms from their cause. Revenge effects are consequences of a policy that serve to undermine the objective of that policy.
Can anything be done to reduce such effects?
One possibility is for policy-makers to recognize that people are not merely passive subjects of policy, pawns to be manipulated. Instead, they have agency of their own, and so respond to the changed incentives created by policy change; the Lucas critique has general applicability.
This, though, is not enough. Two things suggest revenge effects will often occur. One is simply bounded rationality: we just cannot foresee the consequences of policy. The other is that revenge effects can take years or even decades to come through. They will therefore appear a long time after policy-makers have left office: I’m thinking here of central bankers as well as politicians. And this means that policy-makers don’t have the incentives to anticipate revenge effects, even if they do have the cognitive resources to do so.

Comments

[Jimmy Hill]

If you're correct about bounded rationality then that will mean it's pretty much irrelevant whether policy-makers have the correct incentives or not.

If it's impossible to know the future it makes no difference if I have an incentive to know the future.

[eck]

Is the statement referring to over-investment in the 50s and 60s widely agreed upon by progressive economists?

[chris]

@eck. I think so. See eg Armstrong, Glyn & Harrison, Capitalism since WWII ch 11, or this:
http://www.scribd.com/doc/22044259/Robin-C-Matthews-Why-Has-Britain-Had-Full-Employment-Since-the-War

[Hoover]

Is it thought that regulatory impact assessments have improved the "quality" of policy-making and legislating?

My feeling is that they have. At least in the short term. Long term is anyone's guess.

[Alaric]

"Revenge effects are consequences of a policy that serve to undermine the objective of that policy"

Isn't it ironic. Alanis Morissette confused me some what as to the words meaning but I'm fairly sure that revenge effects fit the definition of irony.

[CahalMoran]

'Governments’ promise to maintain full employment in the 50s and 60s led to over-investment and wage militancy and hence to inflation and a profit squeeze in the 70s which led in turn to mass unemployment.'

Whilst union militancy and low unemployment played a part in the stagflation, I would dispute your overall explanation. I think financial deregulation and the resultant credit expansion, dismantling Bretton Woods & buffer stock schemes and supply side shocks were the real culprits.

http://socialdemocracy21stcentury.blogspot.com/2011/06/stagflation-in-1970s-post-keynesian.html

[Tim Newman]

US support for the opposition to the Soviet occupation of Afghanistan in the 1980s helped to strengthen Islamic extremism, and thus diminish US security in the long-run.

The collapse of the Soviet Union, to which their defeat in Afghanistan contributed greatly, increased the security of the US and the west to a degree which eclipses the increased threat from Islamic extremism which resulted from US actions in Afghanistan. I even think the latter is overblown. The Islamists were outraged about the Soviet invasion, and mobilised without US help. True, they benefitted from US help, but the US was not decisive in how the Islamists turned out; and the single event which outraged the Islamists following the Afghan war was the stationing of US troops on Saudi after the Iraqi invasion of Kuwait.