Wednesday, August 8, 2012

Secondary Consequences--Blackmailing Batman

One of the most important concepts that we stress in economics is that of secondary consequences.  Too often, we simply focus on the immediate, on the short-term, on what happens to a particular group.  Economics teaches us that we need to go beyond a narrow focus.  In the movie "Batman: The Dark Knight," an employee discovers Batman's secret identity and thinks that he should be paid $10 million a year for the rest of his life to keep quiet.  Here is the scene:

The reason why this scene is funny is because the extortionist has not thought his proposition through.  He hasn't looked beyond the immediate.  What will Batman's reaction be to someone who wants to release his secret?  What will happen to him?  Will he ever be able to enjoy that money?

Earlier this week I attended my Town's Council Meeting.  There was a proposition to limit Electronic Gaming Businesses by saying that these businesses had to stay at least a quarter mile away from each other.  What they are failing to do is think about the secondary consequences.  Let's set aside the issue of whether such a rule will achieve its purpose--to frighten away such businesses from the Town of Garner.  (It won't.  It's like preventing Burger King from locating near a McDonald's because we fear that people are getting too fat.) 

The secondary consequences of creating these spacial regulations is that the town is carving out islands of monopoly.  Each business gets its own territory and all competitors are prevented from encroaching on your business.  The cost of enforcing this rule is picked up by the government.  It's a sweet deal for those already in business.  As an island of monopoly, the business doesn't have to compete as hard and so the product to the consumers is inferior and at a higher price.

So if the Town Council hates competition and wants to stick it to the consumers, then by all means let's pass this rule.  Or perhaps, we should think it through before we go up against Batman.


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