The Law of Unintended Consequences

Americans love a quick fix to a problem. We’re some of the world’s greatest problem solvers, but sometimes we don’t always think through the solutions. Today’s problems are more complex than ever. This fact seems lost on Congress, which too often makes new laws while ignoring a very old one—the law of un­intended consequences.

This is especially true when it comes to secur­ing an affordable, abundant, and clean supply of energy. Congress’ track record in this area recalls another American trait—wanting to have it both ways! For instance, we can’t demand increased domestic production and then put our country’s vast supplies of oil and natural gas off limits.

So as Congress considers energy legislation, it needs to think hard about the consequences of its actions. Consider these three examples.

First, take the case of ethanol. Everyone ac­knowledges that alternative fuels are necessary to meet our energy needs while protecting the environment. But the mandated increase in the use of ethanol has had some unintended consequences. The price of corn has doubled in the last two years. More farmland has been allocated to corn, making other agricultural com­modities more scarce and expensive. Animals that feed on corn and products that use it as a sweetener are now more expensive, from beef to ice cream. Even the Federal Reserve is concerned about the inflationary impact of ethanol mandates.

Second, consider proposals to raise gas mile­age standards. America is most dependent on foreign sources of energy that power our cars and trucks. Everyone would like to make our cars more fuel efficient. But, significant increases to mileage standards would likely lead to smaller, lighter cars and more traffic fatalities. The cost of developing and implementing the technology could sink one or all three of the domestic “Big Three” automakers who are already in severe financial difficulty.

Third, suppose we passed a price gouging law. Would it be justified given that not a single study has shown any evidence of collusion by oil companies? What would be the impact on the market’s ability to make adjustments to both changes in prices and supplies? Could prices actually increase because of the law?

Congress must resist the urge to do what is politically expedient when it comes to energy and think through its actions. Difficult trade-offs must be made. A balanced, informed approach is essential. The nation’s future depends on it.

Thomas J. Donohue

President and CEO, U.S. Chamber of Commerce 

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