Policy Intentions and Policy Consequences

By: Diana Weinhold*

Policies designed with the intention of making employment more secure tend to make employment less secure. Policies implemented to ensure that the poor can obtain housing often reduce residential options for low income families. Again and again, we observe that policy intentions and consequences are, at best, loosely correlated, and occasionally even completely at odds with each other.

Thus, we must take care to carefully think through the potential consequences of policies designed – with every good intention – to simultaneously reduce deforestation and improve human well-being. For example, two channels through which such policies could lead to unintended consequences are through its impact on the local labour market and its impact on rural-to-urban migration.

In the first instance of local labour markets, consider that conservation payments to a local landowner to preserve forest that would otherwise have been cleared will release labour time that would have been spent on clearing. If the clearing would have been done by hired workers, they will now have extra time to provide to others. If the landowner would have done the clearing themselves, they may well decide to take on other tasks on their land for which they may have otherwise hired in labour, or may decide to provide labour to the local market. Either way, local labour supply increases and, in the absence of any increased employment opportunities, wages decrease. The lower wages will impact other landless workers that rely on wages for their living. Furthermore, other landowners, now confronted with lower labour costs, may decide to undertake some tasks that were previously unprofitable, including clearing land. Thus, depending on the elasticity of wages to clearing, deforestation itself may not change much overall.

Another consideration is that, arguably, national land use patterns are ultimately more determined by internal migration patterns than by infra-marginal local land use decisions; a smaller rural population overall will likely reduce pressure on forests more than marginal reductions in forest use of a (constant) rural population.  In the U.S., for example, large regions of previously cultivated land have been given back to natural forest by rural-to-urban migration. Indeed, globally urbanisation shows no signs of slowing and the implications for forest preservation are significant.  To the extent that conservation payments provides an additional flow of revenue from rural land, it has the potential to either slow migration to urban centres, or worse, even attract more population to the forest frontiers.

We should take care not to assume that these unintended consequences will in fact dominate outcomes, just as we should not assume that the policies will result in their intended outcomes just because those were the hopes of the policy makers. The purpose of rigorous economic analysis is to theoretically think through the possible relationships, analysing the data to see which, if any, of these unintended consequences may prove problematic.

*Dr. Diana Weinhold is reader (UK associate professor) of development economics in the Department of International Development at the London School of Economics. She can be reached by e-mail at: d.weinhold@lse.ac.uk.

This article was first published in the development communications magazine “Sociedad que Inspira” No. 17, August 2012.