Housefull Economics

The Unintended Consequences of Being

Our weekly explainer on economics using lessons from popular culture. In Installment 54, two young couples discover The Seen and the Unseen.

Now here’s a scene that would not be possible in these selfie-ridden, smartphone-camera days, but seemed plausible in 1982. In the film¬†Shriman Shrimati, Sarika chases her friend Deepti Naval, insisting that they take pictures of each other dressed in each other’s clothes. So the modern Sarika dresses up in Naval’s saree, while the traditional Naval wears shirt-pant. Naturally, these pictures fall into the wrong hands. A marriage broker shows them around, and hipster Rakesh Roshan chooses Naval for a wife because he wants a modern wife and she is wearing modern clothes, while the sanskaari Amol Palekar chooses the saree-clad Sarika. (That said, if Sarika doesn’t wear sarees, she should change her name, no?)

There are so many ways in which one can find economic lessons in this movie. One, adult people choosing to marry someone based on a photograph. (Imperfect information.) Two, the assumption that the clothes a person wears gives an accurate picture of their personality. (Halo Effect, Anchoring Bias.) Three, the importance one ma-in-law gives to dowry. (Signalling.) There are also lessons of moral science in this film, as women are objectified and their agency is ignored. Privacy advocates would also be aghast at how these casual pictures find their way, without the consent of the ladies involved, into unscrupulous hands.

Shriman Shrimati, charming as it must have seemed at the time, is a lesson in how bad choices can guarantee unhappiness for all protagonists involved.

But the biggest economic lesson is one of Unintended Consequences. A bird flaps its wings, and there is a hurricane somewhere else. Two girls swap clothes and take pictures for fun, and they end up married to obnoxious men. (Since this was 1980s India, they would have ended up married to obnoxious men anyway, but different ones.) This reminds me of the name of my podcast, The Seen and the Unseen, itself inspired from a classic Bastiat essay about unintended consequences.

Now, the unintended consequences of the girls’ photographic adventure were also unforeseeable here: no economist could have foretold that they would result in marriage to assholes. But most public policy has consequences that are unintended by policy-makers, but foreseeable by anyone who knows econ 101.

For example, price caps. Governments often announce price caps with the aim of signalling to voters that they care for them. (Hey, we’re making things cheaper for you!) But we know that price caps lead to shortages, and hurt both consumers and producers. Banning surge pricing on Uber was a classic example of that. Seen effect: no surge pricing. Unseen effect: no cabs. Another example: the price caps on stents.

That is why we keep saying at Pragati that policies must be judged by their outcomes, not by their intentions. Take the amendments to the recent Maternity Care Act. Noble intentions: Let’s help women, especially pregnant women. But any economist would have taken one look at the incentives that came into play, and told you that employers would now be incentivised to prefer men to women while hiring. And as you’d expect, this is now hurting women instead of helping them.

One more example: the new regulations on multiplexes, allowing outside food and controlling the prices of the food items sold there. This will hurt both cinemas and cinema-goers.

Look around you, and you will find this true of most government regulation. They are meant to signal one thing and usually have the opposite effect. All government regulation in free markets, in fact, has the effect of redistributing wealth from the poor to the rich, as I explained in this essay. An unintended consequence that is the opposite of the intention being signalled.

Shriman Shrimati had a happy ending, because hey, it’s Bollywood. Also, no one could have blamed the girls for their innocent fun at the start of the film. But the unintended consequences of most public policy are foreseeable and avoidable. So we should ignore intentions, and consider the likely effects of any action through an economic lens. If that sounds like a lot of work, well, what are we here for? Keep reading Pragati!

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About the author

Amit Varma

Amit Varma is a writer based in Mumbai. A journalist for a decade-and-a-half, he won the Bastiat Prize for Journalism in 2007 and 2015. He writes the blog India Uncut, and hosts the podcast, The Seen and the Unseen. He is the editor of Pragati.