Unintended Consequences

Illustration by Damehi Laloo

An important matter in the social sciences, relates to what a government should do in the face of imperfections and when it should intervene. Proponents of laissez faire argue that intervention should be strictly limited as it tends to create inefficiencies in allocation. Opponents of this view argue that interventions should aim to correct imperfections when they arise, so as to move society towards an efficient outcome.

In Welfare Economics the Theory of the Second Best refers to a situation where an optimality condition cannot be satisfied. The concept was formalized by Richard Lipsey and Kelvin Lancaster in 1956, and deals with the problem of whether an intervention directed at a specific market imperfection can improve social welfare. The problem states that correcting a specific imperfection while leaving other imperfections untouched will not necessarily improve social welfare. But introducing a second imperfection may partially cancel out the first, and lead to a more efficient or second-best outcome.

However, when interventions are short sighted or poorly thought of, we may arrive at what public policy literature calls Unintended Consequences. When policymakers design policies to address imperfections, they need to pay careful attention not just to the consequences that they intend to achieve, but also to other consequences that may be byproducts of the policy design. When we talk about unintended consequences, we refer to these unforeseen after-effects of what may be a well-intentioned policy.

On the 24th of March, 2020, the Government of India announced a 21-day lockdown in response to the growing spread of COVID-19. This lockdown was followed by subsequent extensions up to the 31st of May, 2020. However, on the 30th of May, it was announced that the lockdown would be further extended up to the 30th of June only in specific containment zones, while it would be relaxed in a phased manner in other zones, beginning on the 8th of June.

In a report titled, “COVID-19 Crisis Through a Migration Lens”, the World Bank estimates that the lockdown has impacted the livelihood of nearly 40 million internal migrants. As the growth in the spread of the coronavirus in India continues, so do the stories of human suffering – of men, women and children forced on arduous journeys back to their villages and hometowns. With no viable source of income, they have been evicted out of their shanty accommodations, carrying with them the looming fear of hunger, pain, and death. For many, walking was the only feasible option as interstate railway and bus transportation services were suspended.

A lockdown has meant locking millions of people out of employment, housing, access to public goods and services, etc. When the government first came up with the idea of enforcing the lockdown to contain the spread of the virus, how is it that no one anticipated this large-scale human catastrophe?

If policymakers had given some thought (and they would have, given that they are experts on the demographics of their electorates), shouldn’t they have been three steps ahead of the problem?

In this context, the lockdown in its current form can be viewed as an inadequately-thought-of second-best policy introduced to counteract a societal imperfection – the COVID-19 pandemic; with the mass exodus of migrant labourers, being the unintended consequence. We use game theory to understand why this may be so.

We consider two players – The Government and Migrant Labourers. The government has two strategies- either to impose a Lockdown, or to Do Nothing; while the migrant labourers can either Stay where they are, or choose to Go Home.

Illustration by Damehi Laloo

From the point of view of the government, its best response would be to impose a lockdown in the face of the pandemic while expecting migrant labourers to stay exactly where they are. The migrant labourers, however, respond by choosing to go home, given that they have already lost their jobs and have nothing left to tie them down to where they are. Clearly, while the government may have been expecting a correlated equilibrium with respect to the migrant labourers’ strategy, the reality is that there is a disagreement between the two on their goals. This is similar to the Prisoner’s Dilemma where two players acting strategically to further their self-interest, end up with an outcome that is not efficient for either. There is a lack of trust or cooperation from the other player in such a setting.

In this game, a correlated equilibrium would imply that the government enforce the lockdown while migrant labourers cooperate wholly and stay where they are, even if they cannot afford to pay their rent, have no access to adequate and affordable food, and have no idea as to when the lockdown would be lifted.

Even though the migrant labourers are aware that they may be potential carriers of the virus, and that they may be doing more harm to their friends and family at home, they still prefer to make the journey back, risking contracting and spreading the infection. This is because the virus is a secondary concern for them, when compared to food and shelter. Starvation will come to them earlier than the disease if they stay back, and if death is what awaits them anyway, the thought of being home with their family will overshadow all other concerns. It is only a matter of time before the doors of the city are slammed shut and so, they will have to find a way out. Expecting cooperation from them in such a situation is naive.

At the very least, the government should have acknowledged that people will leave for their homes and therefore, allow all means of interstate transport to remain open for a few days after the imposition of the first wave of lockdown, before locking down completely. Although shelters have been set up by the state governments for migrants, the move has come a little too late, as most have already made the decision to leave.

By wanting to have it both ways, the government missed the big picture – by imposing the lockdown to prevent the community spread of the virus, it overlooked migrant labourers as a community, and underestimated the situation – No one wants to walk for miles on a hot and dusty road, hungry and thirsty; but when people are left with no other choice, the last resort as Tiebout propounded, is to vote with your feet and leave.

Author: Daniel Challam

Daniel Challam is a freelance writer and researcher, currently based in Delhi. He is a Postgrad from the Delhi School of Economics, and an Undergrad from Ramjas College, Delhi. A New Institutionalist by training, he loves taking models to the real world (and secretly enjoys proving them wrong, as long as they’re not his). His current interests lie in Political and Institutional Economics, Public Economics, and the Economics of Discrimination.

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