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9 Int'l Zeitschrift 31 (2013)
Self-Defeating Regulation

handle is hein.journals/intzeit9 and id is 34 raw text is: Self-Defeating Regulation Patrick Walker' The cobra effect is a term coined by German economist Horst Siebert in his book Der Kobra-Effekt. Wie man Irrwege der Wirtschaftspolitik vermeidet2 and is derived from a specific incentive scheme developed in colonial India. The term refers to well- intentioned incentive or regulatory schemes that ultimately exacerbate the problem they were introduced to address. The English in the colonial city of Delhi were concerned by the large population of poisonous cobras inhabiting the city. In order to limit the Cobra pest, the government issued a bounty on cobra skins. The incentive scheme, however, did not work. Unfortunately for the colonial government, the Indian citizenry were clever. Many had begun to farm the cobras. Since the bounty paid on a cobra skin was greater than the cost of raising a cobra to maturity, a new cash crop was created. When these farming enterprises were discovered, the government, believing their bounty program to have been frustrated, repealed the bounty. As cobra skins were now valueless, cobra farmers throughout the city did the only sensible thing - they released the snakes back into the wild, the wild in this case was the city of Delhi. The release of the cobras increased the total population of snakes by an order of magnitude. For all of its effort and cost, the incentive scheme only managed to increase the cobra pest problem. Their bounty program was more than frustrated, it was self-defeating. Frustrated regulation imposes costs on society without realising its intended goals. I think it is fair to say that such a law is bad law - all cost and no benefit3. Regulations and programs impose a cost on society: the welfare costs associated with limiting the choices available to the regulated citizens, or the actual cost of funding a program. If the benefits accruing to society are greater than the costs we are left, collectively, in a better position. Frustrated programs and regulations do not leave us in a better position, they are wasteful. More pernicious than frustrated regulation is regulation that is self-defeating, a regulation that increases the problem or ill it was created to solve or to mitigate, like the cobra bounty. In this case the regulation not only imposes the costs associated with the regulation itself, but also the unintended negative effects by exacerbating the underlying problem. Its harm extends beyond waste. In this paper, I will provide several broad examples of policies, regulations and programs that illustrate the cobra effect. This is by no means an exhaustive list but aims to provide bounds within which I may discuss a rather abstract problem. I then take a more in depth look at a specific instance of self-defeating regulation, followed by a discussion 'Patrick Walker is a JD student at the University of British Columbia, Faculty of Law. 2HORST SIEBERT, DER KOBRA- EFFEKT. WIE MAN IRRWEGE DER WIRTSCHAFTSPOLITIK VERMEIDET (2002) (Pronunciation: Vee munn Ear-veg-eh dare V-ear-t-shafts-politic Ver-my-det) 3 This is not strictly true, there are likely several benefits, they are simply not the desired benefits, and potentially run counter to societal interests. High taxes on cigarettes provide high benefits to smugglers, as do prohibition schemes benefit to drug dealers. 31 IZ 9. 1, April 2013 Self-Defeating Regulation Patrick Walker

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