Definitions and Basics
Unintended Consequences, from the Concise Encyclopedia of Economics
The law of unintended consequences, often cited but rarely defined, is that actions of people—and especially of government—always have effects that are unanticipated or "unintended." Economists and other social scientists have heeded its power for centuries; for just as long, politicians and popular opinion have largely ignored it....
Most often, however, the law of unintended consequences illuminates the perverse unanticipated effects of legislation and regulation. In 1692 John Locke, the English philosopher and a forerunner of modern economists, urged the defeat of a parliamentary bill designed to cut the maximum permissible rate of interest from 6 percent to 4 percent. Locke argued that instead of benefiting borrowers, as intended, it would hurt them. People would find ways to circumvent the law, with the costs of circumvention borne by borrowers. To the extent the law was obeyed, Locke concluded, the chief results would be less available credit and a redistribution of income away from "widows, orphans and all those who have their estates in money.