We should congratulate 2020 candidate Sen. Elizabeth Warren, D-Mass., on recognizing that incentives matter. Warren has a new plan to equalize black and white maternal mortality numbers. Taking money away from those who allow more black than white mothers to die from their pregnancies is indeed a recognition of that most basic lesson that economics teaches us: incentives matter. We could always hope that this newfound knowledge begins to inform her plans for taxation and other things, but: baby steps, baby steps.
The problem with this new plan is that incentives really do matter and thus it’s important to make sure that any attempt to design them gets them right. This being something that is really terribly, terribly difficult. Markets aren’t, by any means, perfect, and they rely upon that most basic human incentive: the desire to gain more by having to do less. Once we start to allow the technocrats to try to design how things are going to work we have that problem of whether they’re going to quite grasp the more complicated ways we can all react to their plans. We can also describe this as the problem of unintended consequences.
