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Examples:

  • City has a homelessness problem. They increase services for the homeless, but because all the surrounding cities also have homelessness problems, homeless people from those cities move in until services are at or above capacity again. Although net good was done in the world (more homeless people fed / treated), from the perspective of a local voter who wants to see less tents in their parks, the program was a failure.
  • City has a housing crisis. They implement a simple solution of building more housing. But because the entire country has a housing crisis, people from outside the city move in, and the housing will first go to those who can pay more, ie tech workers. As a result, the cost of housing does not notably improve for service workers, and there is even more demand for services.
  • Edit: Another example - climate action. It's in everyone's best interest to reduce emissions, as climate change causes worldwide economic damage. However, if one country takes significantly more costly climate action that its neighbors, businesses will likely move production into countries with more permissive emissions laws, and our example country will take that economic hit and still suffer the consequences of those emissions, as greenhouse gases do not respect borders.

I feel like this dynamic pops up a lot in many of the problems we face today, but I don't have a good way to express it or talk about it. I've heard the term induced demand for housing specifically, but I'm reaching for something more general.

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    #2 is actually a myth as every single new home actually reduces the market prices compared to a counter-factual world where no housing was built. #1 is true though. Commented Nov 10, 2022 at 16:47
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    "Externality" is a standard economic term that - in the negative sense - seems to cover similar ground. I do not have the rep to add this as an answer. en.wikipedia.org/wiki/Externality Commented Nov 10, 2022 at 17:03
  • If you want a third example, you have that paradox where a location with strict gun laws (like Chicago) may suffer a high degree of gun violence because the guns easily come in from outside. Commented Nov 10, 2022 at 21:57
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    For #1 It’s not at all clear that “a net good was done in the world” As the inevitable failure in the perspective of local residents likely creates a tremendous amount of resentment, embittered feelings, cynicism, etc… Thus affecting their future life direction and decisions in other matters. Which might lead to profoundly negative consequences. These secondary, tertiary, and higher order, negative consequences might outweigh any positive benefits derived from the original action.
    – M. Y. Zuo
    Commented Nov 11, 2022 at 14:08

9 Answers 9

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While these examples may seem like the same phenomenon, they're meaningfully distinct. That said, there's a whole slew of terms that cover a variety of cases including these and others.

In order of the examples:

1 & 2 are forms of the Rebound Effect, where efforts to improve a system have reduced benefits because use of that system now increases.

Case #1 is also a matter of Perverse Incentives, wherein the needed solution has a powerful negative feedback against whoever implements it.

As mentioned in another answer, Case #2 is classic Induced Demand, a special case of Rebound Effect which is due to an increase in supply lowering the marginal cost of the product and thereby attracting more consumers.

Case #3 (Climate) is broad enough that numerous terms could apply, depending on the specific mechanisms you wanted to examine. Some good candidates:

If you're the country who wants to implement strict climate policy and thus face emigration of businesses to less restrictive countries, we're back at Perverse Incentives. If you're the country seeing this and hoping to boost your economy by eliminating your climate policy, committing the world to more severe climate change, you're participating in the Race To The Bottom

Generally it's a matter of non-rival, non-excludable, public goods which are chronically afflicted by the free-rider problem where if one person solves the issue, all benefit even if they don't contribute to the solution (more perverse incentives). In NR/NE Public Goods this is frequently described under the umbrella term Tragedy of the Commons.

From @CanadianFriendly: Another thing all the examples have in common is a "parochial" mindset. Parochialism is the political tendency to look to collaboration within rather than collaboration without to solve problems. It can describe this tendency at a city, province/state, or national scale. It's a thinking of, "We'll look after our own, and they can look after theirs."

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    It seems to me OP is emphasizing the local nature of the issue. If all the neighboring cities/ countries would impose the same policies all three solutions would work exactly as intended. This is described by your 'Tragedy of the Commons' or the 'Free rider problem' in another answer. Rebound effect and perverse incentives would apply if the proposed solution actually made the problem worse. It doesn't in either example, it only fails because it is too local.
    – quarague
    Commented Nov 8, 2022 at 8:06
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    @quarague The thing about these phenomena is that you can validate/invalidate the descriptor by where you draw the system boundaries. Because of how policy decisions are made, however, it's not inappropriate to draw system boundaries that coincide with jurisdictional or political boundaries as the OP does, and therefore as my answer above also does. You're correct that the validity depends upon the system boundary, but at the local level the problems do become meaningfully worse from the perspective of the local decision-maker. This is why the Race to the Bottom is even a thing. Commented Nov 8, 2022 at 13:25
  • @DmitryGrigoryev or the surrounding locations "solve" their homelessness problem with one-way trips
    – Caleth
    Commented Nov 9, 2022 at 11:08
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    @DmitryGrigoryev Having been homeless myself (6 months in Philly), I agree that they're not choosing homelessness, but I don't agree that this doesn't make them actors. Their choices about where to go - as you say in response to conditions (or, really, their information about said conditions whether it's accurate or not) - are the consumer-level choices. In essence, they're the 'buyers' in the 'shelter market.' While the municipality is the 'seller.' Both buyers and sellers are actors - they just have different sets of choices; different levers they pull that change the behavior of the system Commented Nov 10, 2022 at 13:30
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    @DmitryGrigoryev I see what you're saying. Rebound effect has more forms than just induced demand or adverse substitution. In this case it's a shift in the supply curve that's causing more buyers to enter the market because the marginal cost (which includes the cost of relocating to the served district) is now below the marginal benefit to the new buyers. You are, technically/economically speaking, a participant in distant markets, you're just so far down the demand curve that you essentially never transact, but if someone offered you $500,000 to buy a product from far away, we expect a yes Commented Nov 10, 2022 at 14:13
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Perhaps you are referring to the Free Rider problem? A free rider, most broadly speaking, is a person who receives a benefit without contributing towards the cost of its production.

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  • I think it's a bit different. E.g. in the OP's first example, the people who receive the benefit (the homeless) are not the ones who are supposed to contribute. They are free riders by definition. The real problem is to decide who is going to pay for their free ride. Commented Nov 9, 2022 at 10:31
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Induced Demand works for the homelessness example and may well be a general answer.

Is there a third example where you think it doesn't fit?

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    This should be a comment to ask the OP to clarify the question rather than an answer. Commented Nov 7, 2022 at 15:21
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    Climate action could be another one. It's in everyone's interest to reduce emissions and slow climate change, but if one country takes a lot more action to reduce emissions than its neighbors, they take an economic hit while still suffering the consequences of climate change because greenhouse gases don't respect borders.
    – Noah Green
    Commented Nov 7, 2022 at 16:29
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    "Induced Demand" is an answer. A good one in my opinion.
    – Eric Nolan
    Commented Nov 7, 2022 at 17:00
  • Also used when it comes to building more roads to reduce gridlock. The global emissions is more a free rider issue. Commented Nov 7, 2022 at 20:35
  • @ItalianPhilosophers4Monica I thought the third (added) example wasn't like the others and I think you are correct that it's more like the Free Rider problem. It might also be worth looking at en.wikipedia.org/wiki/Tragedy_of_the_commons
    – Eric Nolan
    Commented Nov 9, 2022 at 10:24
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Perhaps Global problems need global solutions. This phrase has been repeatedly repeated.

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    It is hard to see how the OP's first 2 given examples, both housing related, necessitate a global solution, from the UN. Sorry, usually well-inclined towards the UN, but, no. -1. Commented Nov 7, 2022 at 20:28
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    @ItalianPhilosophers4Monica I think he means global as in larger than local. I.e. solve the problem everywhere where there is a problem.
    – Ingolifs
    Commented Nov 7, 2022 at 23:48
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    @ItalianPhilosophers4Monica It's hard to see how this answer can be taken as asserting that. Commented Nov 8, 2022 at 3:19
  • @Ingolifs he literally writes global twice and links to a UN paper that says global twice more. if it was something about national level stuff, which would apply to housing then "national problems need national solutions" might be a bit pat and formulaic but it would fit here. This doesn't. Commented Nov 8, 2022 at 7:25
  • @ItalianPhilosophers4Monica: To name a concrete example, the Dutch housing crisis is driven 100% by global effects. Dutch demographics certainly aren't unique; deaths exceeds births but immigration even exceeds birth rates. And new housing can't be built due to international treaties that limit nitrogen deposits.
    – MSalters
    Commented Nov 8, 2022 at 8:59
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In Spanish it is common the use of the efecto llamada, by which some event causes people or resources to move (I have seen used for the examples that you post, but also for people investing into some market that is becoming "hot").

I have seen it translated as:

  • call effect, which is the most direct translation
  • pull/pulling effect
  • beacon effect
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    +1 this is the first answer that addresses the fact that global demand is not changing, but redistributing. That's pretty different from "Perverse Incentives" or "Induced Demand". We should just use the Spanish "efecto llamada".
    – Clumsy cat
    Commented Nov 9, 2022 at 16:24
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What you describe essentially fits in the phenomenon known as the tragedy of the commons: users of a shared resource will act in their own self interest until the resource is fully depleted, way beyond the point where the resource utilisation is optimal. This happens because the actions of a single user are not sufficient to preserve the resource, but can be sufficient to harm that user by depriving them from the resource they need.

Notably, this situation is impossible if the resource has a single user, who has all the interest to optimize its use and has effective means for its preservation.

In the first example, the resource is the budget that is ought to be spent to help the homeless, and users are cities. Indeed a city cannot take other cities' budgets, but it can take money away from its own homeless relief program and spend it on something else, even though a nation-wide homeless relief program would have improved the quality of life for every citizen.

Similarly, in the second example the common resource is the budget for affordable housing subventions, and in the third example it's the budget on air purification or green energy programs.

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An alternative answer is that these are all examples of the prisoner's dilemma. In all cases the expenditure of political capital produces no effect for those spending it unless everyone does this.

To explain, if you have city A and city B, if only one city attempts a program then both cities slightly improve. But the politicians who implemented the program spent all their effort for only a little improvement, not a positive trade off for them. From this you can see that unless cities A and B have a reason to trust each other (or a reason for the politicians to trust each other to commit) then it may always be a better payoff for any politician to defect and not commit to the program. Leading to a Nash equilibrium that nobody approaches the problem.

You can resolve this problem with several strategies, but when you have more than two players it becomes vastly more complicated to get cooperation unless there are some players (or subgroups of players) who benefit for one reason or another without anyone else contributing.

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If the a problem is solved locally, only to be redistributed to surrounding areas, this is called the Waterbed Effect. The analogy is clear: if you push down on one spot on a waterbed, the water moves away to other parts. The one spot becomes lower, but the amount of water remains the same.

What you're describing seems akin to that, but not quite. If I were to translate from Dutch ("aanzuigende werking"), I'd say it is an Attracting Effect.

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In a more general sense, the program backfired.

A problem was identified. Someone came up with a solution. The solution was implemented. The problem got worse. The solution backfired (etymology: if a gun "backfires" it shoots you in the face - think of Bugs Bunny plugging Elmer Fudd's shotgun and it exploding in his face)

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    "Backfired", IMO, generally means that something did more bad than good, which doesn't seem to be the case with the provided examples. These examples may have people perceiving that it caused more harm than good, but to the people helped, it definitely did good. These examples are more along the lines of trying to drain a swamp, but in order to drain one section, you either have to drain the whole swamp or physically section it off to prevent draining the whole thing. That's not a backfire, but it does have unintended consequences or more far reaching concerns than the solution handles. Commented Nov 9, 2022 at 19:32

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