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PAM_2000_Sp_2009_Problem_Set_2 - PAM 2000 Intermediate...

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1 PAM 2000, Intermediate Microeconomics Spring 2009 Problem Set 2 Return to TA by beginning of class Tuesday Feb. 10 th I. Discussion Question (4 points): “The law of unintended consequences” was discussed in class. This is the notion that a particular policy or new approach may not have the expected or intended effect because human behavior adjusts in ways that can be difficult to predict ex ante . The example discussed in class was Cornell’s early decision to build few dorms, which generated a vibrant Greek community, which was not the intended result. Policy examples include unemployment created by the minimum wage, and apartment shortages generated by rent control. However, unintended consequences can also flow from technology changes, not just from policy. For example, the widespread adoption of personal computers was expected to result in “the paperless office” because people would only read documents on screen. But of course the result was the reverse since it’s easy to print documents out. Think of a policy, new technology, or new approach that may have an unintended consequence. You can choose an actual policy, new technology, or an imaginary one.
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