Unintended Consequences and the Lucas' Critique

I low-level love this story. Definitely not for any of the people involved specifically, but for the general idea that public policy is a hard thing to do because people adjust their actions and expectations.

Anyway, for the future, when the link may be dead, the city of San Clemente attempted to enforce California's social distancing policies. A problem are cropped up at a local skate park: it was closed, but the kids showed up anyway. So the local policymakers filled it with sand. So the kids switched to dirt bikes.

This relates to one of the most famous ideas in macroeconomics: the Lucas' Critique. In 1976 (and there are bits of this in a 1972† paper too), future Nobel Prize winner Robert E. Lucas Jr. critiqued why policies like those proposed by Keynes often fail. He argued that the design of them often incorporates the idea that people won't react to the policy; that they'll just accept it without changing other aspects of their lives. But Lucas noted this is like a game of strategy: policymakers put in a policy, people figure out the best way to make that constraints in that policy work for them, so then policymakers have to put in new constraints, and so on. The meat of the critique is that the statistical models used to develop policies did not include all that back and forth. Since that time economists have developed much better (and sophisticated) modeling techniques that allow us to envisions better policies. And I'm not saying that government officials don't have access to that stuff. But, what happens is that we all still have our mental models of how policy should work, and they have not advanced on this at all because it's too difficult for us to do the math in our heads.

Back to the skate park: do you think there was a lonely voice in the meeting rooms of the policymakers saying "I think we need to come up with something better than telling kids they're banned from the skate park"?

† This one, "Econometric Testing of the Natural Rate Hypothesis" is hard to find these days. I have a hard copy if anyone needs it. If you want the original, it's in a 1972 book The Econometrics of Price Determination, edited by Otto Eckstein, whose chapters are papers from a conference at the Board of Governors of the Federal Reserve System from 1970.