New York Yankee fans are perplexed about what's going on in the new Yankee Stadium. With 26 home runs hit in the first six games, the new ballpark has broken a Major League Baseball record for most home runs in a new stadium. That has surprised experts. After all, the new Yankee stadium was built on an adjacent site. It's the same size as Old Yankee stadium. And it surely was designed with the help of the latest whizz-bang architectural design software that allowed its architects to see what the stadium would look like even before the foundation was laid. But it turns out experts may have forgotten to include the impact of a "jet stream" effect that is helping loft balls into the stands at an unprecedented pace.

Yet the challenges confronted by Yankee stadium are no different from that of any plan translated into action. Every project has unexpected consequences. As Joseph Myers, an acoustics consultant observed of concert halls recently in the Financial Times: "You know broadly what you will get. But, when you walk into a hall, you hear the sound for the first time, no matter how good your modeling and simulation. There are going to be elements that you have not imagined."

The Law of Unintended Consequences:
"The best-laid plans of mice and men/often go awry"

While architects and engineers readily acknowledge that their plans will inevitably have unexpected consequences, it's ironic that book-smart government policy-wonks always expect to get it right the first time around. Yet their task is infinitely more complex than designing a stadium or a concert hall.

Politicians, academics and government bureaucrats all seem to be guilty of this same sin. Last week, I saw Jack Meyer who ran the Harvard endowment for 15 years here in London. Chastened by Harvard's recent highly publicized losses, Mayer solemnly conceded that the financial models based upon which the Harvard endowment had raked in about 15% per year for the last 20+ years weren't quite up to snuff after all. Now, Meyer and his staff at the Harvard Management Company weren't pie-in-the-sky academics. They were at the very cutting edge of their profession, with the very real world responsibility of managing the world's largest university endowment. Yet, if even Jack Meyer got it so wrong, how can we expect government bureaucrats to get it right?

The U.S. government is suffering from the delusion that the "best and the brightest" can solve complex problems by telling business people what to do. Yet the track record of smart people could hardly be worse. It is exactly this same group of smart people -- educated from the same handful of textbooks at the same handful of universities -- who invented the "financial engineering" that purportedly neutralized the risks of an over-leveraged economy.

Highfalutin plans are one thing. Executing those plans is another. As anyone who has flogged a business plan to investors can tell you, raising money for a sexy idea is the easy part. It's translating those plans into action that is the real challenge. This is not a political argument. Consider the statistics on small businesses. It is said that 80% of small businesses fail within five years. Another 80% fail within the next five. That means 96% of "bright ideas" fail within 10 years when tested in the real world. Now, consider the chances of success for the latest government policy wonk's vision of how GM should be run -- especially when she has never even had the experience of running a pizza shop.

Nor is the government's track record on this front reassuring. Whether it's $400 dollar toilet seats in the Reagan era or proposed $450 million presidential helicopters under Bush, the Pentagon is the very embodiment of government mismanagement and waste. Is there any reason to think that the U.S. government would be any more efficient at running any business than it is in running the Department of Defense? Get ready for a torrent of stories like this about the Johnstown, Pa., airport, which services 20 passengers a day being given $800,000 in economic stimulus to become a daily occurrence.

The Law of Unintended Consequences:
Nasty Government, Spoiled Citizens

Yet wasted money is only the beginning. It's the shift in the collective psychology of a society as a result of government intervention that is particularly nefarious.

First, the government is benevolent -- as long as you do what it says. Consider the case of TARP -- the Troubled Asset Relief Program. In theory, the government pitched the program as a necessary evil to bail out greedy banks. In practice, it was used it as an excuse to meddle in the affairs of financial institutions that had no need for the government's help. Consider the revelations in this week's Fortune magazine that the government bullied Wells Fargo into taking TARP money against its own will. Dick Kovacevich, the CEO of Wells Fargo, spoke of a "true Godfather moment" when the government gave him one hour to take $25 billion -- or else threatened to designate Wells Fargo "undercapitalized," thereby cratering its acquisition of Wachovia. Such was Kovacevich's reward for doing his job better than any other head of a major bank in the United States.

Second, doling out money to some companies, while ignoring others, is like giving a lollipop to only one kid in a kindergarten. All of the kids who didn't get a lollipop get angry, and start nagging you for more. And the next time you walk through the door, every kid wants a lollipop from you. After all, you are now "the lollipop guy." But don't expect any gratitude -- "the least heartfelt of emotions." I once lived in a country where the government doubled the salaries of every public sector worker overnight as part of a leader's ploy to get re-elected. Not a single government worker was grateful. Each felt that if the government could afford to raise their salaries, they must have been underpaid in the first place. Six years later, that country is bankrupt.

The Law of Unintended Consequences:
Killing the Goose That Lays the Golden Egg

Every government action will have unintended consequences. Consider the new found plight of the "filthy rich," whom the government wants to soak with higher taxes. Taxing the bonuses of executives at banks receiving TARP money at 90%? Goldman Sachs and Morgan Stanley bankers will head out of the door and join Nomura and Deutsche Bank, Japanese and German banks that did not receive TARP money. Raise the income tax rate to 50%, as the United Kingdom did just last week? Two friends of mine in London are already packing up their bags and moving to Switzerland.

The biggest consequence of the ramp up in government involvement in the U.S economy is not something that anyone, least of all government bureaucrats, can predict. And perhaps that is the most dire consequence of all.

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