An economic policy produces significantly different short-run and long-run effects, and therefore it is very important to fully assess both. One such example, in which the long-run effects are totally contradictory to its short-run effects, is the population policy of China.

The economic development of a country requires a constant stream of new investments enabled by domestic savings. Savings are earned by not consuming all the goods that a country produces. However, if the population grows at the same rate as the growth of the products, there will be no savings at all, because all the products must be used to feed the additional mouths. Thus, at the early stage of economic development, population control is an absolute necessity.

Plagued by the rapidly increasing population growth, China instituted a very stringent policy of only one child per couple. Initially, a couple is encouraged to have only one child through moral persuasion and economic incentives of free medical care and free college education for the child. However, if this moral persuasion fails, then a heavy taxation is imposed on the second child, and the government strongly advises or coerces the wife to be sterilized. In the short run, the policy worked very well and the feared population explosion of China was avoided. The United Nations predicts that Chinese population will start to decline from year 2042, an almost unimaginable occurrence even a decade ago. Soon China will join industrialized countries that suffer from a shortage of workers. While the short-run effects were expected, the policy created totally unintended long-run effects.

First, in the past, the Chinese considered children a measure of success for women. However, now that the first generation of children born under the one-child policy are reaching adulthood, the prevailing mood among young Chinese women is that no children is a perfectly acceptable social norm, and many professional women prefer not to have any children at all.

Second, in Asian culture, a son is overwhelmingly preferred to a daughter. Therefore, the couple who plans to have only one child wants to make sure that the child is a son. This preference encouraged the widespread practice of infanticide or abortion of female infants. As a consequence, there is currently a serious gender imbalance in China. For every 100 girls, there are 117 boys. This imbalance creates a shortage of women for men to marry and have children with. , In fact, this shortage has created the absurd practice of abducting brides. In the year 2000, 110,000 women were freed from gangs on women trafficking.

Third, in Asia, children are the main source of welfare for aged parents, both financially and emotionally. However, children who have grown up in the atmosphere of the one-child family are so pampered and adored that they feel no social or family obligation towards their parents. Most of the parents will reach retirement age around year 2040, yet there is no well-structured social retirement system in China which may replace the traditional system of children's caring for their aged parents.

Currently, one of the main economic strengths of China is an abundant supply of hard working, low-wage labor. This advantage will disappear in about forty years when the shortage of labor will force Chinese wages to climb higher and force the country to import guest workers from its neighboring countries. These long-run effects are exactly the opposite of the original intention of the Chinese population policy, and China now finds itself urgently revising its policy to encourage population growth.