Elasticity of Substitution...

... means nothing more than that as the price of a particular good changes, the consumption of other goods change as well. If two goods are very much like each other, it is likely that if the price of one good were to increase, consumption of the good whose price remained the same will rise. This makes sense, considering that we usually like possessing more money to less, no?

Consumer product regulation is no different. Regulating the heck out of something, such as requiring licensing or specific safety features, increases the cost of consuming that something, whether that cost be in terms of money, or time, or complexity, for the consumer. Thus, the consumer will choose other items to attain an end. If the particular regulation aimed at increasing consumer safety, but in the process increased the costs of using a particular item so much as to encourage the use of other, less safe products, then at the end of the day all we have is a bunch of fat n' happy bureaucrats at the expense of consumer well-being.

Think of regulating ladders, by requiring ever-more advanced safety features that raises the cost of production, which decreases the supply of ladders on the market, which increases the sale price of ladders. It is likely that consumers will choose not to buy expensive ladders and instead opt to use chairs and watermelons and footballs to stand on to change the light bulb. Are we safer at the end of the day? I'd argue, no.

I would call such an analysis paradoxical, but it isn't, not at all. This is completely reasonable and should surprise nobody. But, I think that's the trick about economics. Many people don't consider it easy, because those same people might look at the issues with blind eyes. Emotion, that is, tends to play a far larger role concerning economic issues than more "objective" sciences, such as physics or biology.

That's why I really appreciate lecturers who can make economics entertaining. Art Carden did that this summer, at Mises University. His Mises page, with his lectures in MP3 format, are here. Making economics entertaining is among the many ways to get otherwise emotional people to see what "good intentions" result in.