Perverse Incentives

Need more proof that carelessly designed incentives can do more harm than good?  Check out Wikipedia's list of perverse incentives.  Perverse incentives, by definition, are those that produce unintended negative consequences.  A few laughs and some solid food for thought.

A couple of my favorites:

• In Hanoi, under French colonial rule, a program paying people a bounty for each rat pelt handed in was intended to exterminate rats. Instead it led to the farming of rats.

• 19th century palaeontologists traveling to China used to pay peasants for each fragment of dinosaur bone (dinosaur fossils) that they produced. They later discovered that peasants dug up the bones and then smashed them into multiple pieces to maximise their payments.

Hat tip to Bob Sutton's post highlighting this topic.

Comments

[Wally Bock]

The problem with so many perverse incentives, like the ones you highlight, is that they seem to make perfect sense when you plan them.

[Ann Bares]

Wally:

Very true. The best antidote to incentive perversity (hmmmm... I like that phrase) that I've found is getting the benefit of many different perspectives during the design of the plan, which is why I am a fan of cross-functional design teams. I also like "testing" them with a group of the intended victims ... er, participants. The more heads involved, the lower the likelihood of unintended consequences.

Thanks for weighing in!