The Potential for Incentive Perversity

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 building the first transcontinental railroad in the 1860s, the United States Congress agreed to pay the builders per mile of track laid. As a result, Thomas C. Durant of Union Pacific Railroad lengthened a section of the route forming a bow shape unnecessarily adding miles of track.

• 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 paleontologists 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 maximize their payments.

Food for thought and a reminder of that old adage: Be careful what you reward, for you will surely get it!

Creative Commons image "...oops" by jasmeet

Comments

[Soni]

I read a lot of blog posts and i never heard of a topic like this. I Love this topic you made, really amazing.