Perverse incentive
From The Art and Popular Culture Encyclopedia
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"A classic example of a perverse incentive occurred when the British government in India offered a bounty for dead cobras with intent to decrease the wild cobra population. However, enterprising people began to breed cobras for the income. When the government became aware of this, the reward program was scrapped, causing the cobra breeders to set the now-worthless snakes free. As a result, the wild cobra population further increased. The term cobra effect was coined to describe a situation where an attempted solution to a problem actually makes the problem worse."--Sholem Stein |
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A perverse incentive is an incentive that has an unintended and undesirable result which is contrary to the interests of the incentive makers. Perverse incentives are a type of unintended consequence.
Perverse agricultural subsidies
Although subsidies can be important, many are "perverse", in the sense of having adverse unintended consequences. To be "perverse", subsidies must exert effects that are demonstrably and significantly adverse both economically and environmentally. A subsidy rarely, if ever, starts perverse, but over time a legitimate efficacious subsidy can become perverse or illegitimate if it is not withdrawn after meeting its goal or as political goals change. Perverse subsidies are now so widespread that as of 2007 they amounted $2 trillion per year in the six most subsidised sectors alone (agriculture, fossil fuels, road transportation, water, fisheries and forestry).
See also
- Cobra effect
- Conflict of interest
- Fossil fuel subsidies
- Freakonomics
- Invasive species
- Moral hazard
- Social trap
- Superimposed schedules
- Perversion
- Tragedy of the commons
- Welfare trap
