Perverse incentive
A perverse incentive is an incentive that has an unintended and undesirable result that is contrary to the intentions of its designers. The cobra effect is the most direct kind of perverse incentive, typically because the incentive unintentionally rewards people for making the issue worse.[1][2] The term is used to illustrate how incorrect stimulation in economics and politics can cause unintended consequences,[2] and is an example of the proverb "the road to hell is paved with good intentions".
The term cobra effect was coined by economist Horst Siebert based on an anecdote of a (possibly ahistorical) occurrence in India during British rule.[2][3][4] The British government, concerned about the number of venomous cobras in Delhi, offered a bounty for every dead cobra. Initially, this was a successful strategy; large numbers of snakes were killed for the reward. Eventually, however, enterprising people began to breed cobras for the income. When the government became aware of this, the reward program was scrapped. When cobra breeders set their now-worthless snakes free, the wild cobra population further increased.[5]
In his autobiography, Mark Twain says that his wife, Olivia Langdon Clemens, had a similar experience:[41]
Once in Hartford the flies were so numerous for a time, and so troublesome, that Mrs. Clemens conceived the idea of paying George a bounty on all the flies he might kill. The children saw an opportunity here for the acquisition of sudden wealth. ... Any Government could have told her that the best way to increase wolves in America, rabbits in Australia, and snakes in India, is to pay a bounty on their scalps. Then every patriot goes to raising them.
