Do incentives work?


Wrong, and it is a big “wrong”, as sometimes they produce the opposite effect.

For example, during the British Raj, when the British ruled India, we had a problem, which especially for the British, was worrying. There was a vast increase in the population of snakes, not any snake but venomous cobras! These deadly snakes were slithering all-round the town, panicking, not just the British, but also the locals. A solution had to be found.

It seemed obvious to the authorities, they decided to offer a financial incentive for every dead cobra bought in. Simple, well it was to start with. However, they forgot the entrepreneurial talents of the local population. The local population soon realised that if they were to breed cobras, kill them and then take the dead ones in they could make a good living. For a time, it worked. The authorities realised what was happening, they stopped paying! They created another problem.

This is an example of the law of unintended consequences. You see, as soon as they learnt they weren’t going to be paid for dead cobras, they released them back onto the streets. The authorities had made the problem worse!

“The Cobra Effect”

That is what it became known as.

In fact, Mark Twain in his autobiography explained it this way:

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 out to raise them.

Here are some other examples of “The Cobra Effect”

1902 – Hanoi

When the French ruled Vietnam, the capital city, Hanoi, was infected by rats. Therefore, the French hit on what seemed to them was first class solution. They said they would pay a reward for each rat killed. All people had to do was bring in the rat’s tail.

Well, while they were paying out a lot for tails, unfortunately, the rat population was increasing. It wasn’t working.

They started investigating and found that there were a lot of rats running around without tails! The rat catchers were catching the rats, cutting off their tails, then, to raise more money, released them back to breed more rats!

1860s America -The First Transcontinental Railroad

States Congress wanted to incentivise the builders of this incredible venture, that was to link both sides for the North American Continent. So, they came up with a brilliant idea, they would pay the builders for every mile of track they laid. Makes sense, doesn’t it? Well, yes but only if you can keep track of their work. However, there was a civil war going on at the time, so the government was a bit distracted.

Thomas C. Durant, managing Union Pacific Railroad, therefore overrode his engineers and ordered extra track to be laid, but not in a straight line. In fact, in the first 36 months the Union Pacific laid many miles of track but only moved it across the country by 40 miles!

Another example of the Cobra Effect

Does it still happen today!

I don’t know, but I understand recently, someone came up with the concept of offering £500 for a positive COVID test. Fortunately, someone in Government twigged that giving people a cash sum would provide an incentive for people to get COVID. They realised rather quickly that, in fact, it could boost the spread of the virus rather than limit it.

Does that mean they had learnt from history, I hope so?

There is no better place to learn.

That is why I say Isn’t History Fun?

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