Editing Perverse incentive

{{Short description|Incentive with unintended results}}
{{Use dmy dates|date=May 2023}}
[[File:Indiancobra.jpg|right|thumb|An anecdote tells of the British government's bounty on dead [[Indian cobra]]s giving locals the perverse incentive to start breeding the snakes, to be able to kill more of them]]
{{Economics sidebar}}
The phrase "'''perverse incentive'''" is often used in economics to describe an [[incentive]] structure with undesirable results, particularly when those effects are unexpected and contrary to the intentions of its designers.<ref name="brickman22">{{Cite book |last=Brickman |first=Leslie H. |url=https://books.google.com/books?id=R6ocCjZIrrUC |title=Preparing the 21st Century Church |publisher=Xulon Press |year=2002 |isbn=978-1591601678 |pages=326}}</ref>

The results of a perverse incentive scheme are also sometimes called '''cobra effects''', where people are incentivized to make a problem worse. This name was coined by economist [[Horst Siebert]] based on an [[anecdote]] taken from the [[British Raj]].<ref name="siebert32">{{Cite book |last=Siebert |first=Horst |title=Der Kobra-Effekt. Wie man Irrwege der Wirtschaftspolitik vermeidet |publisher=Deutsche Verlags-Anstalt |year=2001 |isbn=3421055629 |location=Munich |language=de}}</ref><ref name="freak22">{{cite web |last=Dubner |first=Stephen J. |date=11 October 2012 |title=The Cobra Effect: A New Freakonomics Radio Podcast |url=http://freakonomics.com/2012/10/11/the-cobra-effect-a-new-freakonomics-radio-podcast/ |accessdate=24 February 2015 |publisher=Freakonomics, LLC}}</ref> The British government, concerned about the number of venomous [[Indian cobra|cobras]] in [[Delhi]], offered a [[Bounty (reward)|bounty]] for every dead cobra. Initially, this was a successful strategy; large numbers of snakes were killed for the reward. Eventually, however, people began to breed cobras for the income. When the government became aware of this, the reward program was scrapped. The cobra breeders set their snakes free, leading to an overall increase in the wild cobra population.<ref name="schwarz222">{{Cite book |last=Schwarz |first=Christian A. |title=NCD Implementation Guide |publisher=Carol Stream Church Smart Resources |year=1996 |pages=126}} Cited in Brickman, p. 326.</ref><ref>{{cite news |last1=Coy |first1=Peter |date=26 March 2021 |title=Goodhart's Law Rules the Modern World. Here Are Nine Examples |url=https://www.bloomberg.com/news/articles/2021-03-26/goodhart-s-law-rules-the-modern-world-here-are-nine-examples |access-date=12 January 2023 |work=Bloomberg.com |language=en}}</ref>

Perverse incentives arise in various fields such as electoral systems, pest eradication campaigns, community safety and harm reduction, environmental and wildlife protection, historical preservation plans, healthcare cost control, humanitarian and welfare policies, promotional plans and publicity. These incentives are often designed to achieve short-term goals, but in the long run, they lead to bigger problems or undermine the original objectives.

== Examples of perverse incentives ==

=== Electoral systems ===

* A well-known example in [[Social choice theory|social choice]] is [[perverse response]],<ref>{{Cite journal |last=Spenkuch |first=Jörg L. |date=2012 |title=Please Don’t Vote for Me: Strategic Voting in a Natural Experiment with Perverse Incentives |url=http://www.ssrn.com/abstract=2047221 |journal=SSRN Electronic Journal |language=en |doi=10.2139/ssrn.2047221 |issn=1556-5068}}</ref> where a candidate can lose an election if the voters rank them higher. This occurs under [[single transferable vote]] and related systems (like [[Partisan primary|primary elections]] and the [[two-round system]]).<ref name=":02">{{Cite journal |last=Doron |first=Gideon |last2=Kronick |first2=Richard |date=1977 |title=Single Transferrable Vote: An Example of a Perverse Social Choice Function |url=https://www.jstor.org/stable/2110496 |journal=American Journal of Political Science |volume=21 |issue=2 |pages=303–311 |doi=10.2307/2110496 |issn=0092-5853|url-access=subscription }}</ref>

=== Pest control campaigns ===

* The [[Great Hanoi Rat Massacre]] occurred in 1902, in [[Hanoi]], [[Vietnam]] (then known as [[French Indochina]]), when, under French colonial rule, the colonial government created a bounty program that paid a reward for each [[rat]] killed.<ref name="freak22" /> To collect the bounty, people would need to provide the severed tail of a rat. Colonial officials, however, began noticing rats in Hanoi with no tails. The Vietnamese [[Rat-catcher|rat catchers]] would capture rats, sever their tails, then release them back into the sewers so that they could produce more rats.<ref name=":0">{{Cite journal |last1=Doron |first1=Gideon |last2=Kronick |first2=Richard |date=1977 |title=Single Transferrable Vote: An Example of a Perverse Social Choice Function |url=https://www.jstor.org/stable/2110496 |journal=American Journal of Political Science |volume=21 |issue=2 |pages=303–311 |doi=10.2307/2110496 |jstor=2110496 |issn=0092-5853|url-access=subscription }}</ref>
* Experiencing an issue with [[Feral pig|feral pigs]], the [[United States Army|U.S. Army]] post of [[Fort Benning]] in [[Georgia (U.S. state)|Georgia]] offered hunters a $40-bounty for every pig tail turned in.<ref>{{cite news |date=1 March 2008 |title=Fort Benning puts a bounty on boars |url=https://www.nbcnews.com/id/wbna23416106 |work=NBC News |language=en |agency=Associated Press}}</ref> Over the course of the 2007–2008 program, the feral pig population in the area increased. While there were some reports that individuals purchased pigs' tails from meat processors<ref name="aphis2">{{cite book |author1=((Animal and Plant Health Inspection Service)) |author1-link=Animal and Plant Health Inspection Service |title=Feral Swine Damage Management: A National Approach |date=27 May 2015 |publisher=United States Department of Agriculture, APHIS |others=U.S. Department of the Interior Fish and Wildlife Service; U.S. Department of Agriculture Natural Resource Conservation Service |page=78 |chapter=Chapter 2: Alternatives; Section 2. Methods Dismissed |id=Final Environmental Impact Statement |chapter-url=https://www.aphis.usda.gov/wildlife_damage/nepa/states/US/us-2015-fs-damage-mgt-a-national-approach-eis.pdf |archive-url=https://web.archive.org/web/20230520155519/https://www.aphis.usda.gov/wildlife_damage/nepa/states/US/us-2015-fs-damage-mgt-a-national-approach-eis.pdf |archive-date=20 May 2023}}</ref> then resold the tails to the Army at the higher bounty price, a detailed study of the bounty scheme found different effects from perverse incentives were mainly responsible. Both the pigs' fertility rate and offspring survival rates increased under the scheme. This was due to improved nutrition made available by the feed bait used to attract the animals to hunting sites. Secondly, hunters were found to be more likely to preferentially target large males as "trophy"-quality game, while ignoring females and juveniles as targets. Removal of mature males from the population has a negligible impact on population growth, as remaining mature males can each stud many breeding sows.<ref>{{cite journal |last1=Ditchkoff |first1=Stephen S. |last2=Holtfreter |first2=Robert W. |last3=Williams |first3=Brian L. |date=September 2017 |title=Effectiveness of a bounty program for reducing wild pig densities |journal=Wildlife Society Bulletin |volume=41 |issue=3 |pages=548–555 |bibcode=2017WSBu...41..548D |doi=10.1002/wsb.787 |doi-access=free}}</ref>

=== Community safety and harm reduction ===

* In 2002, British officials tasked with suppressing [[opium production in Afghanistan]] offered [[poppy]] farmers $700 an acre in return for destroying their crop. This ignited a poppy-growing frenzy among Afghan farmers, who sought to plant as many poppies as they could in order to collect payouts from the cash-for-poppies program. Some farmers harvested and sold the sap before destroying the plants, receiving significantly more money for the same amount of poppies.<ref>{{Cite book |last1=Whitlock |first1=Craig |url=https://books.google.com/books?id=FbYYEAAAQBAJ&q=editions:Wo0s0FwTubkC |title=The Afghanistan Papers: A Secret History of the War |publisher=[[Simon and Schuster]] |year=2021 |isbn=978-1982159023 |page=136}}</ref>
* [[Gun buyback]] programs are carried out by governments to reduce the number of guns in circulation, by purchasing firearms from citizens at a flat rate (and then destroying them). Some residents of areas with gun buyback programs have [[3D printing|3D printed]] large numbers of crude parts that met the minimum legal definition of a firearm, for the purpose of immediately turning them in for the cash payout.<ref>{{Cite news |last=Rose |first=Janus |date=2 August 2022 |title=Someone Made $3,000 Selling 3D-Printed Guns at a Gun Buyback Event |url=https://www.vice.com/en/article/someone-made-dollar3000-selling-3d-printed-guns-at-a-gun-buyback-event/ |url-status=live |archive-url=https://web.archive.org/web/20220802154455/https://www.vice.com/en/article/akee4e/someone-made-dollar3000-selling-3d-printed-guns-at-a-gun-buyback-event |archive-date=2 August 2022 |work=[[Vice (magazine)|Vice]]}}</ref><ref>{{Cite news |date=11 October 2022 |title=Participant used a 3D printer to make firearm parts in bulk that he then exchanged for gift cards |url=https://www.theguardian.com/us-news/2022/oct/11/new-york-gun-buyback-rules-3d-printed-parts |work=[[The Guardian]] |agency=[[Associated Press]]}}</ref>
* In 2021, the [[United States Congress|US Congress]] enacted stringent requirements to prevent [[sesame]], a potential [[allergen]], from cross-contaminating other foods. Many companies found it simpler and less expensive to instead modify their recipes and add sesame directly to the other foods as an ingredient, and thus avoid being affected by the law.<ref>{{Cite news |last=Aleccia |first=Jonel |date=21 December 2022 |title=New label law has unintended effect: Sesame in more foods |url=https://apnews.com/article/sesame-allergies-label-b28f8eb3dc846f2a19d87b03440848f1 |work=[[Associated Press News]]}}</ref>
* In [[Alberta]], under the ''Child, Youth and Family Enhancement Act'', every person must report suspected [[child abuse]] to a director or police officer, and failure to do so is punishable by a $10,000 fine plus 6 months of imprisonment.<ref>{{Cite web |date=2023-04-01 |title=RSA 2000, c C-12 {{!}} Child, Youth and Family Enhancement Act |url=https://www.canlii.org/en/ab/laws/stat/rsa-2000-c-c-12/latest/rsa-2000-c-c-12.html |access-date=2024-03-14 |website=CanLII}}</ref><ref>{{Cite news |last=Johnston |first=Janice |date=2019-10-30 |title=Serenity's Law receives royal assent |url=https://www.cbc.ca/news/canada/edmonton/serenity-law-bill-202-1.5340523 |access-date=2024-03-14 |work=[[Canadian Broadcasting Corporation]]}}</ref> However, according to criminal law professor Narayan, enforcing it would cause people to overreport, which wastes resources, and it would also create a [[chilling effect]] that prevents people from reporting child abuse observed over a period of time, as that would incriminate them for failing to report earlier.<ref>{{Cite news |last=Graveland |first=Bill |date=2017-10-01 |title=Alberta urged to enforce law on child abuse reporting |url=https://www.cbc.ca/news/canada/calgary/child-abuse-alberta-law-reporting-1.4315632 |access-date=2024-03-14 |work=[[Canadian Broadcasting Corporation]]}}</ref> There are similar laws in other Canadian provinces.<ref>{{Cite web |last=Rimer |date=2019-04-10 |title=Information Sheet #7 Summary of Legal Requirements for Reporting Suspicions of Child Abuse  |url=https://boostforkids.org/wp-content/uploads/2019/04/Summary-of-Legal-Requirements-for-Reporting-Suspicions-of-Child-Abuse_All.pdf |access-date=2024-03-14}}</ref>

===Environmental and wildlife protection===

* The United States [[Endangered Species Act of 1973]] imposes development restrictions on landowners who find [[endangered species]] on their property.<ref name=":122">Langpap, Christian, and JunJie Wu. 2017. "Thresholds, Perverse Incentives, and Preemptive Conservation of Endangered Species" ''Journal of the Association of Environmental and Resource Economists'' 4(S1):S227–S259. {{doi|10.1086/692070}}.</ref> While this policy has some positive effects for wildlife, it also encourages preemptive [[habitat destruction]] ([[Swamp draining|draining swamps]] or cutting down trees that might host valuable species) by landowners who fear losing the lucrative development-friendliness of their land because of the presence of an endangered species.<ref>Stephen Dubner and Steven Levitt, [https://www.nytimes.com/2008/01/20/magazine/20wwln-freak-t.html?pagewanted=2&_r=1&sq=unintended%20consequences&st=cse&scp=1 ''Unintended Consequences''], New York Times Magazine, 20 January 2008</ref> In some cases, endangered species may even be [[Shooting, shoveling, and shutting up|deliberately killed]] to avoid discovery.<ref name=":122" />
* In 2005 the UN [[Intergovernmental Panel on Climate Change]] began an incentive scheme to cut down on greenhouse gases. Companies disposing of polluting gases were rewarded with [[carbon credits]], which could eventually get converted into cash. The program set prices according to how serious the damage the pollutant could do to the environment was and attributed one of the highest bounties for destroying [[HFC-23]], a byproduct of a common refrigerant, [[HCFC-22]]. As a result, companies began to produce more of this refrigerant in order to destroy more of the byproduct waste gas, and collect millions of dollars in credits.<ref>{{Cite web |title=The Cobra Effect |url=http://freakonomics.com/2012/10/11/the-cobra-effect-full-transcript/ |url-status=dead |archive-url=https://web.archive.org/web/20121018225311/http://freakonomics.com/2012/10/11/the-cobra-effect-full-transcript/ |archive-date=2012-10-18 |website=Freakonomics}}</ref> This increased production also caused the price of the refrigerant to decrease significantly, motivating refrigeration companies to continue using it, despite the adverse environmental effects.<ref>{{cite news |last1=Rosenthal |first1=Elisabeth |last2=Lehren |first2=Andrew W. |date=2012-08-08 |title=Incentive to Slow Climate Change Drives Output of Harmful Gases |url=https://www.nytimes.com/2012/08/09/world/asia/incentive-to-slow-climate-change-drives-output-of-harmful-gases.html |access-date=2015-07-02 |newspaper=The New York Times |issn=0362-4331}}</ref><ref>{{cite web |last=Gupta |first=Anika |title=Carbon credit scam slur on Indian firms |url=http://www.hindustantimes.com/newdelhi/carbon-credit-scam-slur-on-indian-firms/article1-599382.aspx |url-status=dead |archive-url=https://web.archive.org/web/20150704055413/http://www.hindustantimes.com/newdelhi/carbon-credit-scam-slur-on-indian-firms/article1-599382.aspx |archive-date=4 July 2015 |access-date=2015-07-02 |website=Hindustan Times}}</ref> In 2013, credits for the destruction of HFC-23 were suspended in the [[European Union]].<ref>{{cite web |date=23 November 2016 |title=Commission adopts ban on the use of industrial gas credits |url=https://ec.europa.eu/clima/news/articles/news_2011060801_en |accessdate=3 November 2019 |website=Climate Action |publisher=[[European Commission]]}}</ref>
* In 2017, the [[Renewable Heat Incentive scandal|Renewable Heat Incentive]] paid businesses to replace coal with renewable heating, typically [[bioenergy]] in the form of [[Pellet fuel|wood pellets]]. However, the subsidy for the energy was greater than its cost, which allowed businesses to make a profit simply by burning as much fuel as possible and heating empty buildings. The political fall-out caused the [[Northern Ireland Executive]] to collapse in 2017. It was not re-convened until 2020.<ref>{{cite news |date=23 December 2016 |title=RHI scandal: RHI 'cash for ash' scandal to cost NI taxpayers £490m |url=https://www.bbc.com/news/uk-northern-ireland-38414486 |work=[[BBC News]]}}</ref><ref>{{cite news |date=16 January 2017 |title=Stormont crisis: Deadline passes for future of executive |url=https://www.bbc.co.uk/news/uk-northern-ireland-38630403 |work=BBC |publisher=BBC News}}</ref>

=== Historic preservation schemes ===

* The United Kingdom's [[listed building]] regulations are intended to protect historically important buildings, by requiring owners to seek permission before making any changes to listed buildings. In 2017, the owners of an unlisted historic building in Bristol destroyed a 400-year-old ceiling the day before a scheduled visit by listings officers, allegedly to prevent the building from being listed, which could have limited future development.<ref>{{cite news |date=1 September 2017 |title=Bristol Jacobean ceiling 'destroyed before listings visit' |url=https://www.bbc.co.uk/news/uk-england-bristol-41109143 |work=BBC News}}</ref><ref>{{cite news |date=31 August 2017 |title=Press release: Developer mutilates Jacobean ceiling to avoid potential listing |url=https://www.savebritainsheritage.org/campaigns/item/459/Press-release-Developer-mutilates-Jacobean-ceiling-to-avoid-potential-listing |work=Save Britain's Heritage}}</ref>
* The [[Tax Reform Act of 1976]] provided for loss of tax benefits if owners demolished buildings. This led to an increase in [[arson]] attacks in the 1970s as a way of clearing land without financial penalties. The law was later altered to remove this aspect.<ref>{{Cite news |last=Newcomb |first=Amelia A. |date=21 May 1982 |title=Historic buildings prove special target for arson |url=https://www.csmonitor.com/1982/0521/052135.html |access-date=2023-01-13 |work=Christian Science Monitor |issn=0882-7729}}</ref>

=== Healthcare cost control ===

* Paying [[Health professional|medical professionals]] and reimbursing insured patients for treatment but not prevention encourages medical conditions to be ignored until treatment is required.<ref>{{cite journal |last1=Robinson |first1=JC |date=21 April 2004 |title=Reinvention of health insurance in the consumer era. |journal=[[Journal of the American Medical Association|JAMA]] |volume=291 |issue=15 |pages=1880–6 |doi=10.1001/jama.291.15.1880 |pmid=15100208|url=https://www.escholarship.org/uc/item/6kk5k20f }}</ref> Moreover, paying only for treatment effectively discourages prevention (which would improve quality of life for the patient but would also reduce the demand for future treatments).
* Payment for treatment generates a perverse incentive for unnecessary treatments. In 2015, a Detroit area doctor was sentenced to 45 years of prison for intentionally giving patients unnecessary cancer treatments, for which health insurance paid him at least 17.6 million dollars.<ref>{{Cite web |last=Moghe |first=Sonia |date=2015-07-11 |title=Patients give horror stories as cancer doctor gets 45 years |url=https://www.cnn.com/2015/07/10/us/michigan-cancer-doctor-sentenced/index.html |access-date=2024-11-04 |website=CNN |language=en}}</ref> Unnecessary treatment may harm in the form of side effects of drugs and surgery, which can then trigger a demand for further treatments themselves.
* [[Medicare (United States)|Medicare]] reimburses doctors at a higher rate if they administer more expensive medications to treat a condition. This creates an incentive for the physician to prescribe a more expensive drug when a less expensive one might do.<ref>{{Cite news |last=Sanger-katz |first=Margot |date=2016-03-10 |title=Medicare Tries an Experiment to Fight Perverse Incentives |url=https://www.nytimes.com/2016/03/10/upshot/medicare-tries-an-experiment-to-fight-perverse-incentives.html |access-date=2016-07-30 |newspaper=The New York Times |issn=0362-4331}}</ref>

=== Humanitarian and welfare policies ===

* In the 2000s, Canada negotiated a "[[Canada–United States Safe Third Country Agreement|Safe Third Country Agreement]]" with the U.S. under which applicants for [[Right of asylum|political asylum]] could only apply in the first of the two countries they reached, in order to discourage [[asylum shopping]]. Among the provisions was one that barred anyone entering Canada at an official [[port of entry]] from requesting asylum there, in theory limiting asylum applications to either those filed by refugees in camps abroad or those who could legally travel to Canada and do so at an immigration office. In the late 2010s, [[Illegal immigration to Canada|some migrants began entering Canada illegally]], between official border crossings, at places like [[Roxham Road]] between New York and Quebec, since once they were in Canada, they were allowed to file applications with the full range of appeals available to them, a process that could take years. Canada wound up processing thousands more applications for asylum than it had planned to.<ref name="Keller Atlantic article2">{{cite news |last=Keller |first=Tony |date=12 July 2018 |title=Canada Has Its Own Ways of Keeping Out Unwanted Immigrants |url=https://www.theatlantic.com/ideas/archive/2018/07/canada-immigration-success/564944/ |access-date=30 June 2021 |newspaper=[[The Atlantic]]}}</ref>
* A [[welfare trap]] is a situation where a person would make less money working (or [[intensive margin|working more hours]]) than they do receiving [[state benefit]]s, as a result of [[means testing]] rendering them ineligible for benefits.<ref>{{Cite web |date=1997-01-06 |title=Gassing up the welfare trap machine  |url=https://www.aims.ca/op-ed/gassing-up-the-welfare-trap-machine/ |access-date=2023-01-13 |website=Atlantic Institute for Market Studies |language=en-US}}</ref><ref>{{Cite web |last=Baetjer |first=Howard |date=24 August 2016 |title=The Welfare Cliff and Why Many Low-Income Workers Will Never Overcome Poverty |url=https://www.learnliberty.org/blog/the-welfare-cliff-and-why-many-low-income-workers-will-never-overcome-poverty/ |website=Learn Liberty}}</ref>

===Promotional schemes and public relations ===

* Hacktoberfest is an October-long celebration to promote contributions to the [[free and open-source software]] communities. In 2020, participants were encouraged to submit four or more [[Pull request|pull requests]] to [[Free software|any public free]] or [[Open-source software|open-source]] (FOS) repository, with a free "Hacktoberfest 2020" T-shirt for the first 75,000 participants to do so.<ref>{{Cite news |date=25 September 2020 |title=Hacktoberfest 2020 |url=https://laravel-news.com/hacktoberfest-2020 |access-date=31 January 2021 |website=Laravel News}}</ref> The free T-shirts caused frivolous pull requests on FOS projects.<ref>{{Cite web |last=Claburn |first=Thomas |date=1 Oct 2020 |title=Open-source devs drown in DigitalOcean's latest tsunami of pull-request spam that is Hacktoberfest |url=https://www.theregister.com/2020/10/01/digitalocean_hacktoberfest_pull_request_spam/ |access-date=2024-02-29 |work=[[The Register]] |language=en}}</ref>
* Around 2010, online retailer [[Vitaly Borker]] found that online complaints about his eyeglass-sale website, DecorMyEyes, pushed the site to the top of [[Google]] searches and drove more traffic. He began responding to customer reports of poor quality and/or misfilled orders with insults, threats of violence, and other harassment.<ref>{{cite news |author=David Segal |date=2010-11-26 |title=For DecorMyEyes, Bad publicity is a good thing |url=https://www.nytimes.com/2010/11/28/business/28borker.html?_r=1&partner=rss&emc=rss&pagewanted=all |work=New York Times}}</ref> Borker continued writing toxic replies for a decade despite serving two separate sentences in U.S. federal prison over charges arising from them.<ref>{{cite news |last=Segal |first=David |date=2 May 2021 |title=Has Online Retail's Biggest Bully Returned? |url=https://www.nytimes.com/2021/05/02/business/has-online-retails-biggest-bully-returned.html |access-date=3 May 2021 |newspaper=[[The New York Times]]}}</ref>

=== Returns for effort ===

* The 20th-century [[Paleontology|paleontologist]] [[Gustav Heinrich Ralph von Koenigswald|G. H. R. von Koenigswald]] used to pay [[Javanese people|Javanese]] locals for each fragment of [[Hominini|hominin]] skull that they produced. He later discovered that the people had been breaking up whole skulls into smaller pieces to maximize their payments. When he cancelled the payments, many locals burned the remaining skulls they had as retaliation.<ref>{{Cite book |last1=III |first1=Carl C. Swisher |url=https://books.google.com/books?id=gVWOJgM0azoC&q=pieces&pg=PA9 |title=Java Man: How Two Geologists Changed Our Understanding of Human Evolution |last2=Curtis |first2=Garniss H. |last3=Lewin |first3=Roger |publisher=University of Chicago Press |year=2001 |isbn=978-0226787343}}</ref>
* 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 and unnecessarily adding miles of track.<ref>Mark Zwonitzer, writer, PBS American Experience documentary "Transcontinental Railroad" (2006) [https://www.pbs.org/wgbh/americanexperience/features/transcript/tcrr-transcript/ "Program Transcript . Transcontinental Railroad . WGBH American Experience"] {{Webarchive|url=https://web.archive.org/web/20170130153209/http://www.pbs.org/wgbh/americanexperience/features/transcript/tcrr-transcript/|date=30 January 2017}}</ref>
* Funding [[Fire department|fire departments]] by the number of fire calls that are made is intended to reward fire departments that do the most work. However, it may discourage them from [[Fire prevention|fire-prevention]] activities, leading to an increase in actual fires.<ref>Department for Communities and Local Government (2002). [http://www.local.dtlr.gov.uk/review/consult/fire.pdf "Fire"] {{webarchive|url=https://web.archive.org/web/20040801032503/http://www.local.dtlr.gov.uk/review/consult/fire.pdf|date=2004-08-01}}. In ''Consultation on the Local Government Finance Formula Grant Distribution''. Retrieved 10 November 2006.</ref>

== In literature ==
In [[Autobiography of Mark Twain|his autobiography]], Mark Twain says that his wife, Olivia Langdon Clemens, had a similar experience:<ref>{{citation |author=Mark Twain |title=Mark Twain's Own Autobiography: The Chapters from the North American Review |pages=151–152 |year=2010 |editor=Michael J. Kiskis |publisher=University of Wisconsin Press |isbn=978-0299234737 |author-link=Mark Twain}}</ref>
{{quote|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.}}

== See also ==

* {{anl|Conflict of interest}}
* {{anl|Campbell's law}}
* {{anl|Goodhart's law}}
* {{anl|Instrumental convergence}}
* {{anl|Moral hazard}}
* {{anl|Streisand effect}}
* {{anl|The purpose of a system is what it does}}
* {{anl|Tragedy of the commons}}

== References ==
<references responsive="1"></references>

==Further reading==

* Chiacchia, Ken (2017 July 12). "[https://www.hpcwire.com/2017/07/12/perverse-incentives-economics-mis-shaped-academic-science/ Perverse Incentives? How Economics (Mis-)shaped Academic Science]." ''HPC Wire''.
* {{Cite web |last=Hartley |first=Dale |date=8 October 2016 |title=The Cobra Effect: Good Intentions, Perverse Outcomes |url=https://www.psychologytoday.com/blog/machiavellians-gulling-the-rubes/201610/the-cobra-effect-good-intentions-perverse-outcomes |website=Psychology Today |language=en-CA}}
* Myers, Norman, and Jennifer Kent (1998). ''Perverse Subsidies{{snd}}Tax $ Undercutting our Economies and Environments Alike''. Winnipeg, Manitoba: International Institute for Sustainable Development.
* Rothschild, Daniel M., and Emily Hamilton [2010] (2020). "Perverse Incentives of Economic 'Stimulus'," ''Mercatus on Policy Series'' 66. {{SSRN|3561693}}; {{doi|10.2139/ssrn.3561693}}.
* Schuyt, Kirsten (2005). "Perverse Policy Incentives." pp. 78–83 in ''Forest Restoration in Landscapes'', edited by S. Mansourian, Daniel Vallauri, and N. Dudley. New York: Springer. {{doi|10.1007/0-387-29112-1_11}}.
* Sizer, N. (2000). ''Perverse Habits, the G8 and Subsidies the Harm Forests and Economies''. Washington, DC: [[World Resources Institute]].
* {{Cite journal |last1=Kovandzic |first1=Tomislav V. |last2=Sloan |first2=John J. |last3=Vieraitis |first3=Lynne M. |date=July 2002 |title=Unintended Consequences of Politically Popular Sentencing Policy: The Homicide-Promoting Effects of 'Three Strikes' in U.S. Cities (1980–1999) |journal=Criminology & Public Policy |volume=1 |issue=3 |pages=399–424 |doi=10.1111/j.1745-9133.2002.tb00100.x}}
* Stephan, Paula (2012). "[https://www.nature.com/articles/484029a.pdf Perverse incentives]." ''Nature'' '''484''': 29–31. {{doi|10.1038/484029a}}.
* "[https://www.cgdev.org/blog/perverse-incentives-south-african-aids-patients Perverse Incentives for South African AIDS Patients]." [[Center for Global Development]] (8 April 2006 ).
* {{cite news |last1=Phillips |first1=Michael M. |date=7 April 2006 |title=In South Africa, Poor AIDS Patients Adopt Risky Ploy |url=https://www.wsj.com/articles/SB114437285980719599 |archive-url=https://web.archive.org/web/20220117021255/https://www.wsj.com/articles/SB114437285980719599 |archive-date=17 January 2022 |work=Wall Street Journal}}
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[[Category:Subsidies]]
[[Category:Conflict of interest]]
[[Category:Political corruption]]
[[Category:Mechanism design]]
[[Category:Incentives]]
[[Category:Literary theory]]
[[Category:Socioeconomics]]