From Wikipedia, the free encyclopedia
A perverse incentive is an incentive that has an unintended and undesirable effect, that is against the interest of the incentive makers. Perverse incentives by definition produce negative unintended consequences.
[edit] Examples
- 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.[1]
- Funding fire departments by the number of fire calls made is intended to reward the fire departments that do the most work. However, it may discourage them from fire-prevention activities, which reduce the number of fires.[2]
- 19th century palaeontologists 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 maximise their payments.[3]
- Paying architects and engineers according to what is spent on a project leads to excessively costly projects.[4]
- Paying medical professionals and reimbursing insured patients for treatment but not for prevention.[5]
- Digital rights management schemes are often used to discourage duplication of digital media by preventing copying of content, which also has the effect of reducing its utility to paying customers who want to play their purchased material on multiple machines, or make backups. The reduced functionality leads to the situation where pirates have a better product, and pirated copies may be preferred over genuine ones.
[edit] See also
- ^ Michael G. Vann, "Of Rats, Rice, and Race: The Great Hanoi Rat Massacre, an Episode in French Colonial History," French Colonial History Society, May, 2003
- ^ Department for Communities and Local Government (2002). "Fire". In Consultation on the Local Government Finance Formula Grant Distribution. Retrieved November 10, 2006.
- ^ Bill Bryson, A Short History of Nearly Everything
- ^ Amory Lovins Questions Design and Resource Efficiency(2002). "Part 2" in Energy Strategies Special Report, buildings.com. Retrieved 2008-01-12
- ^ James C. Robinson, Reinvention of Health Insurance in the Consumer Era (2004). In JAMA, April 21, 2004; 291: 1880 - 1886. Retrieved 2008-01-12
[edit] References
- John Sloan III, Tomislav V. Kovandzic and Lynee M. Vieraitis. Unintended Consequences of Politically Popular Sentencing Policy: The Homicide-Promoting Effects of 'Three Strikes' in U.S. Cities (1980-1999). Criminology & Public Policy, Vol 1, Issue 3, July 2002.
