A CBC Radio program on Saturday raised a topic that seems to have relevance in almost every aspect of human society. It’s also a wonderful reinforcement for libertarians — folks who don’t like too much government influence or interference in their lives.
The Invisible Hand’s topic on the weekend was an economic concept called perverse incentives, which are the unintended results of actions taken to address a particular issue. The most amusing example on the program was a plan in Hanoi to reduce a problem rat population. Get the people to take on the battle, officials decided. Encourage them to kill the rats by paying them for each one. Of course, the city government didn’t want to be inundated by people arriving at offices with dead rats so, like most similar plans over the years and around the world, it decided to settle for the tail. It takes me back to my gopher-snaring days in Calgary.
But, as Robert Burns said so beautifully:
“The best-laid schemes o’ mice an’ men
Gang aft agley,
An’ lea’e us nought but grief an’ pain,
For promis’d joy!”
The first sign that something was amiss came when officials noticed tailless rats running around in alleys and gutters. Then, a number of “rat farms” were discovered. Residents were taking full advantage of the rat tail reward scheme, first by not bothering to kill the rodents (a messy and unnecessary activity, and one that, shall we say, kills the goose that lays the golden egg) and then upping the ante by capturing them and practicing rat husbandry (and wifery, too, one surmises), making it unnecessary to actually go out and hunt for the animals.
The Hanoi government abandoned the plan when an analysis showed the rat population was actually increasing.
Another example cited was the three-strikes-and-you’re-out policy now used in about half of the American states. The plan, intended to provide a disincentive for criminal behavior by locking up crooks for life when they are convicted of a third crime, seems harsh by Canadian standards, but it does seem to have a logical basis. But what happens when a criminal is aware of the dire consequences when he faces arrest for a third crime? It turns out that the death rate of police officers has doubled in those states since the law was enacted. Cop killers have testified that they deemed the act of murder to be an acceptable risk when facing a conviction of a lesser crime that would put them behind bars for life. In effect, the law has the perverse consequence of turning, for example, a thief into a murderer.
By pure coincidence, on this week’s This American Life public radio broadcast, host Ira Glass introduced the program he titled “Loopholes”, those little glitches that clever folks seem born to exploit. The program opened with a story about an Austrian woman in 18th century who was so disillusioned with her arranged marriage that she decided she wanted to die. The problem she faced was that suicide was a sure passage to hell because a person who takes his own life has no opportunity to be blessed and forgiven for his sins.
She thought she had found a loophole when she tried to commit suicide by consuming arsenic in a small enough quantity that she would have time to repent in the presence of a priest before she died, thus paving her way to heaven. She eventually abandoned that plan and came up with an even more dire scheme. By killing someone, she concluded, she would have the chance to be blessed and forgiven before being put to death. Just to show how rational she was despite her unhappiness, she decided to kill a child, because children, in the eyes of the church, are innocent and they get a quick pass into heaven.
The researcher who told the story reported finding evidence that hundreds of others had, in their misery, used the same tactic with the same optimism that they had found a loophole that would allow them to end their misery and still get into heaven. The eventual government response? Repeal the death sentence for child killers.
If you think about almost any legislation, chances are you can think of a perverse incentive, an unintended consequence that flies in the face of the lawmakers’ intentions. For starters, put marijuana laws to the test. Perverse incentives could become the hottest parlour game since Trivial Pursuit.
Lorne Eckersley is the publisher of the Creston Valley Advance.