I dimly recall a concept, I think defined by an economist, although I cannot remember the details or context. I think an example--apocryphal or not--was welfare recipients who would have more children in order to qualify for more welfare. I know that's a controversial example and am not claiming that the phenomenon is real or wide-spread, but it's just to give a sense what the concept is that I'm searching for.

In general the concept is something like: although you may create some sort of financial or political mechanism to serve one purpose, if people can use it for unintended personal gain then they will.

I was wondering if anyone can name the concept for me so that I can research it further. Also if anyone knows relevant literature from Social Science journals or academic publications, I'd appreciate it.

  • Honestly, ALL poorly though policies are subjected to abuse. – mootmoot Sep 27 '17 at 15:03
  • I think I read somewhere that some European countries created incentives post WWII for women to have more children - Italy comes to mind. – Mozibur Ullah Sep 27 '17 at 22:05
  • For an overview see Unintended Consequences. – agc Sep 28 '17 at 7:24

Another concept very useful here is one usually drummed in by Freakonomics (books and podcasts) - incentive following (with very specific application of it being "Cobra effect".)

If you incentivize something, people usually/likely WILL follow that incentive and change their behavior.

The problem is of course that it's not always (or even usually) clear what the incentivization will be OF, and what the changes will be - and the bad part is, humans are both lazy and inventive and will find loopholes in the rules to get the cheapest bang for the buck by thinking WAAAAAY outside the box.

The quintessential example is rat extermination fee example (I think it was in India but don't have the link off-hand). Government wanted to get rid of rats. By paying for dead rats.

Desired incentive mechanism: people kill rats, to get money for dead rats. Result: less rats.

Actual outcome: first, people bred rats (that's what's called "abusing the mechanism"). So, the feral rat population didn't decrease, as people simply killed rats they bred, in comfort of their environment; instead of going to hunt and kill feral rats.

Worse later outcome: later, when the government realized the policy was just wasting money with no good outcome, they stopped the payments. Guess what happened to rat farmers? Yep, as there was no more money in rat farming, they released all their bred rats into the city. Because, there weren't already enough rats to plague the populace.

P.S. Found the reference - it's "The Cobra Effect" Freakonomics podcast episode - the rat thing was actually in Hanoi and the India example was cobras.

MEHROTRA: So the “cobra effect” refers to a scheme in colonial India where the British governor, or whoever, the person in charge in Delhi, wanted to rid Delhi of cobras. Apparently in his opinion there were too many cobras in Delhi. So he had the bounty placed on cobras. And he expected this would solve the problem. But the population in Delhi, at least some of it, responded by farming cobras. And all of a sudden the administration was getting too many cobra skins. And they decided the scheme wasn’t as smart as initially it appeared and they rescinded the scheme. But by then the cobra farmers had this little population of cobras to deal with. And what do you do if there’s no market? You just release them. And so this significantly, by a few orders of magnitude, worsened the cobra menace in Delhi.

The above-mentioned rat episode was taken from Michael Vann talk about his research, captured in “Of Rats, Rice, and Race: The Great Hanoi Rat Massacre, an Episode in French Colonial History”.

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  • Please clarify the emphasis on the word "WILL", i.e. do you mean "always will", "sometimes will", "can", etc. – agc Sep 27 '17 at 13:32
  • @agc - usually/likely will. – user4012 Sep 27 '17 at 14:51
  • That clarifies the meaning, but that meaning lacks support -- two instances of anecdotal evidence only establishes that a "cobra effect" occurs sometimes. Without measuring the effect's occurrences against instances where it failed to occur, (i.e. a control group), its probability is unknown. Still, the OP's name-finding question is answered... whatever the actual probability may be of a given folkloric theoretical "law" or "effect". – agc Sep 28 '17 at 7:13

TL;DR: rent seeking and the law of unintended consequences are two possible answers.

Perhaps you are thinking of The Law of Unintended Consequences. Loosely speaking, the law of unintended consequences suggests that some of the results of a policy may act in ways unexpected when the policy is adopted. It is theoretically possible for such consequences to be positive, but we usually discuss it in terms of effects that are negative or even perverse to the goal of the policy.

For example, your welfare example is a policy meant to reduce the challenges of children in poverty, but if people react by increasing the number of children they have, that increases the number of children in poverty and might decrease the family's resources per child. Joining you in ignoring whether welfare actually works that way. Another name for this kind of behavior is rent seeking.

Rent seeking is a zero sum approach where people try to increase the amount they accrue without increasing their production. They try to manipulate the system rather than produce within it.

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  • Re welfare queen praetaritio: Usage of the term rent seeking, ("to increase one's share of existing wealth without creating new wealth"), applied to any form of parenting implies it is not work, (unless a stranger is paid to do the same task), and that children are not wealth, (yet consider the costs of infertility treatment for those who lack them). Monetization stigmatization rules the nation... – agc Sep 26 '17 at 2:28
  • @agc - that term as concieved had nothing to do with welfare and was related to regulatory agencies. – user4012 Sep 26 '17 at 11:12
  • @user4012, Please take it up with Brythan if you disapprove of his usage's implications: "...whether welfare {parenting} actually works that way ... this kind of behavior is rent seeking." (The usages of many a common term can diverge considerably from its one meaning at the time of coinage.) – agc Sep 27 '17 at 13:22

The economics term you may be thinking of is "perverse incentives". A perverse incentive is an incentive with undesirable outcomes that are harmful.

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A poorly though policies are definitely subjected to abuse.

Extend from the answer of @user4012 of cobra effect, if there is incentive given to keep the grass low instead of buying the cobra, carrot and stick policies that let people dump their food waste to proper seal lid rubbish can (hence reduce food for rats).

Perhaps the question will be more robust if you start talking about stuff like measurement. As Goodhart's law describe abuse of measurement for policies/motivation: "When a measure becomes a target, it ceases to be a good measure."

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