People, especially economists, love incentives. Incentives motivate people to do things. Even when one may feel like they have no control over those around them, they can create incentives in hopes of changing others’ behaviors. The other day UPS incentivized seniors to attend the “Senior Class Gift Kickoff” by serving every attendee two beers and it worked. Not only did I see many classmates there but I even heard them say they would not have attended if they had not received free alcohol. Further, if you actually donate to the senior class gift you get a special pin to wear at graduation. Some people may not care much about a pin, but my friend did and cared so much about the pin, she donated. A key to incentives is finding out what people actually want. For seniors in college that could be beer and pins, for others those same incentives may not work. A more universal and common incentive is often money.
This is why the Colombian government has offered to pay all coca farmers who switch from growing coca to other crops money. Coca is the key ingredient in cocaine and like the cocoa and coffee plant grows well in Colombia’s climate. Coca had been grown by a rebel group named FARC. FARC would sell coca to fund the war between them and the Colombian government. In the last couple of years though FARC and the Colombian government have signed a peace deal. This has left acres of farmland once used by FARC for coca, open for farmers to start growing alternative crops. So what would you expect when the Colombian government starts paying farmers who have stopped growing coca? You would probably expect the same thing that the Colombian government was expecting when they set up these incentives. That many farmers would now start growing cocoa and coffee, and that the overall production of coca would fall.
However, this is the exact opposite of what happened. What actually happened was that people started growing more coca. In 2017 Colombia produced almost 20% more coca compared to the year before. This is because the more coca farmers grow, the more they can then stop growing to in order receive more money from the Colombian government. This kind of result is nicknamed the “cobra effect,” which gets its name from a similar situation. When the British ruled India, they were concerned by the large population of cobras . The British decided they would give a cash bounty for every cobra skin returned to them, in hopes that incentivizing the killing of cobras would cause their population to fall. Because of these incentives though, people started raising cobras just so they could kill them and return their skins for money. After discovering this the British canceled the incentives they originally offered, leading to all of the cobras being released. The end result was an increase in the cobra population, the exact opposite of what was intended. The British and Colombian governments are not the only ones to fall for this trap, which is why Mark Twain wrote, “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.” So beware that while incentives can influence behaviors, it is not always in the way they were intended to.
Think Like a Freak , Steven D. Levitt and Stephen J. Dubner