Tackling The Cobra Effect and Other Perverse Incentives

A taxonomy of unintended consequences and some potential solutions

If you are like me, you can get frustrated when you hear of well-intentioned government programs and policies that are exploited or abused in unintended ways. There are many examples of naive or poorly thought out policy, but here I will be focusing on what economists call perverse incentives: what they are, where people go wrong, and how they might be prevented.