The Cobra effect

There’s a fascinating anecdote from when the British occupied India.

As the city of Delhi was infested with cobras, the officials offered a bounty on cobra skins. Soon, however, a cottage industry of cobra farming sprang up. People were breeding them for their skins.

So, while the British paid out more and more money, but the cobra infestation did not abate. Instead, the cobra farming only added to the problem.

When authorities finally got wise to the scam and withdrew the bounty, the farmers set their now-worthless cobras free. In this case, truly the road to hell was paved with good intentions – and cobra skins.

It is unclear if this is a true story. But, it makes for a great reminder of the power of perverse incentives.

One for us to keep in mind as we design incentives ourselves.