A reward offered for reducing a problem creates a supply of the problem.
The term was popularised by Horst Siebert using a colonial-India cobra-bounty story whose historicity is uncertain. The well-documented analogue is the 1902 Hanoi rat-tail bounty, which encouraged rat farming and the gaming of the bounty system.
In practice
- A support team rewarded for tickets closed begins closing tickets and reopening them under new numbers.
- A council paying per fly-tipping incident cleared finds contractors declining to report the small ones until they become large ones.
- Possible explanations
- The explanation is that a bounty pays for the measured quantity rather than the outcome, so whoever can produce the measured quantity cheaply will do so, which is the same structure as Goodhart's law.
- In its favour
- The mechanism is well documented, notably in the 1902 Hanoi rat-tail bounty that produced rat farming, and it recurs wherever a target can be met by supplying the problem.
- Against it
- The colonial-India cobra story that gives the effect its name is poorly documented, so the founding case may not have happened as told.
- Standing
- The colonial-India cobra story is poorly documented; the 1902 Hanoi rat-tail bounty is the better-evidenced case.
- Subject
- Economics & Incentives
- Essay
- Rules for choosing, and the paradoxes that humbled the theory