Pay people to kill rats, and you may end up breeding rats.
In 1902 colonial Hanoi paid a bounty for every rat tail handed in. Officials soon spotted tailless rats in the streets: catchers were cutting off tails and releasing the rats to breed. Economists call this a perverse incentive. Its most famous example, about cobras in India, may never have happened.
A perverse incentive is a reward that backfires, producing the opposite of what its designers wanted. The German economist Horst Siebert gave it a memorable name in 2001, the cobra effect, from a story set in British India: the government paid for dead cobras, people began breeding them for cash, and when the scheme was scrapped the breeders released their snakes, leaving more cobras than before.
That story is shakier than it sounds. A 2025 investigation by the Friends of Snakes Society found no contemporary records of cobra farms or prosecutions, and traced the tale to an 1873 newspaper piece that reported only that breeding 'was alleged'. An 1887 inquiry had called breeding cobras in captivity highly improbable. A bounty in Madras was indeed cut back in 1873, but because of cost, not fraud.
Better-documented examples are easy to find. The Hanoi rat bounty is one. A palaeontologist who paid Javanese villagers per fragment of ancient skull found they were breaking whole skulls into pieces. In the 1860s, paying builders of the first US transcontinental railroad by the mile encouraged one section of track to be bent into an unnecessary bow. A 2005 carbon-credit scheme rewarded firms for destroying a potent waste gas so generously that some produced more of the refrigerant that creates it, and the European Union suspended those credits in 2013.
Not every failure is pure cheating. When a US Army base paid 40 dollars per feral pig tail in 2007 and 2008, the pig population grew, mainly because the bait fed the pigs well and hunters preferred shooting big males. The lesson is the same: people and nature respond to what you actually reward, not what you meant to reward.
Source: Wikipedia — Perverse incentive · Text summarised from Wikipedia (CC BY-SA 4.0)
