There is an old story from Delhi that begins with cobras.
And like many good stories about governments, it ends with considerably more cobras.
During British rule in India, so the story goes, the authorities in Delhi became concerned about the number of venomous cobras roaming the city. The problem seemed straightforward enough.
Too many cobras.
The solution therefore seemed equally straightforward.
Pay people to kill them.
The government supposedly announced a bounty: bring in a dead cobra and receive a financial reward.
At first, the policy appeared brilliant.
Dead snakes began arriving. People had an obvious reason to hunt cobras, the government could count the bodies, and somewhere in a colonial office an administrator could presumably point to a rising graph and declare the programme a success.
There was only one problem.
Humans are remarkably creative when money is involved.
Welcome to the Cobra Business
According to the famous version of the story, some residents of Delhi soon realised that hunting wild cobras was unnecessarily difficult.
Why search for cobras when you could simply produce them yourself?
People supposedly began breeding cobras specifically to collect the government bounty.
A policy designed to destroy the cobra population had accidentally created an industry devoted to producing cobras.
The snake was no longer a pest.
It was an asset.
The British authorities eventually realised what was happening and cancelled the bounty.
Which created another problem.
The cobra breeders were suddenly sitting on animals that had gone from being valuable to being completely worthless.
So, according to the story, they released them.
Delhi ended up with more cobras than it had before the government tried to eliminate them.
The solution had become part of the problem.
And from this wonderfully absurd tale comes what economists and policymakers now call the Cobra Effect.
The Cobra Effect
The Cobra Effect describes a situation in which an attempt to solve a problem creates incentives that unintentionally make the original problem worse.
It is easy to laugh at colonial administrators paying people to breed the very snakes they wanted to eliminate.
But we create metaphorical cobra farms all the time.
Imagine a company telling its customer-service department:
“Your performance will be measured by how quickly you close complaints.”
Soon complaints will be closed extraordinarily quickly.
That does not necessarily mean customers are happier.
It may simply mean complaints are being marked resolved before they are actually resolved.
Or imagine rewarding hospitals for having fewer recorded complications.
You might get safer hospitals.
Or you might get fewer recorded complications.
Those are not necessarily the same thing.
Tell a school that funding depends entirely on exam results and suddenly education begins revolving around the exam.
Reward police departments according to the number of arrests and you may discover an extraordinary new enthusiasm for making arrests.
Reward social-media platforms for engagement and do not be surprised when they discover that outrage, fear and anger are excellent ways of keeping us staring at our screens.
The pattern is remarkably consistent.
People respond to the system you create, not necessarily to the outcome you hoped the system would create.
The Metric Is Not the Mission
This is where the Cobra Effect becomes more than an amusing story about snakes.
Modern governments, corporations and international organisations love measurable targets.
Numbers feel objective.
How many jobs were created?
How many patients were treated?
How many kilometres of road were built?
How many crimes were recorded?
How many refugees were returned?
How many trees were planted?
How many people clicked?
How many reports were completed?
Put the numbers into a spreadsheet, add some green arrows and suddenly the world looks manageable.
But reality has an inconvenient habit of refusing to fit neatly into Excel.
Once people know which number determines their reward, reputation, promotion or funding, they begin adapting their behaviour around that number.
Sometimes consciously.
Sometimes unconsciously.
The measurement stops observing reality and starts changing it.
The cobra begins breeding.
A Lesson for Governments
The Cobra Effect should be required reading for anyone designing public policy.
Governments frequently ask:
“How do we encourage people to do X?”
Perhaps the more important question is:
“What behaviour will this incentive actually create?”
Those questions sound similar.
They are not.
Consider environmental policy.
A government might subsidise the destruction of an invasive species. Logical.
But what happens if maintaining a supply of that invasive species becomes profitable?
Or consider development aid.
A programme might financially reward an institution for identifying more people suffering from a particular problem.
The institution now has an incentive not merely to solve the problem, but also to keep finding — or defining — more of it.
Even perfectly well-intentioned policies can produce strange results when human beings discover the loopholes hidden inside them.
The world rarely behaves exactly as policymakers expect.
But Did the Delhi Cobra Story Actually Happen?
There is another twist.
The famous Delhi story may itself be something of a legend.
It is repeated constantly in economics, management and policy discussions, but the dramatic version involving organised cobra breeding and the subsequent release of snakes is difficult to verify historically.
More recent investigations have questioned whether the events happened in Delhi exactly as the modern story describes them. Contemporary evidence for large-scale cobra-breeding operations appears thin, and versions of the story seem to have become more detailed with each retelling.
That doesn’t destroy the idea of the Cobra Effect.
If anything, it makes the story even more Quixotic.
A possibly exaggerated story about unintended consequences became one of the world’s most famous warnings about unintended consequences.
And the underlying phenomenon is unquestionably real.
History provides plenty of better-documented examples of governments accidentally encouraging exactly the behaviour they hoped to eliminate.
Human beings are extraordinarily good at finding loopholes.
Before Killing the Cobra
The lesson is not that incentives are useless.
Incentives are incredibly powerful.
That is precisely the problem.
Change the incentive and you change behaviour.
But behaviour is complex, adaptive and sometimes wonderfully unpredictable.
Whenever a government introduces a subsidy, a company establishes a performance target or an international organisation creates a new metric, someone should ask:
If people reorganise their behaviour entirely around this rule, what happens next?
Not tomorrow.
Not when the policy is announced.
But two or three steps further down the road.
What happens when people learn the system?
What happens when someone discovers how to profit from it?
What happens when the measurement becomes more important than the thing being measured?
And most importantly:
Are we solving the problem — or simply creating a profitable reason to keep the problem alive?
Because somewhere between a well-intentioned policy and its consequences, there is often a cobra waiting.
And occasionally, we are paying someone to breed it.
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