Cobra Effect
The story: British colonial Delhi had a cobra problem. The government offered a bounty for dead snakes. Locals started farming cobras for the bounty. When officials caught on and canceled the program, farmers released their now-worthless snakes into the city. More cobras than before.
The story may be apocryphal — a 2025 investigation found no contemporary records of cobra breeding in British India. But the pattern is real.
Hanoi, 1902. French colonial officials offered one centime for each rat tail. Residents caught rats, cut their tails, and released them to breed more rats. Officials found tail-less rats running through the sewers. The incentive created a rat-farming industry.
This one is documented.
The mechanism: incentives select for behaviors that satisfy the incentive, not behaviors that solve the underlying problem. People respond to what’s measured and rewarded, not to the policymaker’s intentions.
When the incentive and the goal diverge, people optimize for the incentive.
Modern examples:
Wells Fargo, 2016: Employees were incentivized by account openings. They opened 3.5 million fake accounts without customer consent. The incentive was satisfied. Customer trust was destroyed.
Nail houses in China: Developers compensated residents based on building footprint. Residents built thin, tall towers on their plots to maximize payout. The incentive was satisfied. Efficient construction was not.
Rat-tail bounties, modern version: Bug bounties that pay per vulnerability encourage researchers to find bugs but not to help fix them, or to time disclosures for maximum payout rather than maximum safety.
Every incentive creates a game. People will game it. The question: does winning the game produce the outcome you wanted?
Test incentives against: “If people did exactly what this rewards, and nothing else, would I be satisfied?”
If not, the cobra is already breeding.
Go Deeper
Books
- Freakonomics by Levitt & Dubner — Pop economics with chapters on perverse incentives, including teachers cheating on standardized tests.
- The Logic of Failure by Dietrich Dörner — How well-intentioned interventions create unexpected disasters through systems misunderstanding.
- Thinking in Systems by Donella Meadows — Understanding feedback loops and why interventions often backfire.
Essays
- “Assessing the Impact of Planned Social Change” by Donald T. Campbell (1976) — Introduced “Campbell’s Law”: the more a metric is used for decision-making, the more it corrupts the process it measures.
- “On the Folly of Rewarding A, While Hoping for B” by Steven Kerr (1975) — Classic management paper on incentive misalignment.
Related: [[goodharts-law]], [[systems]], [[game-theory]]