Beware of The Cobra Effect

Hola Hello you wonderful bunch of hivers and hiveans

I have been busy as a bee the last couple of days, only surfacing to watch the football early this afternoon and what a blooming disappointment that was, as we conceded a goal deep into injury time so only managed a draw.

Not a happy chappy is me, however, the research I have been doing has been worthwhile.

Whilst doing research for both my book and an article about the future of cryptocurrencies in 2022 I did stumble across a little story that is actually a recognised effect, and most probably you know an example of it.

Original Image by Michael Kleinsasser from Pixabay

The Cobra Effect
In India during colonial rule and in particular Delhi, the head British honcho realised that the city was being overrun with cobras. They had a cobra infestation problem. His solution was very simple. Can you guess what his solution was?

Yes, his solution was to offer money to the public for every cobra skin that was handed into the authorities. There would be a bounty paid for every cobra skin.

What a simple solution you might think. Offering the bounty was initially very successful and the number of cobras started to drop in the city.

However, some members of the public saw a golden opportunity to cash in. They were annoyed that this easy money was drying up. Can you guess what their answer to this was?

They started to breed cobras, and they actually set up cobra farms. They were getting rich as they were breeding more and more cobras, killing them, handing the skins to the authorities and getting paid for it.

Finally the British realised what was happening, so they stopped the bounty payments.

What was the effect of the British stopping the payments for cobra skins?

The Indians who were breeding the cobras, now had no reason to breed them, so they just released them. This now meant that there were even more cobras in Delhi than before the bounty program was implemented.

The term "The Cobra Effect" was coined by German economist Horst Siebert in his book of the same name in 2001. It is also known as perverse incentives.

Basically, the cobra effect is an unintended consequence when the proposed solution actually makes the problem worse.

Have you heard of the Cobra Effect? Can you think of any examples?

Here is one more example. It is also based on a pest infestation, but this time it was in Vietnam whilst it was being occupied by the French. It was not a cobra infestation but was a plague of rats in Hanoi. The French authorities offered a bounty for each rat tail that they were brought. Just like the cobra breeders, these guys thought they could make some quick and easy money and started to breed rats. It was quick and easy and they got their money for these rat tails. The French got wind of this, and stopped the bounty. The effect was that all these rats that were being bred were released into the city, and of course there were many more than before.

Last one from me and if you know any examples, do drop them in the comments and I might give you a wee surprise!

Airbus the maker of planes, thought they could improve the passengers flying experience by reducing noise in its cabins.

However when they removed the noise, they discovered that the cabin noise was covering up lots of unwanted noises such as toilets being flushed and babies crying. Instead of improving the passengers flying experience they had made it worse.

The Best Way to Avoid the Cobra Effect
Before you put a reward scheme in place, try and figure out a way to beat the scheme, then go back and adjust the rewards scheme until you can't beat it!

Thanks for reading and have a wonderful rest of your weekend!

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