96. The Cobra Effect

When you want to get rid of a nasty pest, one obvious solution comes to mind: just offer a cash reward. But be careful -- because nothing backfires quite like a bounty.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:01Stephen J. Dubner?

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• 0:44Stephen J. Dubner?

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• 1:56Stephen J. Dubner?

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• 2:34Speaker 01

  So I'm Vikas Meherotra. I teach finance at the University of Alberta in Canada.

• 2:41Stephen J. Dubner?

  So where are you? Where am I speaking to you?

• 2:44Speaker 01

  I'm in Bogota, Colombia.

• 2:45Stephen J. Dubner?

  You're in Bogota. What are you doing there?

• 2:47Speaker 01

  I was here for CFO Summit. I was doing some talks on corporate governance.

• 2:52Stephen J. Dubner?

  How's the traffic there, I'm wondering?

• 2:54Speaker 01

  Right now, from the window of my room, it looks beautiful. It's flowing, but then I'm in a residential area. When you get to the city's main arteries, it moves with all the elegance of snails.

• 3:07Stephen J. Dubner?

  Fast snails or slow snails?

• 3:11Speaker 01

  Slow snails.

• 3:15Stephen J. Dubner?

  When I talked to Meherotra, he was staying at a hotel in Bogota, a few miles away from the university campus where he was giving his talks. And every day, he'd get a ride to the campus from friends of his, a couple of professors who teach at the university. One thing struck Meherotra as very strange. His friends never picked him up in the same car two days in a row.

• 3:39Speaker 01

  So we are at the Bogota Sheraton parking lot.

• 3:42Stephen J. Dubner?

  We sent reporter John Otis out one morning to take a ride with Meherotra and his friends.

• 3:48Speaker 01

  So what kind of car is this? Chevy Optra. I can read it here. The license plate is RMM660. And it's the last digit, the zero, that's important.

• 4:00Stephen J. Dubner?

  Now, Bogota has legendarily bad traffic and the pollution that goes along with it. City officials have tried all kinds of solutions, including license plate rationing.

• 4:11Speaker 02

  Welcome on board.

• 4:14Stephen J. Dubner?

  That's Alexander Guzman, one of Marotra's friends and chauffeurs. Guzman pulls out a newspaper and reads the prevailing driving rules.

• 4:23Speaker 02

  You are not allowed to drive a car if your license plate ends in 1, 2, 3, 4 on Friday. On Monday, if your license plate ends in 5, 6, 7, 8, it's the same. You are not allowed to go out.

• 4:42Stephen J. Dubner?

  Bogota was not alone in trying this, trying to cut down on traffic by allowing certain cars on the road on certain days. Mexico City has done it, Athens, Beijing, when it hosted the 2008 Olympics. But what do you do if you need to drive every day, or at least want to drive every day? Guzman came up with a workaround.

• 5:03Speaker 02

  We decided to buy two cars.

• 5:06Stephen J. Dubner?

  Do lots of people that you know buy two cars because of this license plate system?

• 5:13Speaker 02

  Yes, yes. For example, Awardeen was telling us that they have four cars in their home because his wife work in another company and they live outside the city, so they need four cars.

• 5:32Stephen J. Dubner?

  That sounds crazy.

• 5:33Speaker 02

  Yes, yes, but it's the solution that everyone is implementing to avoid the restriction.

• 5:42Stephen J. Dubner?

  You might think, as I first thought, that it'd be easier to just make or buy fake license plates. And indeed, we're told that such a black market has existed in Bogota. But that's illegal, and the penalties are apparently stiff enough to discourage fake plates. So what do you do? You do the perfectly legal thing and buy a second car. Now, that's not what Bogota had in mind when it introduced the license plate scheme. And we don't have enough data to know what effect it's had, but there is good data from the license plate rationing plan in Mexico City. Turns out that a lot of people there also bought a second car to beat the system, and a lot of those cars were older models, less energy efficient.

• 6:27Stephen J. Dubner?

  So, the net result? After the license plate regulation went into effect in Mexico City, the regulation that was designed to cut congestion, total driving went up.

• 6:52Speaker 03

  From WNYC and APM, American Public Media, this is Freakonomics Radio, the podcast that explores the hidden side of everything. Here's your host, Stephen Dubner.

• 7:16Stephen J. Dubner?

  Do you believe in economics? If you do, even a little bit, then you also believe in incentives, that people respond to incentives, whether they're financial incentives or something else. And that's why all of us, individuals, families, firms, governments, when we have a problem we want to solve, we come up with some kind of incentive scheme. But do you also believe in poetry? It was the Scottish poet Robert Burns who wrote about "the best-laid plans of mice and men," and how they often go awry. How awry do they go? Not just a little bit awry. The best-laid incentive plans sometimes not only don't work, they backfire completely.

• 7:59Stephen J. Dubner?

  Here, again, is Vikas Marotra.

• 8:03Speaker 01

  This is what in economics we call the Cobra Effect, where you have a well-intended scheme, but instead of solving the problem, it makes the problem actually worse.

• 8:14Stephen J. Dubner?

  This term, the Cobra Effect, it goes back a while.

• 8:18Speaker 01

  So, the Cobra Effect refers to a scheme in colonial India where the British governor or whoever the person in charge in Delhi wanted to rid Delhi of cobras. Apparently, in his opinion, there were too many cobras in Delhi. So, he had the bounty placed on cobras, and he expected this would solve the problem. But the population in Delhi, at least some of it, responded.

• 8:47Speaker 01

  By farming cobras.

• 8:50Speaker 01

  And all of a sudden, the administration was getting too many cobra skins. And they decided the scheme wasn't as smart as initially it appeared. And they rescinded the scheme. But by then, the cobra farmers had this little population of cobras to deal with. And what do you do if there's no market? You just release them.

• 9:13Speaker 04

  Ah.

• 9:14Speaker 01

  And so this significantly, by a few orders of magnitude, worsened the cobra menace in Delhi.

• 9:24Speaker 04

  I'm pushing for the rat effect, in lieu of the cobra effect.

• 9:29Stephen J. Dubner?

  That's Michael Van. He is a history professor at Sacramento State University. And this here is Catherine Wells. Say hi Catherine.

• 9:37Speaker 05

  Hi.

• 9:37Stephen J. Dubner?

  She's a producer on our show. And we sent you out to look for other instances of the cobra effect, did we not?

• 9:45Speaker 05

  Yes. And this led me to Michael Van. So Van did his graduate research on colonial Vietnam. And that meant he spent a lot of time in the French National Archives, looking at old urban planning documents for Hanoi. Boring stuff.

• 9:59Stephen J. Dubner?

  Mm hmm.

• 10:00Speaker 05

  But one day, he got to this file on sewers.

• 10:02Stephen J. Dubner?

  Not boring.

• 10:03Speaker 05

  No, not boring. And he came across this.

• 10:07Speaker 04

  There was a list of rats killed in a day. And it was the most interesting thing I'd seen in a couple of months.

• 10:14Speaker 05

  But let me back up a little bit, to a time before that list.

• 10:17Stephen J. Dubner?

  Okay.

• 10:18Speaker 05

  Around the turn of the century, the French were rebuilding Hanoi. And, you know, the French are French, so they didn't want it to be just any city. It was going to be a model city. We're talking evidence of French civilization. The most beautiful city in Asia.

• 10:34Speaker 04

  And one of the key elements of French urbanism, in addition to the beautiful buildings and the wide streets, were sewers. Unfortunately, there was one unintended consequence. And that's that the sewers provided a wonderful home for rats.

• 10:51Speaker 04

  So after the sewer system was laid, there started to be reports of rats coming up through the flush toilets into the stately villas of the French neighborhood, thus undermining the French sense of superiority and the prestige they enjoyed in living in the nicest, most advanced part of the city.

• 11:09Speaker 05

  It was the rat highway.

• 11:11Speaker 04

  It's the rat superhighway, yeah.

• 11:14Speaker 04

  And the situation became all the more serious during moments of bubonic plague outbreak. And here you have the bubonic plague, which the French viewed as a Vietnamese problem, making its way into the French neighborhoods. Because the rats are overpopulating the sewers in the French neighborhood, coming into the homes of the French families. And you start to have European cases of bubonic plague and some of the outbreaks in early 20th century after the opening of the sewers.

• 11:45Speaker 05

  So the French get very freaked out by this. And they decide they need to act fast. They hire a bunch of Vietnamese exterminators to go down into the sewers and kill the rats, which is where we come back to that list that Van found in the archives.

• 12:03Speaker 04

  So this is compiled in the spring and summer of 1902. And it's a list of the total rat kills. In the first week, they're pulling up hundreds of rats. A month into the project, they're pulling up in one day on May 19th, 7,442. The high point, I believe, according to these records, was in June. June 12th, 1902, they killed 20,114 rats.

• 12:31Speaker 05

  20,000 rats killed in a day.

• 12:33Speaker 04

  In a day. And this is, you know, I'm looking at the spreadsheet here. And I'm looking at numbers, 7,000, 6,000, 8,000, 7,000, 10,000, 11,000, 15,000, 9,000. So there seems to be an endless supply of rats. They're not making a dent on it.

• 12:52Speaker 05

  Clearly, the French are going to need more than a few exterminators to solve the problem. And someone has an idea.

• 12:59Speaker 04

  They decide that they're going to turn to civic responsibility of the Vietnamese residents of Hanoi. So they set out a bounty.

• 13:07Speaker 05

  To collect the cash bounty, people had to bring in the rats' tails as proof of their kills.

• 13:13Speaker 04

  Thousands of rat tails are being delivered to the city hall. The French think they're really making a dent into the rat population. Then, a few months later, one of the health officials is out in the suburbs of Hanoi, just outside the city limits. And it's just outside the city limits where a lot of shady business would go on. You'd have smugglers out there, you'd have houses of ill repute and so forth. And he was checking out one of these villages on the edge of Hanoi and discovered a rat farm. And the Vietnamese were growing rats, cutting off their tails and bringing them into the city, to the city hall, to collect the bounty. You know, this is absolutely a disaster in terms of trying to remove rats. But it does show that the Vietnamese are really catching on with the entrepreneurial spirit

• 13:58Speaker 04

  that the French wanted to instill in them.

• 14:03Stephen J. Dubner?

  As we've said before on this program, and will surely say again, one of the most powerful laws of nature is the law of unintended consequences.

• 14:23Stephen J. Dubner?

  Coming up on Freakonomics Radio, do you have what it takes to be a rat farmer?

• 14:29Speaker 06

  I don't think I would have been smart enough to actually get the idea to start breeding rats and cobras, but I sure hope I would have been smart enough that when I saw my neighbor doing it, I would have been a quick follower and I would have been buying a few rats off him cheap.

• 14:59Speaker 03

  From WNYC and APM, American Public Media, this is Freakonomics Radio. Here's your host, Stephen Dubner.

• 15:08Stephen J. Dubner?

  Today, we're talking about the Cobra Effect, which is what happened in the old days. Freakonomics Radio, sponsored by Granola. You know that moment when a meeting ends and someone says, let's circle back on this next week, and everyone nods, but no one writes it down? Then next week rolls around and it's radio silence? That's why Granola exists. Granola is an AI-powered notepad built for the way real people actually meet. You take rough notes like you normally would, and in the background, Granola securely transcribes the meeting. Then it turns everything into clean, structured, actually useful notes when the meeting ends. And the best part? Granola works through your device's audio, which means it integrates seamlessly into the video conferencing tools you already use. No setup, no awkward bots. It's just your normal meeting with superpowers.

• 15:53Stephen J. Dubner?

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• 16:15Stephen J. Dubner?

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• 16:59Stephen J. Dubner?

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• 17:20Stephen J. Dubner?

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• 17:51Stephen J. Dubner?

  It's when a government wanted to say, get rid of some pests, snakes or rats, and they'd set up a bounty to get its citizenry to pitch in. But sometimes, the bounty would backfire. Now, surely, that kind of thing doesn't happen anymore, does it?

• 18:11Speaker 05

  Okay. It is Monday morning. I'm sitting in the car. I am about to drive out to Fort Benning.

• 18:22Stephen J. Dubner?

  That's producer Catherine Wells again. This time, she's in Fort Benning, Georgia.

• 18:29Speaker 05

  Fort Benning is an army base, which is technically called a military post, in southwestern Georgia. And once you're inside, past the checkpoint, Fort Benning looks a lot like any other town. There are residential neighborhoods, schools, restaurants, gas stations. It's huge. It's over twice the land area of Atlanta with about 120,000 residents. There are lush green woods, ponds, and creeks cutting through bright red soil. It's really beautiful. So beautiful, in fact, that you might forget you were on a military installation.

• 19:05Speaker 05

  If not for the occasional sound of artillery fire in the distance.

• 19:08Speaker 07

  They're over there training.

• 19:10Speaker 05

  That's Bill Brickner. He's a retired master sergeant and a Vietnam vet who knows the post inside and out. He's legendary around here. In fact, his business card says so.

• 19:21Speaker 07

  Bill Hogdaddy Brickner, local hunting legend. That's a big title, isn't it? That don't even sound like me, girl. But most people, they say, when you want to know something about Fort Benning, you got to ask Bill Brickner.

• 19:36Speaker 05

  I did want to know something about Fort Benning, something that Brickner has a little expertise in. I wanted to know about the pigs.

• 19:49Speaker 05

  If you live anywhere in the southeastern US, you probably already know about the pigs. There are millions of wild pigs living in forests and mountains and marshes all over the country. They've been in the US for centuries, ever since they were brought over by Spanish explorers, but their numbers have exploded in the last few decades. And like most invasive species, they cause some problems.

• 20:11Speaker 07

  They're a nuisance, and they need to be controlled. It's amazing what a pig will eat.

• 20:18Speaker 05

  Pigs dig up the land, looking for food, and even just a handful of pigs can do a massive amount of damage. And on Fort Benning, there aren't just lawns and native plants to tear up, but expensive military training equipment, too. So when he can, Bill Brickner loads his gun into the back of his truck, and he goes out for a little recreational pest control.

• 20:40Speaker 07

  See, we joke about it, we say, "When you're not shooting a pig, those pigs out there, they're making bacon."

• 20:49Speaker 05

  Recreational hunting by retirees like Brickner isn't enough to control the population. There are still thousands of pigs on the post, causing problems. And back in the summer of 2007, this situation was getting out of control.

• 21:02Speaker 07

  They had to do something. Pigs were getting into everything. And they used to say, "Man, what are we gonna do about the pig situation?"

• 21:10Speaker 05

  It was time for a bounty. The bounty had a name. They called it the Pig Eradication Program. Fort Benning loosened up a few restrictions about where and when you could hunt, and they essentially said, "Have at 'em." You could even leave the pig right where it was killed. As for proof of the kill, all you had to do was bring in the tail.

• 21:35Speaker 07

  They would give $40 a tail. You know, it paid for your gas, paid for your ammunition. It gave you an incentive to go out and stay all day long.

• 21:46Speaker 05

  Now, at the time, Fort Benning was also confronting the pig problem in a different way. They had hired some researchers from nearby Auburn University to do a study and to figure out if there were any new, better ways to remove pigs from the post.

• 22:00Speaker 08

  I have a fondness for pigs, which is kind of odd considering how many pigs I've had to kill.

• 22:10Speaker 05

  This is Rob Holtfredter. He was working on his PhD in wildlife sciences at Auburn, and he headed up the pig research. He would track pigs on the post with GPS, trap them, kill them, and then he'd bring them back to the university for dissection. When the bounty went into place in 2007, Fort Benning asked Holtfredter to monitor its effect, to figure out if it was working. And when it began, he estimated that there were maybe around 1,000 pigs on the post. A year and a half into the program, hunters had already killed over 1,000 pigs, which you'd think would mean the pig population was pretty much under control. But when Holtfredter sat down with his tracking and trapping data, that's not what he found. What he found was this.

• 22:54Speaker 08

  The population was growing. It's like, holy cow. We just saw that population double like that. And then we're kind of, we're kind of out there trying to explain to these people how they supposedly killed the number of pigs that they did, but density is increasing. And it's like, we killed 1,500 pigs, but you're saying the density went up? How's that possible? And we're like, good question. How is that possible?

• 23:24Speaker 05

  Now, along with each tale, hunters were supposed to turn in an information sheet with details about how, when, and, most importantly, where they killed each pig. Rob Holtfredter started looking at the data from the sheets.

• 23:39Speaker 08

  Everything I know about pigs tells me that you couldn't have killed that many pigs in that small of an area in that amount of time. And there were some of those locations where you're like, that's the top of John Wayne Hill. It's sand. You know, they run tanks through there. Nobody killed 30 pigs in that spot. So yeah, there was a lot of that. Like, we have specific knowledge of this location. And not only that, I mean, we have specific knowledge of the pigs in that location. And this just doesn't sync up that so-and-so says in the last two weeks they've killed 30 pigs there. And not only that, but I don't think anybody could be that successful.

• 24:18Speaker 05

  But if the tails weren't coming from Fort Benning, where were they coming from?

• 24:23Speaker 09

  That's our guard dog, a ferocious guard dog.

• 24:25Speaker 05

  Oh yeah, I'm scared. Brothers Johnny and Jason Daffin run a family business called Daffin's Meat Processing, not too far from Fort Benning.

• 24:35Speaker 09

  We do custom slaughter, so we do cows and hogs and sheep, goats, anybody you don't like, and you get a little more for that, though.

• 24:43Speaker 05

  Jason Daffin was in the middle of skinning a wild sow when I stopped by.

• 24:48Speaker 09

  A little wild, probably about an 80-pound little female pig, just the right eating size.

• 24:54Speaker 05

  So where'd this one come from?

• 24:55Speaker 09

  Fort Benning. They get a lot of them at Fort Benning. They're kind of a nuisance. They're like an armadillo on steroids. They can really tear up the land quick.

• 25:05Speaker 05

  So, one thing I wanted to ask you is, I've been talking to people about the bounty and you turned in the tail and everything, and I was wondering, did anybody ever just call you and want to get your tails?

• 25:16Speaker 09

  Yeah, but that's not, you know, right's right and wrong's wrong, and that's just not the way we operate. But that wasn't, there wasn't many people like that at all. It was a good program, and it was just, just wanted every now and again, call up. They didn't want their tail saved, many tails, or, you know, people wanting to go and get them off of domestic hogs and all that, so they kind of, and even some people would kill a pregnant sow and want to get the tails off the little babies that weren't even born yet. So you have all kinds of people out there, you know, trying to take advantage of the system.

• 25:57Speaker 05

  Do you have a tail? Can I see one? Do you have any lying around?

• 26:01Speaker 09

  Hmm, let's see.

• 26:04Speaker 09

  Unusual request?

• 26:06Speaker 05

  Daffin opened a big bucket, and there were a bunch of pig parts inside.

• 26:11Speaker 09

  Look at that.

• 26:12Speaker 05

  There it is.

• 26:14Speaker 09

  There's your old hog tail, in all its glory. It's not exactly curly cue like what you see on the cartoon, it's just kind of straight hairy pigtail.

• 26:30Speaker 05

  I wanted to know if other people had gotten these same kinds of calls. So I stopped by another business that does meat processing. It's called Buckhead Taxidermy. The owner is James Kirtin.

• 26:40Speaker 10

  Oh, I'm sure everybody did. Whether they tell they did or not, I don't know, but I'm sure they did.

• 26:46Speaker 05

  I mean, I wouldn't be surprised with all the tail fever if you could start a tail business.

• 26:52Speaker 10

  Well, a friend of mine had a pig farm, and he said they was wanting to buy the tails off his pigs. You know, he can sell these little pigs cheap, and they'll buy these pigs just to get the tails off of them.

• 27:06Speaker 05

  Really?

• 27:07Speaker 10

  Yeah, you can buy a little baby pig for $5 or $10, and you know, if they're giving $45 for a pigtail, gosh, look at the money that would be.

• 27:15Speaker 05

  So to collect the cash, hunters needed to bring in their tails to the Fort Benning Conservation Office, which deals with all sorts of wildlife issues. Biologist Mark Thornton and technician Gregory Brooks work on staff in the office. They spend a lot of time trapping and removing pigs from the base, so they're really the local experts on the pigs. Now, they weren't so crazy about the idea of a bounty to begin with. They really didn't think it would work. So I figured if suspicious tails had come in, they might have known about it. So here's what I want to ask about. If you get $40 per pigtail, it makes total sense that people might start trying to get pigtails somewhere else. Did that happen?

• 27:58Speaker 05

  Can you tell me that, or no?

• 28:01Speaker 10

  I don't want to tell you that.

• 28:04Speaker 05

  You can say no comment.

• 28:06Speaker 10

  No comment.

• 28:07Speaker 05

  No comment from you, Mark?

• 28:10Speaker 11

  I don't have any record of it happening. Now, whether it happened or not, we don't know.

• 28:15Speaker 05

  Were you worried about it? Was it kind of like...

• 28:19Speaker 11

  Well, obviously, everybody thinks about that, you know? Because, I mean, you came in here with 10 tails, that's $400. That's enough incentive to make some people start thinking about it.

• 28:28Speaker 10

  There's definitely the possibility that at some point, somebody broke the rules. And that's expected when you're talking about bounty programs.

• 28:37Speaker 05

  So pretty much every time there's a bounty, there's some of that involved?

• 28:41Speaker 10

  I'm quite sure of it. Sometimes you get a reverse effect of what you're trying to do, you know? Overall, it upside downs the whole idea you're trying to accomplish.

• 28:57Speaker 05

  Almost everyone I talked to at Fort Benning had heard these rumors about people buying tails from domestic pig farms. But no one really thought the cheating was that widespread either. And even if lots of the tails had been coming from somewhere else, there was still that nagging question, why was the pig population going up?

• 29:22Speaker 05

  One factor was that southwestern Georgia was just beginning to recover from a drought. So there was a lot more food for pigs out in the woods. But the bounty was making things worse. Because in order to help the hunters draw the pigs out of the woods, Fort Benning started giving out free bait. Here's Rob Holtfredter again from Auburn University.

• 29:41Speaker 08

  They could back up to any cafeteria and fill up like a 40-gallon bucket full of waste left over from the meals. And it's like, you'd see like butter packets and steaks and dinner rolls and just like high-calorie stuff that you shouldn't feed an invasive species. And then they'd go out and dump it in these long lines, you know? And we'd see them. And, you know, you might have 15 or 20 pigs in an area. You might pull up and kill three or four from the road. And meanwhile, the other 15 are fat and happy. And they're also figuring out what the crunch of a tire on gravel sounds like. They're figuring out what's going on. It's like, well, we've got a free meal, but we've got to, you know, watch out for these warning signs.

• 30:26Speaker 08

  And they educated pigs. And they fed them. And they fed them really well.

• 30:31Speaker 05

  And what happens when you feed pigs really well?

• 30:34Speaker 08

  They make more pigs.

• 30:38Speaker 05

  I wanted to see these pigs in the flesh. So I asked Bill Brickner, the local hunting legend, to take me on a drive around the post.

• 30:45Speaker 07

  Now, right here, we're pulling into this cornfield. And pigs have just annihilated this cornfield.

• 30:52Speaker 05

  Brickner showed me how and where to look for them. He showed me what their tracks look like, how they rub red clay against the trees to scratch themselves. He showed me indentations in the mud where they've laid down to wallow. But we drove around for three hours, and we didn't see a single pig. And I started to think, hey, maybe they finally have this thing under control. But at dusk, as soon as it started to cool off...

• 31:21Speaker 05

  Whoa. How many are there?

• 31:23Speaker 07

  There's three, four, five, six, seven, eight.

• 31:26Speaker 05

  Look, there are more. Oh, my gosh.

• 31:28Speaker 07

  Okay, so there's 11, 12, 13, 14, 15.

• 31:36Speaker 05

  After three years and about $125,000 in payments, the bounty ended. Thousands of pigs had been reported killed. Now, there's no way to know exactly how many of the tails weren't from Fort Benning, but what's clear is that the end of the drought, plus the tons and tons of extra bait, helped the pig population to grow. All the hunters had really been doing was playing a giant, unwinnable game of whack-a-mole. That's amazing. There are just tons of them.

• 32:06Speaker 07

  There's 6, 800 pounds right there of meat.

• 32:11Speaker 05

  So, Bill, if you had been hunting, how would that have been different, what we just did?

• 32:17Speaker 07

  Oh, right there, I would have shot that pig right there.

• 32:24Stephen J. Dubner?

  That was Catherine Wells, reporting from Fort Benning, Georgia.

• 32:36Stephen J. Dubner?

  So while the evidence from the Georgia pig bounty is a bit murky, the pattern here is pretty clear. An incentive, like a bounty, doesn't always have the intended effect. Now, I realize that most of the stories we've told you today have concerned animals: feral pigs and sewer rats, overbred cobras. But I can assure you that the backfiring bounty problem is not confined to icky animals. Consider an incentive scheme that the United Nations came up with a few years ago to cut down on greenhouse gases. It rewarded companies with carbon credits for disposing of polluting gases, and those credits could be converted into cold, hard cash.

• 33:17Stephen J. Dubner?

  Now, the prices were set according to how bad these things were for the environment. And one of the highest prices, and the highest bounties, really, was for destroying a nasty gas called HFC-23, which is a byproduct of a common coolant. So what happened? Yep. Companies began to produce more and more of this coolant in order to destroy more and more of the byproduct waste gas and collect millions of dollars in the process. The other problem was that the coolant itself was also really bad for the environment.

• 33:58Speaker 06

  Some of the best-intentioned government policies have backfired through incentives.

• 34:03Stephen J. Dubner?

  That's Steve Levitt, my Freakonomics friend and co-author. He's an economist at the University of Chicago.

• 34:09Speaker 06

  One example would be the Endangered Species Act, which, of course, by its very name, is designed to save endangered species. But the way it was written as a law, there's a review period. So before any particular species can be named as endangered, they first is maybe, I forget the exact amount of time, a year or two years, in which people are able to argue back and forth about whether it should be the case.

• 34:35Stephen J. Dubner?

  So while these human beings are arguing back and forth about whether a particular habitat should be protected in order to save a particular species, some other human beings are quickly firing up their chainsaws.

• 34:49Speaker 06

  What do you do if you're a developer in the meantime? Well, you build the buildings as fast as possible. If you think that there's a chance that the red-bellied woodpecker is going to be protected by the Endangered Species Act, you have every incentive in the world to get the hotel up before anyone decides that that species is really endangered. So actually, there's empirical work by my friend John List, who's shown that indeed, the Endangered Species Act often has the effect of endangering the various species it's supposed to protect.

• 35:19Stephen J. Dubner?

  So as an economist, you preach that people respond to incentives?

• 35:24Speaker 06

  I do believe hardly in incentives. And I think any problem you're faced with, the typical economist, including myself, starts by asking, what are the incentives of the people involved? And how can we get them to respond?

• 35:38Stephen J. Dubner?

  But when we hear these stories of incentives that are created, and these are incentive programs that don't work out, what's a well-intentioned public servant or even private citizen to do? You think you're doing the right thing? You think you're coming up with the right idea? You're well-intentioned, and you offer your incentive scheme, and then the public, the world, responds to it, maybe in a way that you had never anticipated. So how are you supposed to unleash these things in the world?

• 36:07Speaker 06

  Well, I think you start by admitting to yourself that no individual, no government is ever going to be as smart as the people who are scheming against you. So when you introduce an incentive scheme, you have to just admit to yourself that no matter how clever you think you are, there's a pretty good chance that someone far more clever than yourself will figure a way to beat the incentive scheme. So one response is to say, well, before I put it in place, let me at least try to think through all of the crazy, different approaches that might be taken that could trick my incentive scheme. But even on top of that, I think you want to design incentive schemes that are relatively simple. The more complicated you make something,

• 36:51Speaker 06

  the more opportunities there are for people to game it. If it's simple, you usually think, if you're reasonably intelligent, you can think about a lot of the ways that people might respond to it and prevent the sort of unexpected, backfiring, overly zealous responses to what you're doing.

• 37:08Stephen J. Dubner?

  All right. Imagine yourself 100 years ago, let's say, living in Hanoi or India, and the government offers an incentive, a bounty, for a pest, a rodent, a rat, maybe a cobra. And let's say you're a person of humble means, you, Steve Levitt, living back then. Would you have been the kind of guy that would have figured out a way to take advantage of that bounty and raise and slaughter hundreds, thousands of rats, cobras, et cetera? Or are you not that kind of guy?

• 37:40Speaker 06

  So I don't think I would have been smart enough to actually get the idea to start breeding rats and cobras. But I sure hope I would have been smart enough that when I saw my neighbor doing it, I would have been a quick follower and I would have had, I would have been buying a few rats off him cheap, you know, one male and four or five females, and then making the most of it. So I would hope I would be that kind of person.

• 38:15Stephen J. Dubner?

  Coming up on the next Freakonomics Radio, we've told you before that most predictions are pretty much worthless. But what about when you're just predicting your own future? Like, whether you'll run away to Canada if the presidential candidate you hate gets elected? Are we any better at that kind of prediction? That's next week on Freakonomics Radio.

• 38:41Speaker 03

  Freakonomics Radio is produced by WNYC, APM, American Public Media, and Dubner Productions. This episode was produced by Catherine Wells. Our staff includes Susie Lechtenberg, David Herman, Borey Lamb, and Chris Bannon. Colin Campbell is our executive producer. Special thanks to David Maxson and Jake Smith. If you want more Freakonomics Radio, you can subscribe to our podcast on iTunes or go to Freakonomics.com, where you'll find lots of radio, a blog, the books, and more.

• 39:22Stephen J. Dubner?

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• 39:53Stephen J. Dubner?

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• 40:26Stephen J. Dubner?

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• 41:03Speaker 12

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