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We should be cognizant of perverse incentives in Policy making

Posted: Saturday, February 4, 2023. 2:18 pm CST.

The views expressed in this article are those of the writer and not necessarily those of Breaking Belize News.

By Charles B Leslie: Perverse Incentives (Unintended Consequences) are a pervasive problem in many areas of society, and politics, journalism, education, banking, and the medical system are no exceptions.

These incentives are rewards that drive individuals and organizations to act in ways that go against the greater good, leading to negative outcomes and widespread harm.

In this article, we will examine the effects of perverse incentives in these five areas of society.

I also hope that we, as Belizeans, become cognizant of these detrimental incentives, because in Belize, too often, we call on our policymakers to make decisions that they may end up making due to public pressure and remaining politically relevant, however, we end up with unintended consequences.

Let’s dive in.

POLITICS:

Political incentives are often driven by a desire for power and control. This leads to politicians making decisions that benefit their own careers rather than the well-being of the people they serve.

For example, politicians may prioritize enacting laws that cater to their base over passing legislation that is truly in the public interest.

This can result in policies that are divisive, ineffective, and harmful to society.

JOURNALISM:

Incentives in journalism often focus on getting clicks, views, and profits, leading to sensationalist and misleading reporting.

This can undermine public trust in journalism, and lead to the spread of false information.

It can also lead to the suppression of important stories that don’t generate traffic or don’t align with the political or financial interests of the media outlet.

EDUCATION:

Education is meant to provide students with the skills and knowledge they need to succeed in life.

However, incentives in education can lead to a narrow curriculum that prioritizes test scores over critical thinking, creativity, and problem-solving skills.

This can result in students who are well-versed in rote memorization but lack the skills necessary to succeed in the real world.

BANKING:

Banks are incentivized to maximize profits, often at the expense of their customers.

This can lead to practices such as predatory lending, miss-selling of financial products, and the promotion of financial products that are not in the best interests of customers.

These practices can have devastating consequences, such as driving people into debt and damaging their financial health.

MEDICAL SYSTEM:

The primary goal of the medical system is to improve the health and well-being of patients, but incentives can lead to a focus on profits over patient care.

This can result in sky-high medical costs, limited access to essential treatments, and a lack of investment in research to find new and effective treatments for illnesses.

This can result in patients who are unable to access the care they need to get better.

SOME GREAT REAL-WORLD EXAMPLES:

In Hanoi, under French colonial rule, a program paying people a bounty for each rat pelt handed in was intended to exterminate rats. Instead, it led to the farming of rats.

19th-century paleontologists traveling to China used to pay peasants for each fragment of dinosaur bone (dinosaur fossils) that they produced. They later discovered that the peasants dug up the bones and then smashed them into many pieces, greatly reducing their scientific value, to maximize their payments.

Opponents of the Endangered Species Act in the US argue that it may encourage preemptive habitat destruction by landowners who fear losing the use of their land because of the presence of an endangered species, known as “shoot, shovel, and shut up.”

In the former Soviet Union, managers and employees of glass plants were at one time rewarded according to the tons of sheet glass produced. Not surprisingly, most plants produced sheet glass so thick that one could hardly see through it. The rules were changed so that the managers were rewarded according to the square meters of glass produced. The results were predictable. Under the new rules, Soviet firms produced glass so thin that it was easily broken.

Private companies were paid to transport convicts/prisoners from the U.K. to Australia during the late 1700s and the early 1800s. The first payment schedule was based on the number of prisoners who boarded ships in the U.K. As you might imagine, there was no incentive to deliver living prisoners to Australia, and many of them died during the trip, due to overcrowding, lack of food and water, unsanitary and unsafe conditions, untreated diseases, etc. The payment schedule later changed and was subsequently based on the number of living prisoners delivered to Australia. Result? Fewer prisoners died during transport.

In Belize the government decided to pay gang leaders and members as an incentive for them not to commit crimes. The gangs realized that this, also, was another way of making money and when they did not get what they demanded, they committed more crimes…a perfect example of Perverse Incentives (Unintended Consequences) in Belize.

In conclusion, Perverse Incentives (Unintended Consequences) are a major problem in many areas of society, and the effects can be far-reaching and devastating.

These incentives can lead to a focus on profits over people, a narrow focus on metrics that don’t truly reflect success, and the suppression of important stories and ideas.

To overcome these challenges, it is important to rethink our reward systems and create incentives that encourage positive behavior and outcomes, leading to a better and more sustainable world for all.

Sometimes, our leaders will make decisions that are not popular but will have intended positive outcomes.

Let us start becoming a nation, where we lead ourselves with a great balance of logic and emotion, and not just emotion.

 

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