The Cobra Effect: A New Freakonomics Radio Podcast

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(Photo: Russ Bowling)

Our latest  Freakonomics Radio podcast is called “The Cobra Effect.” (Download/subscribe at iTunes, get the RSS feed, listen via the media player above, or read the transcript here.) The gist: 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.

This is a story-filled episode that looks at the unintended consequences of trying to control everything from traffic to rodent populations to dangerous gases. If you’ve been hanging around these parts for a while, you will have noticed a similar theme in our “Misadventures in Baby-Making” podcast or the section of the film Freakonomics wherein Steve Levitt tries to potty-train his daughter.

The episode begins with Vikas Mehrotra, a finance professor at the University of Alberta, who is visiting Bogota, Colombia, and notices a strange traffic pattern. (You may remember Mehrotra from our “Church of Scionology” episode.) If you want to do some further reading on the story Mehrotra tells, check out “Rationing Can Backfire: The ‘Day Without a Car’ in Mexico City” (abstract; PDF) and “The Effect of Driving Restrictions on Air Quality in Mexico City” (abstract; PDF).

Mehrotra also introduces us to “the Cobra Effect,” a term popularized by the late German economist Horst Siebert:

MEHROTRA: 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 by farming cobras. 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 And they decided the scheme wasn’t as smart as initially it appeared and they rescinded the scheme.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. And so this significantly, by a few orders of magnitude, worsened the cobra menace in Delhi.

In a similar vein, you’ll hear the historian Michael Vann talk about his research, captured in “Of Rats, Rice, and Race: The Great Hanoi Rat Massacre, an Episode in French Colonial History” (abstract; PDF).

We also sent producer Katherine Wells on a hunting trip of sorts, down to Fort Benning in Georgia, where a surplus of feral pigs led to the introduction of, yes, a cash bounty. This captured the curiosity of Robert Holtfreter, who was then a Ph.D. candidate in wildlife sciences at Auburn. Here is Holtfreter’s PowerPoint assessment of the bounty program.

Later in the episode, we point out how a bounty designed to fight greenhouse gases backfired and how the Endangered Species Act sometimes ends up further endangering the species it was meant to protect (here‘s a paper on the topic, by John A. List, Michael Margolis, and Daniel E. Osgood).

And you’ll hear Steve Levitt taking the long view on the use of bounties or similar incentives:

LEVITT: 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 out a way to beat the incentive scheme.

 

Robert Holtfreter, an academic researcher trying to figure out the pig glut. (Photo: Brian Williams)

A pig tail, proof of a kill, worth $40 in the Fort Benning pig-bounty program.  (Photo: Katherine Wells)


Sam

Is a "lie" similar to a cobra or other pest? If so, it does not bode well for TruthMarket.com, a website that puts a bounty on lies. Read more here: http://econosaurus.tumblr.com/post/33941675960/truth-and-the-cobra-effect

Thomas

This podcast reminded me of a recent article I read about recycling in California. Amazingly 104% of plastic is recycled! http://articles.latimes.com/2012/oct/07/local/la-me-can-fraud-20121007

Derek

http://www.centives.net/S/2012/exporting-water/

Arian Avalos

One thing that came to mind while listening to this podcast was online gaming. The issues presented by bounties are faced by video game companies (specifically those that run MMO worlds) every time they roll out new game content. Similarly here is a scenario where a world is provided with certain rule sets and restrictions which get challenged and tested on a daily basis by thousands to millions of players. It kind of puts to wonder how much capital and what strategies some of these companies put in place and how successful (or not) they end up being overall.

Devin

Possible solution to the Cobra Effect?: Use the bounty system to correct itself. You could have one bounty for the capture of cobras, and another much larger bounty on tips/reports that lead to the conviction of bounty system cheaters, and then promote them together. "$10 per cobra capture, $100 per cheater capture!"

Philo Pharynx

"Hey, Bob! why don't you start a Cobra farming business. You'd be a natural. You're way too smart to get caught."

Devin

Right, some people would definitely be thinking this. So if dumb Bob is encouraged to do this and somehow doesn't hear about the cheater bounty or thinks he can get away with it, when he brings in his first counterfeit cobras, he's again informed that cheating the system is illegal and that anyone who knows about his deeds will get a paid a large sum upon his capture. He could even be forced to sign something stating that he understands and agrees to these terms in order to receive his bounties.

And if somehow none of this gets through to the Bobs out there and a few still try to game the system, the first few times their mean friends get paid the big bucks for getting the Bobs caught, word will spread quick about the consequences and no other Bob would try it again. Cheating ultimately undermines further cheating.

My thought is that the larger and more sensational bounty on cheaters will stick in people's minds even better than the cobra bounty, with both bounties promoting each other in sort of a viral way. This system would work better and would even have more notoriety than a traditional bounty.

Read more...

Thieme Hennis

thanks for another great podcast. I asked a question on Quora on this topic, after hearing this podcast. Please, if you have nice examples of the cobra effect, check it out: http://www.quora.com/Behavioral-Economics/What-are-the-most-interesting-examples-of-the-Cobra-effect

Another Steve

Dubner and Levitt, Thanks for the clever examples of unintended consequences from bounties. Entertaining and thought-provoking as usual. But those shallow words from Levitt!: "I don't think I would have been smart enough to actually get the idea to start breeding rats and cobras [and selling their parts for bounty], 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." Translation: If you could only spot the opportunity, you hope you'd make your way in the world by scamming your government.

Is this really the behavior you would hope to see from yourself? Stop and think about what you have said: a livelihood that contributes NOTHING USEFUL to anyone. Purely for profit. Is there no concept of dignity to be found in the outlook of an economist?

Albert Varner

Levitt's comments were both shocking and disappointing. Is he really so eager to scam the government? Maybe Dubner should look for a new economist expert to do podcasts with.

Ajith U

Look at this story from Miami. Looking forward to see how this "initiative" will end up
http://www.miamiherald.com/2012/12/05/3128490_south-florida-contest-bag-some.html#storylink=addthis

Kayce

Looks like Florida has jumped on the bandwagon...

http://fox8.com/2012/12/06/florida-tackling-python-problem-with-hunting-contest/

John Pilge

The Python effect?
Florida has a snake hunt in January to both reduce the population of pythons and to study the captured critters. Story here:
http://news.yahoo.com/blogs/abc-blogs/python-challenge-offers-cash-prizes-florida-snake-hunters-204628413--abc-news-topstories.html

Let's hope they read the story of the Cobra effect.

Bob Gaynor

Another data point for you. Florida has announced a bounty for burmese pythons in the Everglades.

"Burmese pythons have been threatening Florida's ecosystem for years, so the state is turning to the public for help in the form of a hunting contest to cull the population. The Florida Fish and Wildlife Conservation Commission has announced the 2013 Python Challenge beginning in January.

'We are hoping to gauge from the python challenge the effectiveness of using an incentive-based model as a tool to address this problem,' says Florida Wildlife Commission spokeswoman Carli Segelson. A grand prize of $1,500 will be awarded to the person who kills the most pythons, and $1,000 will go to the person who bags the longest one. According to the rules, road kill will not be eligible."

http://www.cnn.com/2012/12/06/us/florida-python-hunt/index.html?iref=obinsite

C.L.

It seems we are embarking on the cobra effect in Florida with cash incentives being paid for killing pythons. Is this deja vu all over again?

http://www.bloomberg.com/news/2013-01-10/killing-pythons-for-cash-lures-hunters-to-florida-s-everglades.html

B

Cobra effect? http://www.popsci.com/science/article/2013-01/whoever-kills-most-burmese-pythons-florida-wins-cash-prize

It's even a snake!

B

Oops. Several people beat me to it. Should have read the comments before I posted.