Perverse Incentive

A perverse incentive rewards behavior that undermines the outcome the incentive was meant to support. The mechanism often arises when an easy-to-measure proxy differs from the actual goal. Counterproductive responses are possible rather than inevitable, and they need not involve dishonesty.

Start with three separate items: the desired result, the rewarded measure, and actions that improve the measure without improving the result. A perverse incentive exists when the reward structure encourages behavior contrary to its purpose. Someone adapting efficiently to a target is not necessarily cheating; the target itself may ask for the wrong thing.

Changing the metric can move rather than eliminate the problem. A balanced set of measures, review of individual cases, or weaker rewards may help, but each adds cost or judgment. Test plausible responses with the people doing the work. The familiar colonial cobra-bounty story should be treated as an anecdote rather than reliable historical evidence for the mechanism.

When to use it

When incentive programs produce unexpected or counterproductive behavior; when people seem to be gaming the system rather than pursuing its intended goals; when designing compensation, bonus, or reward structures; when Goodhart's Law is turning metrics into gamed targets.

How it can help

Compare the desired outcome, rewarded measure, and feasible responses. Use observed cases and staff input to revise incentives, then check for displaced harms and added complexity.