An after-school centre in Israel started fining parents if they picked their kids up too late. But it made the problem worse: late pick ups increased as the fine was now seen as a ‘fee for services’.
Perverse incentives
Be careful what you wish for.
Houses in Amsterdam are narrow because of tax evasion. In the 16th century they were taxed by the width of a property’s canal frontage, rather than total size, which incentivized the construction of narrow, deep, and tall buildings.
In 1927 British cinemas specified that a proportion of films shown had to be made in Britain. So to avoid losing out, American studios set up production facilities locally and churned out ‘quota quickies’. Many of the films, like the Demon Barber of Fleet Street, were so bad that they were screened to empty cinemas while cleaners cleaned up.
Athens began using alternate number plate restrictions in the 1990s: on a given day you could only drive if you had an odd or even number. The rule only encouraged people to buy an extra car so they were always free to drive.
In the US, “report cards” provide data on the performance of cardiac surgeons. Unfortunately, they incentivise doctors to avoid operating on the severely ill – instead choosing patients who might not even need it.
For years, Domino’s Pizza had a promotion that guaranteed delivery within 30 mins or the pizza was free. But it meant delivery drivers often sped to make the deadline and caused a number of accidents, with one crash victim suing Domino’s for $79m. The chain shut the promotion down, citing “public perception of reckless driving and irresponsibility.”
France has over twice as many companies with 49 staff as with 50. Why? At 50 employees, companies are must abide by a range of regulations including mandatory works councils and more stringent dismissal procedures.
Spotify pays artists based on the number of streams they receive, which only counts if someone listens to 30 seconds of a song. As a result, artists are incentivised to pack albums full of short songs, all of which hint at the chorus in the opening few seconds, as opposed to longer experimental songs that take a long time to build.