The Cobra Effect

The Cobra Effect and the Rat Effect are closely related ideas in economics and public policy. Both describe situations where well-intended incentives backfire, making the original problem worse.

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The Cobra Effect

Definition:
When a solution to a problem creates incentives that unintentionally encourage the very behavior it was meant to stop.

Origin story (colonial India):

• British authorities offered a bounty for dead cobras to reduce their numbers.

• People began breeding cobras to kill them for the reward.

• When the program ended, breeders released the cobras.

• Result: more cobras than before.

Key idea:
Poorly designed incentives change behavior in unexpected ways.

Modern examples:

• Paying schools based only on test scores → teaching to the test or cheating

• Paying per bug fixed → developers create unnecessary bugs

• Traffic fines that are cheaper than parking → people treat fines as fees

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The Rat Effect

Definition:
A broader term for reward systems that lead people to game the system, often by producing the problem being rewarded for solving.

Common story (varies by region):

• Governments pay for dead rats to control infestations.

• People begin breeding rats to collect rewards.

• Ending the program releases rats → infestation worsens.

Key idea:
When rewards focus on outputs instead of outcomes, people optimize for the reward, not the goal.

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Cobra Effect vs. Rat Effect

Aspect	Cobra Effect	Rat Effect
Scope	Specific historical example & concept	Broader behavioral pattern
Focus	Perverse incentives	System gaming
Use	Policy & economics	Policy, management, organizations
Relationship	A classic example	Generalization of the same problem

👉 All cobra effects are rat effects, but not all rat effects are cobra effects.

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How to Avoid These Effects

• Measure outcomes, not just outputs

• Anticipate how people might game incentives

• Use multiple metrics, not a single reward signal

• Pilot programs before scaling

• Include behavioral and cultural analysis