Forbes July 29, 2024
In the sweltering heat of 19th-century colonial Delhi, legend has it that cobras were taking over the streets. To eliminate the dangerous snakes, British officials offered a bounty for every dead cobra brought to government offices. Soon, locals began breeding and killing cobras for profit. When British officers caught wind of the scheme, they ended the program immediately. In response, the breeders released their now-worthless snakes back into the streets, turning a problem into a crisis.
This tale of unintended consequences, known as the “cobra effect,” serves as a stark reminder that well-meaning policies usually backfire disastrously when they fail to consider human nature and economic incentives.
Medicare’s method of reimbursing doctors bears a striking resemblance to this parable.
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