When Incentives Go Wrong

Part II: Going Wrong

In Part I of this article (which was released an unconscionable time ago) I wrote about how incentives shape human behavior and how governments ‘nudge’ incentives in order to change the behavior of their citizens, with taxation being the most common tool used in this endeavor.

Especially true when you wield the tax code as a weapon

And while you can’t ‘nudge’ everybody (some people will not shop at Wal-mart no matter how low the prices), you can get compliance high with big incentives. For example, you can get nearly everybody insured when you threaten them incentivize them to get insurance. The same is true of ‘offering’ you the ability to keep your job by getting a jab. These are instances of government purposely distorting the market with bad incentives in order to further its political goals.

But just as often, it seems, bad incentives by themselves lead to terrible outcomes — as we saw with the CARES Act. Central planners (government or otherwise) fixate on (bad) incentives and worsen the entire system. We see this when we look at the vaccine issue: governments have lied and removed data (and people repeating data) nearly the entire pandemic. THEIR incentives point all their resources at getting jabs into arms, results be damned.

Take this example about fake carbon neutral energy, from a (long) Twitter thread:

Doomberg@DoombergT

1/ In the second half of the 16th century, Britain plunged into an energy crisis. At the time, the primary source of energy driving the British economy was heat derived from the burning of wood, and Britain was literally running out of trees.

9:08 AM · Sep 17, 2022

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5.7K Reposts · 17.5K Likes

TL;DR: The EU is gobbling up “carbon-neutral” wood from felled American trees — which is then milled, dried, and pressed into pellets. From there, the pellets are transported to the American coast, where they are shipped to Europe. Once there, the pellets are considered a carbon-neutral energy source. But the energy required to get the pellets to the EU overwhelms whatever “gains” they are claiming to make by using pellets instead of coal.

These types of stories make no sense anywhere but the halls of the bureaucracy. But in the halls of bureaucracy, ANYTHING can be made to sound sane. That’s why Europe is dismantling their energy sources while preparing to freeze to death.

Do you remember the great debate surrounding the Affordable Care Act? Republicans (generally) stated that with a government control of healthcare, bureaucrats would be make difficult end-of-life decisions for those (very expensive) final years. Democrats (Obama in particular) said this was OBVIOUSLY crazy and there were no “death panels” anywhere in the ACA.

Of course, like modern “fact-checks”, this missed the obvious point that shifting the burden of end-of-life care to government incentivizes them to value life extremely poorly. And this is exactly what we see when we look to our neighbors to the north.

Possum Reviews@ReviewsPossum

After assisted suicide was legalized in Canada, many severely ill patients have found themselves effectively forced into "voluntary" euthanasia by healthcare costs, or even hospitals just refusing to treat them. Euthanasia is now the sixth leading cause of death in Canada.

1:18 AM · Aug 14, 2022

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3.84K Reposts · 12.8K Likes

I should probably state upfront that I’m 100% for medically assisted suicide as the right of any free person. However, it seems that Canada has (unsurprisingly) drifted into dangerous territory, with doctors more often “advising” that suicide is an option. The program is set to expand to the mentally ill, and while that has been delayed for now, it still sets off all sorts of alarm bells.

It’s easy to see how — from the government’s point of view — every nail can be solved with the hammer of you just killing yourself and going away! Not only do they save the state the time of dealing with your incessant nagging about how they ruined your life, they save some serious cash while doing it!

Meanwhile the politicians are their usual worthless selves.

Healthcare is not a one-size-fits-all industry. Free individuals should be able to make their own decisions about what type of end-of-life care they want, if they even want any at all. (Personally, I’d rather my cash went to my family rather than the healthcare industry, but I’m a strange bean.) But when government gets involved, the central planners are going to centrally plan. That means reducing your life, or the life of a loved one, to a figure on an Excel spreadsheet.

Maybe they don’t call these people “death panels”, (in wokespeak they would obviously be Transcendence & Resurrection Assistance Professionals) but in the end the result is the same: medical officials attempting to lead you to medical procedures that will lead to your death.

And just like de-banking, this isn’t staying in Canada.

The covid years were a glimpse into the future of government-run healthcare. Millions of actual people with actual medical problems had those problems ignored (or exacerbated!) because of government’s fixation on covid. Government will have no problems making the same “tough call” to sacrifice you or a loved one next time as well.

That’s why when pondering legislation, it’s vital that we’re mindful of how changing rules changes incentives, and that we attempt to align incentives to maximize human flourishing. Often, incentives point to a better return on investment via government bribery rather than serving customers (think Comcast). This is why Microsoft and big social media companies WANT regulation — it keeps competitors out of the market. Facebook can throw millions of dollars at regulation compliance and not blink an eye — but that expensive compliance is an insurmountable hurdle for a small start-up. (Feature, not bug)

Substack is a good example of the right incentives. In old media they cater to advertising, because advertising is how they survive. That incentivizes clicks and ‘edgy’ articles, not solid journalism. (Support that might be a mile wide but only an inch deep). Here on Substack, writers such as myself are beholden to the readers, who are free to unsubscribe at any time if they no longer value the service. The incentives mean you must please the audience, and that involves building trust, being able to explain your way through your thoughts, backing up statements with fact — all the stuff that journalism was (allegedly) about back in the day.

This is the way.

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Sadly we’re too close to the email limit for a picture today, but here’s an update on our cat’s stray cat (tentatively named Bonnie):

She's (90% it's a she now) still happy in the Jeep, which now also holds her new food bowl, which is refilled daily. Today she came running when I went to refill the bowl and ate while I was sitting there instead of waiting to eat until after I had gone.

A little while later I took out the trash while her and G were catting around. G ran right up (like always) and planted himself for some pets. Bonnie did the happy kitty dance (roll around on ground with belly in the air) a couple times but kept her distance. Just before I left, I put my hand out and she came running! I was excited until she nommed down on my finger thinking there was food.

So overall, a lot of progress. We know kitty is safe and happy and fed. She's got a clipped ear, so she's also vaxxed and fixed. It's only a matter of time before she (officially) becomes part of the family!