Intro

Those who think humans are motivated by incentives are behind such glorious innovations as gamification, carrot-and-stick approaches to education, sales commissions, and golden handcuffs.

While perverse incentives are a pervasive problem, the answer usually ain't better incentives.

I hope to convince you of three things:

1. Perverse incentives are inevitable.
2. They're mainly a problem when things are already fucked up on another level.
3. And even if you could align incentives with values, it's not as great as you'd hope.

Perverse Incentives are Inevitable

In any organization or social structure, a host of concerns arise:

• The organization and department must continue to exist for you to keep your job, even if it no longer fits the mission.
• You want to rise within the ranks, to be accepted and esteemed by your colleagues. This goal is seldom aligned perfectly, even with your own values.
• To get work done, you need things from colleagues. Your work is blocked unless they deliver, even when it'd be best for them to reevaluate timelines or goals.
• A colleague's project might be part of your deliverable. You may benefit if it's finished quickly, even if they do a bad job.
• A colleague's project may compete for your resources. You may benefit if it's shut down.

There are incentives-alignment tricks, like bonus structures and stock ownership. There are other ways of resolving these conflicts, like internal court systems, management meetings, or participatory budgeting.

But there's no magic bullet. These perverse incentives arise inevitably, again and again, in any organization.

When People Exploit Perverse Incentives, there's likely a Deeper Problem

If perverse incentives are so widespread, why do we act like they are special cases, giving them names like "Tragedy of the Commons" or "Embedded Growth Obligation"?

In part, it's because perverse incentives are only a problem once things are already fucked.

Most real world situations have perverse incentives which no one exploits. Incentives to fraud, for instance: we have names for someone who exploits incentives to fraud in everyday social situations: we call that person a sociopath, a conman, a charlatan.