The Power Of Bad Incentives
Imagine that a young, white man has been falsely convicted of a serious crime and sentenced to five years in a maximum-security penitentiary. He has no history of violence and is, understandably, terrified at the prospect of living among murderers and rapists. Hearing the prison gates shut behind him, a lifetime of diverse interests and aspirations collapses to a single point: He must avoid making enemies so that he can serve out his sentence in peace.
Unfortunately, prisons are places of perverse incentives—in which the very norms one must follow to avoid becoming a victim lead inescapably toward violence. In most U.S. prisons, for instance, whites, blacks, and Hispanics exist in a state of perpetual war. This young man is not a racist, and would prefer to interact peacefully with everyone he meets, but if he does not join a gang he is likely to be targeted for rape and other abuse by prisoners of all races. To not choose a side is to become the most attractive victim of all. Being white, he likely will have no rational option but to join a white-supremacist gang for protection.
So he joins a gang. In order to remain a member in good standing, however, he must be willing to defend other gang members, no matter how sociopathic their behavior. He also discovers that he must be willing to use violence at the tiniest provocation—returning a verbal insult with a stabbing, for instance—or risk acquiring a reputation as someone who can be assaulted at will. To fail to respond to the first sign of disrespect with overwhelming force, is to run an intolerable risk of further abuse. Thus, the young man begins behaving in precisely those ways that make every maximum security prison a hell on earth. He also adds further time to his sentence by committing serious crimes behind bars.
A prison is perhaps the easiest place to see the power of bad incentives. And yet in many other places in our society, we find otherwise normal men and women caught in the same trap and busily making life for everyone much less good than it could be. Elected officials ignore long-term problems because they must pander to the short-term interests of voters. People working for insurance companies rely on technicalities to deny desperately ill patients the care they need. CEOs and investment bankers run extraordinary risks—both for their businesses and for the economy as a whole—because they reap the rewards of success without suffering the penalties of failure. Lawyers continue to prosecute people they know to be innocent (and defend those they know to be guilty) because their careers depend upon winning cases. Our government fights a war on drugs that creates the very problem of black market profits and violence that it pretends to solve….
We need systems that are wiser than we are. We need institutions and cultural norms that make us better than we tend to be. It seems to me that the greatest challenge we now face is to build them.
