Incentives

October 2026

• Oct 12, 2026ConceptsThe Law of Diminishing Returns ExplainedBiologists derived the same curve independently: Charnov's 1976 marginal value theorem predicts a forager leaves a patch when its intake rate falls to the average available across the environment, and Cowie's 1977 study of great tits found they go close to that optimum, lingering when travel between patches is costly. The article separates increasing, diminishing and negative returns, and argues the way past the curve is to unfix the binding constraint.13 MIN369

June 2026

• Jun 22, 2026ConceptsGoodhart's Law: When a Measure Becomes a TargetCharles Goodhart noticed in 1975 that the Bank of England's stable money-supply relationships broke down the moment it started targeting them, because targeting changed the system that produced the correlation. Marilyn Strathern gave it the phrasing everyone quotes in 1997. Manheim and Garrabrant later split it into four mechanisms, and Choi, Hecht and Tayler found surrogation deepens exactly when pay is tied to the proxy.10 MIN1.6k

February 2026

• Feb 10, 2026ConceptsHow Goodhart's Law Breaks MetricsGoodhart's 1975 observation that a statistical regularity collapses once it is used for control explains teaching to the test, surgeons avoiding high-risk patients, and Compstat crime reclassification. Wells Fargo's cross-selling target produced about 3.5 million potentially unauthorized accounts in the bank's expanded review, $185 million in 2016 fines and a $3 billion settlement in 2020. Also: detection signs and eight harder-to-game metric designs.21 MIN56.1k
• Feb 3, 2026ConceptsEconomic Laws Explained SimplyGneezy and Rustichini's 2000 study added a fine for late pickup at Israeli daycare centers. Late arrivals roughly doubled, and did not return to earlier levels after the fine was removed. The charge turned an obligation into a purchasable option and destroyed a stronger non-monetary incentive. Eight principles in plain language: scarcity, opportunity cost, incentives, marginal thinking, supply and demand, comparative advantage, diminishing returns, and prices as information.17 MIN40.8k

August 2025

• Aug 19, 2025IdeasIdentifying Organizational Alignment ProblemsEvery team had bonus exposure but no shared view of what success required from its own position, so each integrated the social features in whatever way least disrupted its existing metrics, and Google shut the consumer product down in 2019. Incentive alignment without goal clarity buys local optimization. Steven Kerr named the pattern in 1975: organizations reward what they can measure while hoping for what they want, as universities reward publications and hope for teaching.25 MIN45.5k

July 2025

• Jul 17, 2025ExplainersIncentive Design Failures ExplainedSeven cases of incentives producing the opposite of what was intended, from Wells Fargo's sales quotas to Microsoft's stack ranking, dropped in November 2013. The sharpest evidence is Gneezy and Rustichini's "A Fine Is a Price": in ten Israeli day care centers in Haifa, a fine for late pickups made late pickups rise, and removing the fine never restored the old rate. Goodhart's and Campbell's laws and seven design principles follow.36 MIN54.9k

June 2025

• Jun 29, 2025ExplainersHow Incentives Shape OutcomesWhy rewards often produce the opposite of what was intended. Gneezy and Rustichini studied ten Haifa daycare centers, adding a late-pickup fine at six and leaving four as controls: late pickups immediately increased and remained elevated even after the fine was removed, because the fine converted a social obligation into a priced service. Wells Fargo set a quota of 8 products per customer its own research showed was unachievable.33 MIN48.0k
• Jun 24, 2025ExplainersHow Metrics Influence BehaviorWells Fargo tracked products sold per household as a proxy for engagement and attached bonuses and firings to an eight-product target. Employees hit the number by opening roughly 2 million accounts customers never requested, drawing a $185 million penalty in 2016. The healthcare version is stranger: Dranove and colleagues found in the Journal of Political Economy that publishing New York surgeons' cardiac mortality rates raised overall cardiac mortality.27 MIN3.0k
• Jun 17, 2025ExplainersStep-by-Step: Analyzing Incentive StructuresMap five layers, not just pay: financial, social and status, career, intrinsic, and punishment. The sharpest diagnostic asks what would happen to someone who fully optimized for the stated goal, since in many organizations that person is dismissed as naive. Gneezy and Rustichini reported that late pickups roughly doubled after Israeli daycare centers introduced a fine for lateness, and stayed high even after the fine was dropped.36 MIN6.3k

May 2023

• May 21, 2023ConceptsThe Cobra Effect: Solutions That Worsen ProblemsA tailless rat kept breeding, which made it a renewable source of future bounty income, and rat farms appeared on the city outskirts. The page treats the original Delhi story as structurally instructive whether or not its details are precisely accurate. Soviet nail quotas show the same trap twice: counted in units, factories made useless tiny nails, and switched to weight, they made a few oversized spikes instead.13 MIN11.9k

November 2022

• Nov 19, 2022ConceptsMoral Hazard Explained: Risk from ProtectionThey separated it from physical hazard, the objective risk of the insured thing, because transferring financial risk also transfers the motivation to prevent loss. Three ingredients are needed: a guarantee, separation between who decides and who pays, and actions nobody can observe. Without that third element a contract could simply require the locked garage and verify it monthly.20 MIN2.0k

July 2022

• Jul 18, 2022ConceptsCobra Effect in Education: When Incentives BackfireThe quieter failure is performance pay. Vanderbilt researchers offered Nashville math teachers bonuses up to $15,000, roughly a third of a typical salary, and found no significant difference in student achievement. Grades drifted the same way, with Rojstaczer and Healy finding As at about 43 percent of all grades at American four-year colleges, up from 15 percent in 1960. The mechanism is that a measure stops informing once it becomes the target.22 MIN3.6k