Perverse Incentives

Posted: January 17, 2016 in Blogroll, Consumerism, Culture, Economics, Education, Idle Nonsense

After some delay, I picked up Nick Carr’s latest book The Glass Cage to read (see link to Carr’s blog Rough Type on my blogroll at left). Carr is an exceptionally clear thinker and lays out his arguments both for and against technology very well. Like my blog about Michael Crawford’s book, I won’t get too involved blogging about The Glass Cage, which discusses deskilling among other things. However, my reading of his discussion of self-driving cars (and autopilot on airplanes) and the attendant loss of the driver’s and pilot’s skill and focus coincided with something I read elsewhere, namely, that while self-driving cars may free the driver of some attentional burdens (not really burdens upon closer inspection), they are likely to cause increased congestion precisely because self-driving cars would no longer require passengers. Thus, an owner could potentially instruct the car to drive back home from work in the morning and then to come back and pick him or her up in the evening, handily doubling the time and distance the car is on the road. Similarly, a driver could avoid paying parking fees in pricey downtown precincts by instructing the vehicle to circle the block while the owner is out of the car shopping or dining. These are workarounds that can be fully anticipated and perhaps limited, but there will undoubtedly be others not so easily anticipated.

Carr argues that technology has enabled some (e.g., for those who designed their own software) to profit disproportionately from their effort. This is especially true of wikis and social media sites that run on user-generated content. It’s impossible to establish whether that’s laudable innovation, a questionable workaround, or simply gaming the system. Either way, redesigning workflows and and information flows carries the unintended consequence of creating perverse incentives, and one can be certain than in a hustling society such as ours, many someones are going to discover ways to exploits loopholes. This is already the case with the legal system, the financial system, social media, and journalism, and it seems ubiquitous with education and sports, where cheating is only a problem if one gets caught.

Perverse incentives don’t arise solely from rapid, destabilizing technological change, though that’s frequently a trigger. What’s worse, perhaps, is when such perversity is normalized. For instance, politics now operates under a perverse funding regime that awards disproportionate influence to deep pockets while creating no incentive for participants (politicians or deep pockets) to seek reform. Similarly, pooling wealth, and with it political power, within an extremely small segment of society carries no incentive for the ultrarich to plow their riches back into society at large. A few newly philanthropic individuals don’t convince me that, in the current day and age, any high-minded idealism is at work. Rather, it’s more plausible that the work of figuring out things to do with one’s money is more interesting, to a few at least, than merely hoarding it. A better incentive, such as shame, does not yet exist. So the ultrarich are effectively circling the block, clogging things up for no better reason than that they can.


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