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:

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.