Incentives are sneaky

File this under “incentives work, so think about them before you unleash the unintended consequences.”

Alternatively, simplified mental models fail to capture the richness of actual reality and are therefore all broken in some way.


Maybe things like health care, crop subsidies, mortgage interest deductions, and no-doc loans are similar. Can Congress read? Is there a study that determines exactly how big a committee has to be to strip itself of all intelligence? I admit, I’m a small government libertarian and a fan of tax simplification. I think we’ve skipped the Occam’s Razor phase of legislative drafting, sometime about 200 years ago, and gone straight to the “we’re geniuses and can finely orchestrate systems we don’t even understand.”

The economy and human behavior are not to Congress as a poem is to Humpty Dumpty:

I can explain all the poems that were ever invented — and a good many that haven’t been invented just yet.

Longer and more complicated laws and regulations merely make it harder to sort out what levers and buttons we’ve been pushing to try to change things, making it exponentially more difficult to go back and adjust.

Recent example:

My health care prescription, assuming you want to expand the availability of health care in the US? Just change the maximum income qualification level for Medicaid. One number. The entire system is already in place, with all the rationing, cost sharing, cost controls, and related stuff working (such as it is). Whole new systems have to be implemented for ObamaCare. Why bother?