What could possibly go wrong? Let’s hope the UK government will not breed cobras
By Max Turney (Consultant, TWS Partners), Christian Paul (Principal, TWS Partners), and Sebastian Moritz (Managing Partner, TWS Partners)
The Covid-19 pandemic has, if nothing else, been a golden age for creative government policy, from furlough schemes to stimulus payments. According to reports this morning in the Guardian, the next big idea from the UK government is to give a one-off payment of £500 to every individual who tests positive for coronavirus.
Reports of the proposed scheme were met with immediate criticism from some quarters, with many detractors expressing misgivings about what Behavioural Economists call the ‘cobra effect’.
Breeding cobras to kill them
This is named for another British governmental policy, during the British Raj in India. The story goes that British rulers were concerned about the population levels of venomous cobras around Delhi. They came up with the ingenious idea of offering a bounty for anyone who could present a dead cobra, thus effectively outsourcing pest control to the citizens of Delhi.
Initially this worked well: the cobra population dropped, and why wouldn’t it? After all the government had created a powerful monetary incentive for citizens to kill cobras. The problem was that they had also inadvertently created an equally powerful incentive to breed cobras — the more cobras you have, the more you could kill and the greater your profit from bounties! The government ended up achieving the opposite of their goal, with the cobra population of Delhi higher than ever.
Intended and unintended consequences of the UK scheme
The stated intention of the government is to provide an incentive for people to get tested, i.e. helping them to find undiagnosed cases and reveal the true rate of infected people. The incentive scheme therefore targets the group of people that doesn’t bother too much with getting tested — either because they can’t afford a week off work and don’t want to risk being told to self-isolate, or they have very mild symptoms and don’t even think of taking a test.
In these cases, the £500 pay-out for a positive test might do the trick. The more people who can be convinced in this way to be tested, the fewer undiagnosed cases. This allows the government to enforce self-isolation rules more effectively to dampen transmission of the virus.
However, there might also be a group of people who are even less concerned about Covid, such as younger people who consider Covid no real risk to their health. The £500 pay-out could motivate people in this group to catch the disease
Let’s hope the UK government is not breeding cobras
The wisdom of this proposed scheme effectively boils down to which group is bigger: those with Covid who could be induced to get tested by a £500 pay-out, or the group who would look to profit by recklessly seeking infection.
If it is the former then the scheme could be a key driver in suppressing the disease, with the economic benefits from reopening the economy helping to fund the pay-outs. If it is the latter then the government risks the worst of both worlds, spending large amounts of money only to excacerbate the UK’s epidemic.
We can only hope that the government will base their decision on solid data estimating the relative sizes of these groups; it could be a costly mistake if not considered thoroughly.
