Me, Me, Me! – How Perverse Incentives Have Shaped Our Decision-Making

Mariana Sereno – Period 1

Honorbound

 

When you were little, you probably remember asking your mom if you could have one of those big, delicious cookies that grandma sent. She says no because you’ll be having dinner soon. Deep down you know she was only helping so you wouldn’t be full before dinner, but it doesn’t help the fact that she is now the worst person ever… that is until you finally get that cookie. Good intentions are not often applauded for effort if there is a negative outcome in the decision-making process, leading people to pave their own ways for personal benefits. But how good of an intention are these decisions made with? How good can intention be when it is for self-interest? With the advancement of our ever-growing economy, incentives have become less about helping the community as a whole and more about each person or group working for self-interest, all while demeaning the meaning of having a good intention.

Charles Wheelan, author of Naked Economics, discusses the idea of perverse incentives, which are “inadvertent incentives that can be created when [people] set out to do something completely different.”[1] A person’s decision can be made with good intention, but it can cause a frenzy once it produces a negative outcome and worsening the situation instead of fixing it. Wheelan uses the Federal Aviation Administration’s (FAA) and the requirement of car seats for children on planes. Wheelan goes on to beg the question of “What if?” when comparing the FAA’s decision and possible events in the future. In the short run, having car seats would provide injuries and save lives, but in the long run, the high expenses of owning a car seat would lead people to instead drive to their destination, essentially gambling their lives in the process.[2] Although the FAA made this decision for the sake of safety, airlines would be bashed for charging a toddler’s seat as the average adult’s fare, claiming that they are doing it for the sole purpose of cheating people out of their money, and that’s not even including the price parents have to pay for a government-approved car seat.

One of the biggest controversies in the past few months has been Heather Bresch’s decision to raise the EpiPen price to $600. The CEO of Mylan set the community into an outrage state, as her company “introduced a generic version of the lifesaving device and sells it for half the price of the brand-name auto-injector.”[3] In an interview with CNBC, Bresch explained her motives for having such a highly priced product, stating that she was “[bringing] light to a ‘broken’ drug system.”[4] Although people might still find her actions disagreeable and claim she was only doing it to receive a high profit, Bresch, as many other people, had a good intention hidden behind accusing fingers. Self-interest is often mistaken for selfishness, and the only difference that makes them distinct is the true intention behind a person’s decision.

 

[1] Wheelan, Charles, Naked Economics Undressing the Dismal Science (New York: W.W. Norton & Company, Inc., 2010), 36.

[2] Wheelan, Charles, Naked Economics Undressing the Dismal Science (New York: W.W. Norton & Company, Inc., 2010), 37.

[3] Mangan, Dan. “Mylan CEO Heather Bresch says diversification is boosting company after EpiPen controversy.” CNBC. March 03, 2017. Accessed March 25, 2017. http://www.cnbc.com/2017/03/03/mylan-ceo-heather-bresch-discusses-epipen-controversy.html.

[4] Ibid

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