Free Market Institute Blog
The Cobra Problem: When “Great” Ideas Unleash Absolute Chaos
In the early 1900s, British officials in Delhi, India faced a public safety headache. Cobras were everywhere - curling in alleyways, slipping into homes, turning ordinary errands into calculated risks. The problem demanded action.
Their solution sounded airtight - offer cash for every dead cobra. Align public safety with personal profit. Kill snakes, reduce snakes, problem solved. At first, the policy delivered exactly what it promised. Dead cobras piled up. Snake sightings dropped. Officials relaxed, congratulated themselves, and poured victory tea.
Then the good intentioned incentive revealed its flaw! Locals realized hunting cobras was dangerous and unpredictable, while breeding them was safe, cheap, and reliable. Small cobra farms appeared, quietly converting government bounties into guaranteed income.
When officials finally caught on, they shut the program down. The farms were suddenly worthless. With no reason to keep them, breeders released their cobras into the city. Delhi ended up with more snakes than before the policy began.
Economists later named this pattern the Cobra Effect - when a well-intended incentive produces the opposite result. It wasn’t unique. In Hanoi in 1902 (French-controlled Indochina, now Vietnam), rat tail bounties led people to amputate tails and release rats to reproduce. In Fort Benning, Georgia (2007-2008), $40 feral pig tail rewards sparked trapping and breeding operations instead of population control.
Ludwig von Mises understood this long before economists gave it catchy names. He argued that human action is purposeful, people choose means to achieve ends, using the information and incentives they face. Change the incentive, and you change the action. [Human Action: A Treatise on Economics, 1949].
These cases expose a basic truth about human behavior - people respond to incentives, not intentions. When rewards are poorly designed, perfectly rational choices can produce wildly irrational results. Systems don’t fail because people are greedy, lazy, or immoral. They fail because the incentives quietly push behavior in the wrong direction.
That same logic governs everyday life. Students push through midnight study sessions for a few extra points. Parents willingly trade higher income today for better education tomorrow, investing in schools that sharpen skills, values, and opportunity. Entrepreneurs risk comfort for possibility. No one is forced into these choices. They are free decisions, made because the incentives in the form of knowledge, growth, and a stronger future, outweigh the cost.
Incentives aren’t the problem. When they’re aligned, ordinary people do extraordinary things. When incentives reward long-term development instead of short-term gains, those choices don’t just feel rational, they build futures that last. The same logic that once multiplied cobras can just as easily multiply progress, learning, and innovation. Design incentives well, and you don’t need force or blame. Instead, you get momentum. Follow the incentive wisely, and watch good outcomes scale.
