Perverse Incentives Research Articles

A behaviorist perspective on how to address negative consumer behaviors

AbstractThe cognitivist paradigm has dominated the past 50 years of consumer research. Cognitivist theories have provided extensive insights into pre‐consumption behaviors (i.e., information gathering, attitude formation, product choice, and product purchase) and the processes that support these behaviors (i.e., attitudes, persuasion, information processing, memory, knowledge, and choice processes). Yet, the cognitivist paradigm has limitations, especially when it comes to addressing detrimental consumption, over‐consumption, and perverse incentives in consumption systems. To address these issues, we discuss how a behaviorist paradigm can be used to identify more efficient and effective interventions for societal ills. The behaviorist perspective emphasizes that an alteration of the consumption environment can influence the ease of expressing a behavior and the rewards/punishments associated with this expression. Hence, behaviorism is useful in identifying and implementing intelligent nudges.

Scientific Discoveries and Technological Innovation are Nobody's Intellectual Property

Scientific discoveries and technological advances emerge from global communities of inves- tigators sharing their ideas and material resources with one another. Individual investigators or groups make important contributions, to be sure, but these advances are incremental; only when ideas and resources are shared with the community at large, so they can modify and combine with other ideas and resources, does the community become fully creative and innovative. While the "intellectual property" that an individual can legitimately lay claim to is thus very modest, it is the source of a supremely valuable cultural reward: the esteem of the creative communities to which the investigator belongs. When governments attempt to foster innovation by the promise of government-enforced patent monopolies, rather than by direct public spending, scientific communities are disrupted, creativity is impaired, the price of goods and services is greatly elevated, wealth inequality increases, and perverse incentives can distort the marketplace. These shortcomings are especially troubling in the case of pharmaceuticals and other essential sectors, where the products are a public good — not just commodities like TVs or new running shoes — and where effective innovation is a matter of basic economic and social justice — not just commercial prosperity.

A paper tiger in the fog of governance: Norway's riddle in biodiversity matters

AbstractEffective biodiversity protection is generally associated with a strict rule of law and democratic participation in environmental decision making. Norway's exceptional ranking in terms of governance, however, has failed to be a predictor of effective biodiversity protection. Through a systematic review of the main regulatory frameworks relevant to protecting biodiversity in Norway, this article analyses the misconceptions, perverse incentives and institutional bottlenecks that lie at the centre of the problem. The analysis finds three overarching barriers that regulatory frameworks have created to the effective protection and promotion of biodiversity in Norway, namely, a governance system based on diffuse legal obligations and responsibilities, excessive trust in private operators and considerable discretion to local entities. Accordingly, this article proposes three enabling factors, and related reform suggestions, for mitigating such barriers and domesticating earth system governance in biodiversity matters.

Psychology’s reform movement needs a reconceptualization of scientific expertise

Science is supposed to be a self-correcting endeavor, but who is “the scientific expert” that corrects faulty science? We grouped traditional conceptualizations of expertise in psychology under three classes (substantialist, implicitist, and social conventionalist), and then examined how these approaches affect scientific self-correction in reference to various components of the credibility crisis such as fraud/QRPs, the inadequate number of replication studies, challenges facing big team science, and perverse incentives. Our investigation pointed out several problems with the traditional views. First, traditional views conceptualize expertise as something possessed, not performed, ignoring the epistemic responsibility of experts. Second, expertise is conceived as an exclusively individual quality, which contradicts the socially distributed nature of scientific inquiry. Third, some aspects of expertise are taken to be implicit or relative to the established research practices in a field, which leads to disputes over replicability and makes it difficult to criticize mindless scientific rituals. Lastly, a conflation of expertise with eminence in practice creates an incentive structure that undermines the goal of self-correction in science. We suggest, instead, that we conceive an expert as a reliable informant. Following the extended virtue account of expertise, we propose a non-individualist and a performance-based model, and discuss why it does not suffer from the same problems as traditional approaches, and why it is more compatible with the reform movement's goal of creating a credible psychological science through self-correction.

The trinity of good research: Distinguishing between research integrity, ethics, and governance

ABSTRACT The words integrity, ethics, and governance are used interchangeably in relation to research. This masks important differences that must be understood when trying to address concerns regarding research culture. While progress has been made in identifying negative aspects of research culture (such as inequalities in hiring/promotion, perverse incentives, etc.) and practical issues that lead to research waste (outcome reporting bias, reproducibility, etc.), the responsibility for addressing these problems can be unclear due to the complexity of the research environment. One solution is to provide a clearer distinction between the perspectives of “Research Integrity,” “Research Ethics,” and “Research Governance.” Here, it is proposed that Research Integrity should be understood as focused on the character of researchers, and consequently the responsibility for promoting it lies primarily with researchers themselves. This is a different perspective from Research Ethics, which is focused on judgments on the ethical acceptability of research, and should primarily be the responsibility of research ethics committees, often including input from the public as well as the research community. Finally, Research Governance focuses on legal and policy requirements, and although complementary to research integrity and ethics, is primarily the responsibility of expert research support officers with the skills and experience to address technical compliance.

Pay-for-performance in healthcare provision: the role of discretion in policy implementation in Turkey

PurposeNew Public Management-informed pay-for-performance policies are common in public sectors internationally but can be controversial with delivery agents. More attention is needed on contingent forms of bottom-up implementation of challenging policies, in emerging market economies, for professionals who face tensions between policies and their codes of practice. Street-level bureaucrats (SLBs) mediate policy implementation through discretionary practices; health professionals have enhanced space for discretion based on autonomy derived from professional status. The authors explore policy implementation, adaptation and resistance by physicians, focusing on payments for health workers in Turkey.Design/methodology/approachThe researchers conducted semi-structured qualitative interviews with 12 physicians in Turkish hospitals and thematic analysis of interview transcripts, using a blended (deductive and inductive) approach.FindingsThe policy fostered discretionary behaviours such as cherry-picking (high volume, low risk procedures) and pro-social rule-breaking (e.g. “upcoding”), highlighting clinical autonomy to navigate within policy restrictions. Respondents described damage to relationships with patients and colleagues, and dissonance between professional practice and perverse policy incentives, sometimes leading to disengagement from clinical work. Policymakers were perceived to be detached from the realities experienced by SLBs. Tensions between the policy and professional values risked alienating physicians.Research limitations/implicationsThis study utilises participant self-reported perceptions of discretionary behaviours. Further work may adopt alternative methods to explore the relationship between self-reporting and observed practice.Originality/valueThe authors contribute to research on differentiated, contingent roles of groups with high scope for discretion in bottom-up implementation, pointing to the potential for policy-professional role conflicts between top-down P4P policies, and the values and codes of practice of professional SLBs.

How do the affective and symbolic factors of private car driving influence car users’ travel behavior in a car restriction policy scenario?

The number of private car trips a person makes is usually linked to external factors such as economic incentives or disincentives, legislation, infrastructure, and the quality of transport systems, among others. The impact of these options are typically analyzed to evaluate urban transport policies and projects. However, internal factors related to an individuals' attitudes and perceptions also play an essential role in the amount of private car driving they do and on urban mobility as well. Therefore, insight into private car driving's affective and symbolic aspects is important in order to formulate appropriate transport policies and strategies to reduce car-use dependency and encourage private car drivers to use public transport. Congestion charging schemes make drivers pay the full social cost of driving, they achieve congestion reduction, pollution reduction, they make cities more attractive for pedestrians and cyclists, and help improve quality of life. Congestion charging schemes are often difficult to implement and expensive to administer. As a result of these reasons, several cities worldwide have adopted a variety of car restriction schemes that try to reduce air pollution and congestion as well, instead of establishing congestion charges. The effects of driving restrictions in the short term are positive, but in the medium and long term, there are unwanted consequences. However, by giving private car drivers the option to pay a toll so that their cars are exempted from the restriction, these perverse incentives could be eliminated. This paper analyzes the impacts of internal factors related to individuals' attitudes and perceptions about the travel behavior of car users affected by car restriction policies in urban areas. We designed a stated preference survey conducted among car owners in Cali, Colombia, where a License Plate Restriction Charging (LPRC) policy has been in place since January 2017. Through hybrid discrete choice modeling, we demonstrated that latent variables, such as the feelings of being in control, independence, and higher social status, positively influence the decision to use cars for daily trips, thus impacting the urban modal split. The heterogeneity captured through these latent variables allowed us to understand more deeply how individuals deal with the LPRC policy in order to travel to their destination.

Influential independent directors' reputation incentives: Impacts on CEO compensation contracts and financial reporting

We study how reputation incentives of influential independent directors (those holding multiple directorships) affect CEO compensation and firm financial reporting decisions. We find that CEO equity-based incentives, measured by CEO delta, vega and the number of equity grants are positively related to these directors' reputation incentives. These director reputation incentives also mitigate the perverse CEO incentives to inflate earnings, which arise from such high-powered compensation structures, by motivating increased board monitoring to limit discretionary accruals and real activity-based earnings management. These findings are invariant to endogeneity adjustments under multiple approaches, including exogenous changes in reputation incentives.

Payer reimbursement practices and incentives for improving interpretation of germline genetic testing.

Germline genetic testing for inherited cancer risk has shifted to multi-gene panel tests (MGPTs). While MGPTs detect more pathogenic variants, they also detect more variants of uncertain significance (VUSs) that increase the possibility of harms such as unnecessary surgery. Data sharing by laboratories is critical to addressing the VUS problem. However, barriers to sharing and an absence of incentives have limited laboratory contributions to the ClinVar database. Payers can play a crucial role in the expansion of knowledge and effectiveness of genetic testing. Current policies affecting MGPT reimbursement are complex and create perverse incentives. Trends in utilization and coverage for private payers and Medicare illustrate opportunities and challenges for data sharing to close knowledge gaps and improve clinical utility. Policy options include making data sharing (i) a condition of payment, and (ii) a metric of laboratory quality in payment contracts, yielding preferred coverage or enhanced reimbursement. Mandating data sharing sufficient to verify interpretations and resolve discordance among labs under Medicare and federal health programs is an option for the US Congress. Such policies can reduce the current waste of valuable data needed for precision oncology and improved patient outcomes, enabling a learning health system.

Commercial determinants of human rights: for-profit health care and housing.

Commercial determinants of human rights: for-profit health care and housing.

Trends in the Cost of Medicines, Consultation Fees and Clinic Visits in Malaysia's Private Primary Healthcare System: Employer Health Insurance Coverage.

To examine trends in the cost of medicines, consultation fees and clinic visits among the employees covered by the employer health insurance in Malaysia's private primary healthcare system in Malaysia. Retrospective cross-sectional study. PMCare claims database from January 2016 to August 2019. A total of 83,556 outpatient clinic visits involving 10,150 IIUM employees of the International Islamic University Malaysia (IIUM) to private general practitioners (GPs). During the study period, IIUM adopts the incentive structure of capping coverage at Ringgit Malaysia (RM) 45/outpatient visit (USD 10.58) to cover for consultation fees and medicine costs. The monthly percentage change in the number of clinic visits, medicine costs, consultation fees and total costs between January 2016 and August 2019. A simple linear regression using Stata v15.1 was also performed to measure the association between the characteristics of the prescribed medicines and medicine charges. The number of clinic visits per patient increased by 17% from January 2016 to August 2019, with consultation fees increasing by 113.9% and total costs by 7.9% per clinic visit per patient. Conversely, the cost of medicines and the number of medicines prescribed per clinic visit per patient decreased by 39.7% and 6.3%, respectively. Within the incentive structure of capping the total amount of coverage per clinic visit, medicine costs were reduced by decreasing the number of medicines prescribed, to offset the increased consultation fees. This may create perverse incentives that affect medicine use with negative consequences for the health system and health insurers.

Green Finance or Daltonic Finance?

Clean energy is currently a top priority on the global agenda, and green bonds have emerged as a key response from financial markets. However, while these bonds aim to reduce carbon emissions, they may create perverse incentives. Brazil has made significant investments in eolic parks in recent years, with players issuing green bonds to finance these activities. One region that has seen high levels of investment is the interior of Bahia state, which has historically had low levels of economic and social development. Unfortunately, the production of wind energy in this region has been marked by several social conflicts. Despite this, these conflicts have largely gone unnoticed, as the appeal of clean energy has overshadowed them. Social issues such as land disputes are critical but often overlooked in green finance mechanisms. In some cases, these financial incentives may incentivize land grabbing from vulnerable populations in the name of clean energy production.

“A cold, hard asset”: Conservation resource spectacle in Chilean Patagonia

Chile’s public conservation estate has expanded by unprecedented margins in recent years, following the creation of several mega projects. One such project is the Route of Parks of Chilean Patagonia, a public–private partnership to protect nearly 30 million acres of land across 18 national parks at the bottom of the South American continent. The partnership, over two decades in the making, was proposed by the U.S-based philanthropic foundation Tompkins Conservation but rejected by previous presidential administrations before finally being accepted in 2017. This article traces the role of two complementary forces behind the project – big philanthropy and big conservation – showing how both shaped the state’s eventual decision to take historic action for environmental protection. I argue that resource spectacle is key to understanding the ‘how’ and ‘why now’ of this mega project. Whereas traditional resource spectacles are conjured to court buy-in from private actors for extractive projects, a conservation resource spectacle is conjured in this case to court buy-in from the state for a large-scale national parks project. Big philanthropy emphasizes the spectacular investability of national parks by selling them as “a cold, hard asset,” akin to Chile’s other natural resources. It does this by rendering the value of protected nature legible and consumable through the same resource-making techniques that define extractivism. Yet, these resource-making techniques when applied to environmental protection not only establish perverse incentives for action, they also help fuel the convergence of conservation and extraction.

NSF Fellows’ perceptions about incentives, research misconduct, and scientific integrity in STEM academia

There is increased concern about perverse incentives, quantitative performance metrics, and hyper-competition for funding and faculty positions in US academia. Recipients of the prestigious National Science Foundation Graduate Research Fellowships (n = 244) from Civil and Environmental Engineering (45.5%) and Computer Science and Engineering (54.5%) were anonymously surveyed to create a baseline snapshot of their perceptions, behaviors and experiences. NSF Fellows ranked scientific advancement as the top metric for evaluating academics followed by publishing in high-impact journals, social impact of research, and publication/citation counts. The self-reported rate of academic cheating was 16.7% and of research misconduct was 3.7%. Thirty-one percent of fellows reported direct knowledge of graduate peers cheating, and 11.9% had knowledge of research misconduct by colleagues. Only 30.7% said they would report suspected misconduct. A majority of fellows (55.3%) felt that mandatory ethics trainings left them unprepared for dealing with ethical issues. Fellows stated academic freedom, flexible schedules and opportunity to mentor students were the most positive aspects of academia, whereas pressures for funding, publication, and tenure were cited as the most negative aspects. These data may be useful in considering how to better prepare STEM graduate trainees for academic careers.

The impact of child mortality on fertility in South Africa: Do child support grants and antiretroviral treatment matter?

This paper investigates the effect of under-five mortality, child support grant (CSG) coverage and the rollout of antiretroviral therapy (ART) on fertility in South Africa. The study employs the quality-quantity trade-off framework to analyse the direct and indirect factors affecting fertility using the two stage least squares fixed effects instrumental variable approach. The analysis uses balanced panel data covering nine provinces from 2001-2016. This period was characterised by significant increases in the child support grant coverage and ART coverage. Furthermore, this period was characterised by a significant decline in the under-five mortality rate. We find no evidence to support the hypothesis that increases in the CSG coverage are associated with an increase in fertility. This finding aligns with previous literature suggesting that there are no perverse incentives for childbearing associated with the child support grant. On the other hand, results indicate that an increase in ART coverage is associated with an increase in fertility. Results also show that a decrease in under-five mortality is associated with a decline in fertility over the sample period. HIV prevalence, education, real GDP per capita, marriage prevalence and contraceptive prevalence are also important determinants of fertility in South Africa. Although the scale up of ART has improved health outcomes, it also appears to have increased fertility in HIV-positive women. The ART programme should therefore be linked with further family planning initiatives to minimise unintended pregnancies.

Hospital congestion: a market solution to address delayed transfers of care from hospital beds.

Hospital congestion: a market solution to address delayed transfers of care from hospital beds.

Policy dissonance when wearing the “employer hat”: The practice of governmental vehicle reimbursement among public sector employees

Transport-related benefits can have a significant impact on employees’ vehicle ownership and use. Policy implemented by governments, which are often both large-scale employers and models for the private sector, are especially important in determining travel behavior. The research focuses on the Israeli practice of providing substantial subsidies for public sector employees to own cars, through the salary benefit of “vehicle reimbursement”. The benefit, originally created to circumvent salary caps, today provides a substantial income supplement for more than half of the country’s public sector workers, translating to 10% of all Israeli employees (in addition to 10% of employees who receive a company car). The article explores the extent to which vehicle reimbursement encourages car ownership and car usage among public workers. It also seeks to assess the willingness of workers, the labor union and the government to replace the vehicle reimbursement salary component for a substitute that does not require car ownership. Analysis of both a survey of employees (n = 276) and interviews with government and labor union officials, suggests that Israel’s “vehicle reimbursement” constitutes a classic perverse incentive, driving and perpetuating private car ownership and usage, thereby affecting workers’ transport preferences in both the short and long terms. While the majority of public employees are willing to consider accepting salary compensation in lieu of car ownership, institutional and legal obstacles currently stand in the way of policy reform. This case study offers a first exploration of the role of historical employment arrangements in shaping employee and employer transportation decisions.

Autism and the draft mental health bill in England and Wales: Unintended consequences?

The Draft Mental Health Bill for England and Wales proposes a range of changes to the Mental Health Act 1983. Among these is a proposal to amend the definition of ‘Mental Disorder’, which would mean that people with a primary diagnosis of autism or learning disability would be excluded from most of the civil sections of the Act. If enacted, this will be the first occasion in English and Welsh law where a legal definition of autism is created. While we argue that there are inherent difficulties in creating legal definitions of clinical problems, this ‘legal Autism’ appears to be substantially disconnected from a clinical understanding of autism, and its breadth could potentially encompass conditions beyond those currently identified as autism. Moreover, numerous potential unwanted practical consequences may arise from these changes, partly because of uncertainty about the legal position of presentations that share features with autism, uncertainty about the process of assessment of ‘legal Autism’, and potential perverse incentives placed on local authorities. We argue that particular groups of people likely to be impacted by these changes are those who not only present with profound clinical impairments, but also who pose significant risks to others. We urge serious consideration is given to these issues in the legal debate of the Bill.

Smallholder farmers' willingness to pay for two‐wheel tractor‐based mechanisation services in Zambia and Zimbabwe

AbstractMechanisation is back among top development policy priorities for transforming African smallholder agriculture. Yet previous and ongoing efforts ubiquitously suffer from lack of scientific information on end‐user effective demand for different types of mechanical innovations to inform public investment or business development programmes. We assess smallholder farmers' willingness to pay (WTP) for two‐wheel tractor (2WT)‐based ripping, direct seeding and transportation using a random sample of 2800 smallholder households in Zambia and Zimbabwe. Applying the Becker–DeGroot–Marschak Mechanism (BDM) experimental auctions, we find that at least 50% of sample households in Zambia and Zimbabwe were willing to pay more than the prevailing market prices for ripping. In nominal terms, sample households in Zimbabwe were willing to pay more than those in Zambia for the different services. Empirical results suggest that wealth is the strongest driver of WTP for tillage and seeding 2WT services while labour availability and using animal draft power reduce it. These findings imply a need to (i) raise awareness and create demand for 2WT‐based services in an inclusive business manner that does not create perverse incentives and (ii) better target mechanisation to operations with comparative advantage, using approaches that bundle 2WT‐based and other mechanisation services with asset‐agnostic credit schemes or other interventions meant to overcome asset‐mediated barriers.

Reforming Shareholder Claims in Investor-State Dispute Settlement

Abstract Investor-state dispute settlement (ISDS) stands alone in empowering shareholders to bring claims for shareholder reflective loss (SRL)—meaning claims over harms allegedly inflicted upon the company, but which somehow affect share value. National systems of corporate law and public international law regimes generally bar SRL claims for strong policy reasons bearing on the efficiency and fairness of the corporate form. However, ISDS tribunals allow shareholders broad and regular access to seek relief for reflective loss. The availability of SRL claims in ISDS ultimately harms States and investors alike, imposing surprise ex post costs on States and various corporate stakeholders (particularly creditors), and creating perverse incentives likely to raise the cost of doing business ex ante. The article sets out the harms caused by allowing ISDS claims for reflective loss, as well as the possible justifications for allowing such claims in this specific context. Concluding that any potential benefits of SRL can be realized through less invasive means, we then canvas a number of plausible reform options, with an eye to their trade-offs.