Professor Abi Adams-Prassl joined Tim Harford on the Radio 4 programme ‘More or Less’ last week to discuss the ‘Cobra effect’ in the context of incentivising people to stay at home when they are faced with a positive COVID diagnosis.
Abi explained that the Cobra effect is a term that refers to a scenario where the incentives designed to solve a problem are not only ineffective but they actually backfire, making the whole situation worse.
Research has shown that most people don’t follow the self-isolation rules to the letter, and that only 11% of people remain indoors for the full time they are required to quarantine.
People not adhering to rules is, in part, down to economics. People who are self-employed or on zero hours contracts will suffer financially from having to isolate. If someone tests positive but feels OK then effectively by asking them to isolate they are having to take a financial hit.
Last year the Government stepped in to introduce a £500 payment for those on Universal credit or other benefits who were asked to self-isolate. Since then however information has been leaked about a proposed new initiative that would pay everyone that was asked to self-isolate regardless of their financial situation.
Abi went on to explain the origin of the term ‘Cobra Effect’. It refers to a situation in Delhi where there was a proliferation of cobras which led to the government paying a bounty on the snakes, incentivising people to kill the snakes. But what actually happened was as the numbers of cobras fell some citizens started to breed the snakes so that they could derive an income from the bounty hunters. The government then scrapped the scheme, the cobra breeders released the snakes and then there were more cobras than there had been to start with. It sounds like a crazy story but in 2007 in Georgia, USA, a bounty was paid on wild pigs to reduce the population and people started going into other states to obtain pigs to earn the payment.
Tim and Abi discussed the current payment system and whether people will take less care in avoiding the virus if they know there is a financial reward for having it, especially people who face a relatively low risk from the virus. In this context a positive effect incentivises people to stay at home, a negative effect incentivises people to go out and catch the virus. Evidence from analysis of sick pay shows that more generous sick pay does result in more people claiming sick days and that it stops people from going back to work too early, which does help slow the spread of viruses. However there is no evidence to suggest that people take advantage of the payment scheme as yet and therefore the weight of evidence suggests a net positive impact.
Listen to the full discussion on the BBC website.