Learn With Elaine: Misleading Metrics

Sometimes incentives can have unintended consequences.

Econlife Blog

https://econlife.com/2021/07/misleading-metrics/

Fact Questions:

1. In the former Soviet Union, how might a factory’s weight quota lead to the wrong kinds of output?
2. In the U.K., why did a seemingly beneficial requirement for medical appointments have unintended consequences?
3. In the U.S., how were births affected by hospitals’ quest to elevate their Apgar scores?
4. In India, why did a British bounty on dead cobras not quite work out as they expected? 

The Economic Idea: Incentives

Incentives are the foundation of economics because they make markets work. By a market, we just mean the process through which demand and supply determine price and quantity.

Most of the time, demand and supply incentives have predictable results. On the demand side of the market, we have the incentive to buy more when price falls. At the same time, a lower price encourages the supply side to produce less.

Sometimes though, government can create new incentives that result in unintended consequences. It happened in the former Soviet Union with factory output quotas and in India with snake bounties.

Activity Goal: To consider how incentives can lead to unintended consequences.

 Procedure: A small group exercise.

1. In class, remotely, or at home, divide into pairs or small groups of 3 to 5 people.
2. Each group should decide a quality that will determine what makes a classmate the best achiever for homework assignments. Please choose from the following list. Then add your own new metric.

• Speed
• Facts
• Length

3. Re-gather as a class. Each group can share the unintended consequences of both metrics.
4. Optional: You might want to discuss how class tests could have unintended learning consequences. What are the best metrics for tests?