Commentary

Perverse Incentives, Heartless government

A commission convened by the Indian state of Andhra Pradesh last year to investigate a spate of suicides by poor farmers concluded that the farmers were driven to despair after successive droughts. Cause of the droughts? An inadequate irrigation system that was simply unable to deliver adequate water in the wake of monsoon failure. Nor did the farmers have any hope of ever recovering because government policies hampered their access to low interest credit or quality inputs such as seeds. Yet the state government stopped all aid to the destitute survivors after just a few months. Why? Relief measures would prompt more distressed farmers to commit suicide, it explained. Talk about a government understanding that incentives matter! Too bad it doesn’t apply this insight to reform itself.

Shikha Dalmia is a senior analyst at Reason Foundation, a nonprofit think tank advancing free minds and free markets. The archive of her latest work can be found here at Reason.com.