The economics of 'cash for cane toads' – a textbook example of perverse incentives

phys.org | 1/11/2019 | Staff
iloveangie02 (Posted by) Level 3
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Economics teachers can all thank Pauline Hanson for providing an excellent example to add to their classes.

Indeed, it's rare that Economics 101 lessons are as readily on display as in the Queensland senator's "cash for cane toads" proposal.

Textbook - Wisdom - Failures - Plan

Both textbook wisdom and historical failures tell us the plan won't work.

Hanson's proposal involves paying welfare recipients 10 cents for each toad they collect (alive) and hand over to their local council. The council would then kill the toads humanely in large freezers.

Senator - Cane - Toad - Problem - Fix

The senator is right to be concerned about the cane toad problem. Introduced in the 1930s as a biological fix to control native beetles eating sugar cane crops, the animals have prospered with devastating impact on native flora and fauna. It's estimated there are now more than 200 million across Queensland and northern New South Wales.

They carry toxins at all stages of their life cycle, including as eggs. Ingesting the toxin is fatal to many Australian species. Their voracious appetites both deplete insect populations such as honey bees and threaten the food sources of other native animals.

Reason - Hanson - Idea - Theory - Practice

The reason Hanson's idea is fundamentally flawed, both in theory and in practice, has to do with incentives.

Incentives are central to economics. They are ingrained in the laws of demand and supply, and the setting of interest rates and taxes.

Humans - Incentives - Key - Costs

Humans react to incentives. The key is setting them just right by accounting for all of the costs involved.

This is the most obvious and least interesting problem with the scheme. In NSW and Queensland, you can earn 10 cents by returning an empty drink container to your local supermarket. That's a task exponentially easier than catching a cane toad and delivering it alive to your local council chambers.

Case - Incentives - Solution

If it were just a case of the incentives being too low, the solution would be simple: raise the...
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