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Wednesday, March 30th, 2011

[reddit-me]Andrew Sullivan and Ezra Klein both posted today about Campbell’s Law, citing an article by Dana Goldstein in the Daily Beast about corruption in schools under Michelle Rhee’s chancellorship in Washington, D.C.:

In the social sciences, there is an oft-repeated maxim called Campbell’s Law, named after Donald Campbell, a psychologist who studied human creativity. Campbell’s Law states that incentives corrupt. In other words, the more punishments and rewards—such as merit pay—are associated with the results of any given test, the more likely it is that the test’s results will be rendered meaningless, either through outright cheating or through teaching to the test in a way that narrows the curriculum and renders real learning obsolete.

I can think of cooler things that might be called Campbell’s Law — but such as it is, it goes a long way to explaining the flaw in capitalism without enough regulation. Organizing an economy around the pursuit of currency is efficient but not in the way it was intended — as any shortcut or corruption is utilized, as every possible cost is externalized.

It also goes a helps explain — but not as completely — how government tax incentives subsidizing gasoline, corn, middle class mortgages, student loans, and health care costs has led to escalating demand for these resources — seemingly distorting the market more than a direct intervention would. There seems to be something about tax incentives that distorts markets more than direct interventions. (A topic that seems up Matt Yglesias‘s alley to explore.)

On a related note, when taxpayers demand their receipt for government services– it should reflect not only disbursements, but the cost of tax benefits and loopholes.

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