Freaky Unintended Consequences

I’m a fan of the Freakonomics books, though I don’t always agree with them. (I’ve written about them a couple times before.) The documentaryof the same name includes some material not found in the books.

I enjoyed this line: “You can teach a kid just as much at a grocery store as you can at a museum, maybe more.”

But perhaps the most poignant new story from the film is of Steven Levitt’s experiences potty-training his daughter. As he relates the story, his wife for months had trouble getting their daughter to use the toilet. So he figured that, as an economist, surely he could come up with an incentive structure to encourage potty training.

So Levitt decided to offer his daughter a bag of M&Ms if she’d use the potty. Immediately she did so. And for a couple of days, she consistently used the potty in exchange for M&Ms.

But on about the third day, Levitt’s daughter said she had to use the potty, and she went a very small amount in exchange for the M&Ms. She immediately said she needed to go again, so she went a small amount for another bag of M&Ms. Levitt points out that his incentive structure had encouraged his daughter, in three short days, to develop excellent bladder control. What it had not done is accomplish his purpose of getting her to use the potty normally.

The moral of the story? If a genius-level economist can screw up the incentives to potty train his daughter, why do so many people think that politicians and unelected bureaucrats can centrally control vast swaths of our economy?