It’s the Incentives, Stupid

By Christian Schneider

Thursday, December 11, 2025

 

In August 2011, near the steps of the Wisconsin Capitol, congressional candidate Kelda Roys stood atop a flatbed truck and addressed the attendees at a gay pride parade. Roys, now a state senator and candidate for Wisconsin governor, pressed the need for marriage equality and told the onlookers that because of Wisconsin’s ban on same-sex weddings, she herself had to flee to the gay-marriage-friendly state of Iowa to marry her “partner.”

 

Roys never mentioned that her “partner” was, in fact, a man, whom she had married in 2010. But she was running for Congress against Mark Pocan, an openly gay man, who succeeded Tammy Baldwin, an openly gay woman. In the heavily progressive Madison-area congressional district, being gay wasn’t something to hide; it was a résumé-builder. And Roys clearly found her résumé lacking.

 

“She was clearly trying to represent herself as a member of the LGBT community,” Katie Belanger, executive director of Fair Wisconsin, the state’s most visible LGBT rights organization, told me at the time. “That’s what happens when you start making a political calculation in order to help yourself instead of working for the common good,” said Belanger.

 

But Roys took this ill-conceived gamble because she had an incentive to do so. When benefits are handed down based on immutable characteristics, like sexual orientation, you’re going to find more people claiming to have those characteristics.

 

Consider reporter Rose Horowitch’s stunning story at The Atlantic last week, in which she noted the high number of students at prestigious universities today who seek to be considered “disabled” so they can obtain “accommodations” in the classroom. Horowitch notes that 20 percent of the students at both Brown and Harvard are deemed disabled.

 

Clearly, this cohort of kids and their parents have figured out how to game the system to receive advantages such as flexible deadlines for turning in work, missing classes without penalty, and being given extra time to take exams. Claim you have some sort of learning disability, and the school will typically grant you an exception rather than fight your parents over the special treatment. (For one kid at a California school, that accommodation meant bringing the student’s mother to class.)

 

Some argue that the increase in mental-health-related diagnoses — ADHD, anxiety, depression — is a step forward, as health experts are more accurately diagnosing problems that previous generations had to struggle with on their own. If this were the case, though, we would expect to see similar disability rates among students at two-year colleges. Yet, as Horowitch notes, only 3 to 4 percent of students at two-year colleges receive accommodations, and over half of four-year students magically develop these learning disabilities after they arrive at school. (In reality, students who attend two-year schools are much more likely to have learning disabilities, which keeps many of them from getting the grades necessary to attend a four-year college.)

 

Few people would disagree that students with legitimate disabilities deserve special accommodations to complete their school work. But again, the stigma of being labeled “disabled” pales against the desire to have a special advantage in the classroom.

 

Once again, the incentive is backward.

 

As Milton Friedman famously said, the greatest mistake we can make is to judge policies and programs “by their intentions rather than their results.” And yet, more often than not, our lawmakers celebrate inputs and ignore potential outputs. They imagine citizens not as dynamic individuals who will change their behavior in response to changes in the law but as cardboard cutouts who will dutifully act without considering their own self-interest.

 

And those self-interests are determined by the incentives given to people to pursue them. When university professors know they can move up more quickly in their profession by claiming to be members of minority groups, you get Elizabeth Warren pitching her family recipe for “pow wow chow.” When progressives promote homeownership by supercharging Fannie Mae and Freddie Mac, people with poor credit are incentivized to buy homes that are well beyond their means, collapsing the economy. When “wealth taxes” are implemented, wealthy (and thus more mobile) taxpayers simply move their assets to lower-taxed areas.

 

“Unintended” consequences are only unintended for lawmakers with a lack of imagination.

 

Yet it seems to shock everyone when citizens react to a new government program in a way that is entirely predictable. Americans recently learned that a band of Minnesota-based Somali immigrants had raided a government fund meant to feed hungry children during the Covid-19 pandemic. These criminal pockets made off with more than a billion dollars to pay for luxurious homes and travel, yet it went on for years under the blind eye of Governor Tim Walz.

 

The Somali racket is a case of double incentives at work; when governments set up giant programs with little oversight, they effectively set up a bank with a “Rob Us, No Weapons Needed” sign out front. When the government distributes money to feed students, it is remarkable how many fictitious hungry students suddenly appear.

 

There were incentives at work on the part of Minnesota state investigators as well. Much of the fraud took place after the death of Minneapolis man George Floyd at the hands of police, so state agents were afraid to target the predominantly black Somali community, lest they receive blowback for racial insensitivity.

 

So when criminals are incentivized to steal, and law enforcement is incentivized to look the other way, taxpayers are left to watch a billion dollars of their money walk out the door.

 

Nobody wants to think their personal behavior can be reduced to a menu of incentives, but acting in our own self-interest is how we survive. Of course, people often act outside of their own interests, but that is because feeling good about helping others or giving to charity is an incentive in itself.

 

Whether it is society granting benefits to people with certain characteristics or governments granting benefits to preferred groups, it would help to game things out. Subsidizing an activity only creates more of it, just as making it more expensive guarantees less of it.

 

Policymakers can give as many speeches as they want about fairness and justice. Still, until they start crafting laws that account for human nature rather than ignore it, we’ll keep getting more of exactly what we’re paying for. And if history is any guide, the only incentive Washington ever seems to understand is the one that involves a camera pointed at them — which is why, when it comes to unintended consequences, Congress remains our most reliable repeat customer. After all, if the incentives weren’t broken, they’d have fixed them already . . . and then what would they campaign on?