The principle is simple: people respond to incentives. This succinct statement captures the essence of what one might glean from a well-structured undergraduate economics course. The catch, however, is recognizing that this principle holds true even when we wish it did not.
Consider, if you will, a scenario where you are tasked with making decisions. You have three choices: to make a correct decision, to make an incorrect one, or—here’s the nuance—there are two distinct ways to be wrong. You could either act when you should not have or refrain from acting when action was warranted.
Perfection in decision-making is, frankly, unattainable. So, which type of error do you tend to guard against more vigorously? The answer often hinges on the potential repercussions of your mistake—specifically, which one could cost you your job.
In many governmental contexts, the bias in this regard is both predictable and significant. Economists refer to this phenomenon as asymmetric accountability. It occurs when the fallout from one type of mistake is clear, traceable, and potentially career-ending, while the consequences of another type are nebulous, diffuse, and often blamed on no one in particular. This skewed incentive structure leads government agencies to be far more cautious of the repercussions of wrongful action than of inaction that could have been beneficial. This behavior is not born from incompetence but rather from a rational instinct for self-preservation. We often observe this dynamic at play with entities such as the FDA, the TSA, and the ever-expanding national debt.
Take the FDA as a case study. The agency faces a choice: approve a treatment that later proves unsafe, or delay or deny a treatment that might have saved lives. The consequences of approving a harmful treatment are stark—identifiable victims, sensational headlines, and potential congressional scrutiny. In contrast, the fallout from denying a beneficial treatment tends to be far less visible. The ongoing pain and suffering of patients denied access to effective treatments rarely gets linked back to regulatory hurdles.
The incentives here are evident. An FDA reviewer who sits on an application for two additional years may escape any accountability for the possible deaths their delay may have caused. Conversely, a reviewer who greenlights a treatment that subsequently harms individuals could face severe professional repercussions. The net result? An institution that leans toward conservative delays, demanding more studies and extensive clinical trials before granting approval.
This same pattern sheds light on why the TSA confiscates your water bottle. If a security officer allows a passenger through who later commits an act of violence, the fallout would be catastrophic and, crucially for the screener, directly attributable. On the other hand, if they inconvenience thousands of passengers with security delays, missed flights, and the indignity of being searched, the negative impact is palpable but lacks a personal accountability link. Travelers might complain, but they eventually move on.
In this scenario, the screener, their supervisor, and the agency face significant consequences if they let a real threat slip through the cracks, yet encounter virtually no repercussions for treating every passenger as a possible threat. The predictable outcome is a display of security theater designed not to minimize overall harm but rather to avoid a specific type of harm that could lead to congressional inquiry.
Asymmetric accountability is also a key factor in understanding the persistent issue of government deficits. Balancing a budget is not rocket science; most individuals and even elected officials manage to do so in their personal lives without much fuss. Yet, achieving the same with government finances requires every policymaker to agree to limit spending—including on projects within their own districts. This is where the system often falters. Restraint is only effective when everyone is on board.
On the flip side, spending requires cooperation, but that cooperation is generally easier to obtain. Every politician understands that spending money today brings immediate, attributable credit. They gain the reputation of being results-oriented, complete with ribbon-cutting ceremonies, press releases, and appreciative constituents. However, the bill for that spending often arrives much later, typically paid by taxpayers who weren’t even born when the expenditures were approved. Thus, a cooperative environment emerges: politicians engage in a practice known as “logrolling,” where everyone benefits from the immediate rewards without considering the future tax burdens. No one ever runs a campaign on the promise of sparing future generations from a hefty tax bill.
These examples may appear as various failures, but they all stem from the same core issue: asymmetric accountability. From the viewpoint of the decision-maker, one type of error is visible, attributable, and personally damaging, while the other is invisible, diffuse, and devoid of consequences. While it’s easy to express frustration over this reality, the solution does not lie in seeking out better individuals or enhancing training. Instead, we must focus on establishing improved accountability structures.
After all, incentives shape behavior.
