A new Freakonomics podcast explores how putting out a bounty on something can backfire. Their guest Vikas Mehrotra, a finance professor at the University of Alberta, explains:
[T]he "cobra effect" refers to a scheme in colonial India where the British governor, or whoever, the person in charge in Delhi, wanted to rid Delhi of cobras. Apparently in his opinion there were too many cobras in Delhi. So he had the bounty placed on cobras. And he expected this would solve the problem. But the population in Delhi, at least some of it, responded by farming cobras. And all of a sudden the administration was getting too many cobra skins. And they decided the scheme wasn’t as smart as initially it appeared and they rescinded the scheme. But by then the cobra farmers had this little population of cobras to deal with. And what do you do if there’s no market? You just release them. And so this significantly, by a few orders of magnitude, worsened the cobra menace in Delhi.