Incentives Matter, Little Big Horn Edition

13 July 2010 at 11:11 am Peter G. Klein 1 comment

| Peter Klein |

Thanks to Norman Van Cott for this tidbit, which I hadn’t known before:

The crux of Roger McGrath’s review of Nathaniel Philbrick’s “The Last Stand” (Bookshelf, June 18) is that George Custer’s “undoing was the wildly inaccurate information he [Custer] received about the number of Indian warriors he might face.” Left unnoted by Mr. McGrath is the role perverse public-sector economic incentives played in generating this information.

To wit, Indian reservation agents’ salaries varied directly with reservation populations. More Indians, more money. This provided agents an incentive to inflate reservation population counts, which led in turn to underestimates of the number of Indians on the warpath. For the economist, the Little Bighorn debacle is an excellent example of public choice economics in action.

Details about how these incentives affected the population counts appear in a previous decade’s classic study of Custer, Evan Connell’s 1984 “Son of the Morning Star.” For example, prior to the battle, agents reported 37,391 Indians on the reservations. A U.S. Army count after the battle turned up 11,660. That Custer’s soldiers ended up facing perhaps twice as many Indians as they had been told to expect is not surprising. Incentives matter.