Three Government Fixes That Backfired: Yosemite Permits, Italy's Superbonus, and the 1993 CEO Pay Cap

Government fixes tend to follow a pattern: identify a problem, pass a rule, declare victory. What happens next often gets less attention. Three cases, spanning three decades and two continents, show how policies built on good intentions can produce the exact outcome they were designed to prevent.

Yosemite's Half Dome Lottery

In 2010, the National Park Service faced a real problem. The cables route up Half Dome in Yosemite National Park was drawing as many as 1,000 hikers a day, creating dangerous bottlenecks on exposed granite. The Park Service's solution was a permit lottery, cutting daily hikers to roughly 250, according to Reason.

Fewer people on the trail sounds like a straightforward safety win. But Reason reports that when permits became scarce and hard to win, hikers who beat the odds felt pressure to use them no matter what. A hiker who waited months or years for a slot was less likely to turn back because of a sore ankle, exhaustion, or a storm rolling in. The chance might not come again.

The result: fewer hikers overall, but accidents did not drop the way planners expected. Scarcity changed hiker behavior in a way that offset the safety benefit of a lower headcount.

Italy's Superbonus

In 2020, Italy needed to jumpstart a struggling economy and cut carbon emissions. The government's answer was the Superbonus, a tax credit that covered 110 percent of the cost of qualifying energy-efficiency home renovations, according to Reason.

Paying homeowners more than the full cost of their own renovation sounds generous. It also erased any reason to negotiate on price. A former Italian prime minister, quoted by Reason, put it plainly: "110 percent eliminates the incentive to negotiate on price." When the credits could also be sold instantly to contractors, banks, and other intermediaries, demand for renovation work exploded and so did prices for materials and labor.

The fiscal damage was substantial. The Superbonus was initially projected to cost 35 billion euros over 15 years. Reason reports it actually cost more than 220 billion euros in just four years, an amount equal to roughly 12 percent of Italy's GDP. That bill lands on Italy's already strained national debt, a cost that Italian taxpayers and, by extension, European Union creditors will be dealing with for years.

The 1993 CEO Pay Cap

The oldest case here is also the most directly relevant to today's arguments about executive compensation. In 1993, Congress capped the corporate tax deduction for executive salaries at $1 million under Section 162(m) of the tax code, aiming to rein in what many saw as runaway CEO pay.

Companies did not respond by capping pay. They responded by restructuring it, according to Reason, shifting compensation into performance bonuses and stock options that fell outside the deduction cap. Total executive pay packages did not shrink. They grew substantially in the years that followed.

Economists cited by Reason argue the law had a second-order effect: it pushed executives toward decisions that would boost short-term stock prices rather than build long-term company value, since stock options became the dominant form of pay. A former SEC chairman went so far as to say the 1993 law "deserves pride of place in the Museum of Unintended Consequences," according to Reason.

The Pattern

All three cases share a structure. A government body identified a real problem, chose a rule that targeted the visible symptom, and did not fully account for how people would adjust their behavior around the new incentive. Hikers changed their risk tolerance. Italian homeowners and contractors changed their pricing. American corporations changed how they packaged pay.

None of this means the underlying problems weren't real. Half Dome traffic was dangerous. Italy's economy needed stimulus. Executive pay in the early 1990s drew public criticism. The lesson from all three is narrower and more specific: a policy's stated goal and its actual incentive structure are not the same thing, and the gap between them is where the costs show up, whether in an ER report, a national debt figure, or a boardroom compensation committee.

The unresolved question for policymakers is not whether intentions were good. It is whether anyone modeled how people would actually respond before signing the rule into law. In Italy's case, the answer is now measured in over 200 billion euros of unplanned public debt. In the case of Half Dome, the Park Service has not published data definitively closing the debate on whether accident rates per hiker changed after the lottery began, leaving open how much of the original safety problem the permit system actually solved.