Perverse incentives refer to situations where individuals or organizations are encouraged to act in ways that may be counterproductive, wasteful, or even harmful. These incentives can distort behavior and lead to unintended consequences. For example, a healthcare system might offer higher reimbursements for procedures rather than preventative care, leading doctors to prioritize more expensive treatments over less costly but potentially more effective measures. This would create perverse incentives that could harm patients in the long run.