Unexpected behaviour of encode()

psql -U postgres
psql (9.2.3)
Type "help" for help.

postgres=# select encode('can''t', 'escape');
 encode
--------
 can't
(1 row)

I observed the same behaviour on one of our older systems (8.3.11) as well.

Am I missing something?  I expected "can''t" as the output.

--
Bill Moran
http://www.potentialtech.com
http://people.collaborativefusion.com/~wmoran/