The Introduction How People Respond to Incentives
There are incentives in all aspects of our lives, such as, home where you do your chores and get rewarded, or at work when you do extra jobs to get a promotion or raise, or at school where you do some extra credit for a better grade.As economist Steven Landsburg writes in The Armchair Economist (1991, p 3), “Most of economics can be summarized in four words: ‘People respond to incentives.’ The rest is commentary.
” People care about their employers, but they also care about their families, hobbies, gardens, and churches, which for the most part is why the incentives work so well.People respond to incentives differently.
Take for example the professional athlete, who loves their team and talks about giving “110 percent” also loves their families, favorite charities, and their different vacation homes. Even the true dedication that they have for the sport comes with incentives, such as earning an extra $100,000 for rushing more than 1000 yards in a season, or $300,000 for being on the Is this Essay helpful? Join OPPapers to read more and access more than 325,000 just like it! GET BETTER GRADES roster for at least for 14 games.Coaches have different incentives, their main objective is to have the best team, but also receive $75,000 extra if at least 75 percent of his senior players graduate. Also if there aren’t any legal and NCAA infractions they receive $50,000 each year. There are bonuses for good grades, but coaches don’t shorten practices to extend study time, that is where incentives kick in, “You look at the proportional size of each bonus, and it’s not very hard to see where, over the long term, the priority and focus are going to be.
They would rather rewrite a contract on an athlete than change the practice time than to allow them to succeed academically. Incentives drive markets. If people are using a product and the price goes way high, then their incentive is to search for something with the same effect but a lower price. Such as whale oil that people used, until it became too expensive then they turn to an alternative and started using rock…