Incentives Matter

In ‘Incentives Matter’ basic and complex influences of incentives are being discussed. From wildlife behavior to political and economic decisions, incentives are directing the way things are happening and also the way things are changing. According to the article one can compare the killing of endangered animal (which is worth several yearly incomes) to economic black markets where people take risks with illegal actions in order to avoid high tax payment. In both cases it was demonstrated how changing incentives may change people behavior. For example, when gorillas population was going down, local people were given the ability to help saving the gorillas in a way that will bring tourism to their area (so they would profit from tourism). This incentive indeed caused locals to help saving the gorillas, unfortunately once wars took place tourism stopped. Another issue is that changes are usually causing different people to have different incentives. For example, when a new technology is entering the market, some people will be happy and some will object. If you’re the one that currently make money from current technology you’ll object the new technology since its harming your business. This is why many economic changes are hard to implement even if it’s good for all. Taxes for example are strongly influenced by incentives. When specific tax is aiming for specific purpose or specific group it’ll usually cause losses for both sides. If the tax is too specific (e.g. for buying expensive red sport cars) people will usually bypass tax payment (e.g. buy blue expensive cars) in a way that tax won’t be paid and people won’t buy what they like. On the other hand if tax is not specific i.e. all are paying less (bigger population) as a result many people are paying for something they don’t use.