There are few important concepts described in the article. Self interest drives humans to work, produce and on the way to enrich and help the society. People, who are rewarded for their innovation and hard work, innovate more and work harder. A person, who is paid commission, has a larger incentive to sell more.
However, there are public areas of responsibility that do not consent to these concepts, like public health and public education. Even the Israeli universities have lowered their standards of education over last years, as can be seen from their yearly ranking.
Incentives must be carefully designed and thought through, in order not to cause an adverse effect in other areas, like in the Mexican cars driving restriction example.
There is the principle-agent problem, which states that the agent’s interest is not always correlated with the principle’s one. This problem is relevant for simple jobs as well as for CXO jobs. Cleaver incentives for the agents and the public should prevent principle-agent problems.
The largest problems arise when some resource is commonly owned. Then there is an incentive to abuse this resource as much as possible, otherwise someone else will. Corrective incentives can include quotas, licenses, taxes etc.
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