Member-only story
Incentive issues
A simple instrument to influence behaviour has a huge potential for unintended consequences
Imagine you are a dentist (unless you actually are one, of course). To a large extent, your income is paid for by people who have bad teeth, and this tends to be the consequence of inadequate dental hygiene. Would you advise your patients how to take better care of their pearly whites?
Standard economics would discourage you from doing so. The better they look after their teeth, the fewer root canal treatments, crowns and extractions, or even ordinary fillings they will need, and hence the less you will earn. You are, in effect, incentivized against encouraging people to take better care of their oral cavity.
I have quoted the economist Steven Landsburg more than once, and I am sure it will happen again. ‘Most of economics can be summarized in four words: “People respond to incentives.” The rest is commentary,’ he writes on the first page of The Armchair Economist. Despite everything you hear from behavioural economics, it is true: in many cases, a very effective way to influence someone’s behaviour is to pay them if they must do something, or to fine them if they must not do something.
