Why incentives fail
Incentives do matter, but how people respond depends as much upon how incentives are designed as on the context
One of the central tenets of undergraduate economics is that “incentives matter". In one of the most famous graduation speeches ever delivered by an economist, Nobel Prize winner Thomas Sargent listed 12 important lessons from economics. Among them, incentives featured prominently. Sargent’s advice to graduating students was simple: “Everyone responds to incentives, including people you want to help."
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