Incentives Matter, Whether In Marketing, Economics or Politics

My April column in Business North was about the role incentives play in generating outcomes that businesses desire. Here's the beginning of the story, followed by a number of quotes about the importance of understanding incentives.

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Photo credit: Gary Firstenberg

Even though economics has been famously nicknamed “the dismal science,” there have been some surprisingly interesting books written about this topic over the years. One of these was the 2005  bestseller Freakonomics, by Steven D Levitt and Stephen J. Dubner, which went on to sell more than 4 million copies. When I read the book in 2009, one of the takeaways for me was the importance of incentives.

As a result, I did a Google search on the topic at the time and came across a blog titled Incentives Matter that dealt with economics. To my surprise, the blogger was a UMD economics professor originally from Brazil, Pedro Albuquerque. We met for lunch at Pizza Luce and I soon learned that a Nobel Prize was given in 2007 to a University of Minnesota professor, Leonid Hurwicz, for his recognition of the role of incentives in the field of economics and game theory.

Continue reading Here.

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Quotes About Incentives

"Show me the incentive and I will show you the outcome."
~ Charley Munger

"The basic idea that incentives can be used to motivate behavior is a powerful one. It works for employees, and it has a clear place in parenting, as anyone who has tried to potty-train a recalcitrant toddler with sticker rewards knows."
~ Emily Oster

"People from both political parties have long recognized that welfare without work creates negative incentives that lead to permanent poverty. It robs people of self-esteem."
~ Mitt Romney

EdNote: If this is so, why do we persist in doing it?

"The time is long overdue to stop looking for progress through racial or ethnic leaders. Such leaders have too many incentives to promote polarizing attitudes and actions that are counterproductive for minorities and disastrous for the country."
~ Thomas Sowell

"People in the political world have every incentive to say things that lead voters away from a clear economic understanding of issues. What has happened more and more is that organized groups have more and more reasons to say things that don't make any economic sense."
~ Thomas Sowell

"If individuals can take from a common pot regardless of how much they put in it, each person has an incentive to be a free rider, to do as little as possible and take as much as possible because what one fails to take will be taken by someone else."
~ John Stossel

And so it goes.