Incentives Matter

http://www.econlib.org/library/Columns/y2006/Robertsincentives.html

This article basically explains how incentives can be about monetary or not monetary. He explains that in the 1790's England began sending convicts to Australia. The problem was that 13% of them would die because of disease and overcrowding on the boat. They suspected that the captains on the boat would keep the medicine and food provided from the convicts and sold them in Australia in exchange for money instead. They offered these captains money for every convict that made it to Australia and everything changed completely. There were no convicts dying from that point on. An example that they used for non monetary incentives is if they tell people that the Beatles are reuniting and that concert will take place at a small theater in town. The catch is that the concert is free, this then becomes a problem for people. They begin to think of the struggle it will be to get in because of the capacity. The incentive in this case is not high enough because the guarantee of them being able to see the Beatles is low.

This article explains the importance in incentives. They explain that incentives does not only come in the form of money but that there is also psychological incentives. I know that when people tell me that Baskin Robins is giving away free ice cream cones, but that the line is down the block. I would rather pay and wait less, then to wait in a huge line for a long time. Time is money in that case. I could be doing something more useful with that time. In the previous articles all of the incentives had money involved, this one had different scenarios. Although some incentives are not monetary, they still come down to making monetary decisions at the end.