What is an Incentive?
An incentive is a choice appealing to someone’s interest in such a way as that person has reason to make that choice for their self-interest, even if it is against the interests of others in society.
Generally, as well as in a free society (i.e. a society which follows the Legal Principle), incentives are healthy. They draw us to situations which increase our standards of living. However, this can be at other’s expense.
A common example is the case of the cobras in the nineteenth century during British colonial control of India. So the story goes:
- the government paid people who would bring in dead cobras to reduce the number of snakes in the city;
- due to the incentives created by these payments, however, the more snakes killed, the more money one could earn;
- accordingly, it was more profitable to breed snakes to increase the numbers which may be killed;
- this practice led to a greater number of snakes in the streets rather than less;
- although the credibility of this story is questionable, it does illustrate the concept nicely - that even well-intentioned actions can have negative consequences.
Another harm of incentives comes about when some people have the authority to make decisions about others’ lives, but instead make choices which benefit the decision-maker.
The Legal Principle makes all aggressing illegal and subject to proportionate consequence. However the Legal Principle does little if anything to remove the incentive for people with unfair power balances, particularly in politics to aggress. This is especially true regarding the enforcers of the Legal Principle, and those who are connected to those enforcers.
Incentives, therefore are an incredibly powerful consideration in predicting how people make decisions and, importantly, how politicians make law and policy.