Incentives In Steven D. Levitt's Freakonomics
“An incentive is simply a means of urging people to do more of a good thing and less of a bad thing.” This quote from Freakonomics by Steven D. Levitt and Stephen J. Dubner explains why incentives are used in modern society. They are present to motivate someone to make a decision, whether it be a positive or negative one. Many times the average person thinks of an incentive as a term they are not familiar with, or that they don’t use on a daily basis. However, people everywhere use incentives on a daily basis to get what they want, whether they realize it or not.
Incentives have the power to act in different manners depending on what one may want to achieve. For example, positive incentives will motivate someone by promising a reward while …show more content…
negative incentives threaten a punishment. Economic incentives are created to make people behave in a certain way by offering them a reward or prize. When making a choice is the right thing to do and an individual's own moral values dictate their actions, moral incentives have been applied. A social incentive, however, is when behavior is motivated by a strong feeling to conform to society and what others think about an individual's actions.
In Freakonomics Paul Feldman studies the incentives of late pickups at day care and bagel thefts in a company he had started himself.
Paul Feldman had created a moral incentive when he would lay out bagels for people throughout different businesses and would also have an empty basket with a suggested price to pay for the bagels they took. What Paul found after collecting his earnings was that his collection rate was about 95%, making the majority of his customers honest. When people did cheat from him, he found trends from the data he collected. For example, immediately after September 11th, 2001, Feldman had a 2% gain in payments. He contributed this to the idea that many of his customers were patriotic because of their affiliation with national security. A social incentive can be seen in this very same experiment. The data Feldman collected suggested that smaller offices were more honest than larger offices. He believes that smaller officers were more honest because members would be put under a greater sense of shame if caught stealing. Negative incentives were put in place at a daycare facility when adults continued to pick their children up late. In order to combat late pickups, the daycare facility decided to enact a 3 dollar payment for each day they came to pick their child up late. The daycare service believed this incentive would prevent late pickups but, the number of late pickups rose because a 3 dollar payment was simply not enough
money.
Incentives play a similar role in the lives of cheating teachers and sumo wrestlers from Japan. Freakonomics explains how a positive incentive is used when sumo wrestlers perform at a high level. In Japan, sumo wrestlers will earn at least 170,000 dollars a year if they are ranked within the top forty while the seventieth ranked sumo wrestler will earn only 15,000 dollars per year. Sumo wrestlers are also being encouraged by an economic incentive, the more matches a sumo wrestler wins, the more money the sumo wrestler receives. Cheating teachers were caught in the Chicago Public School system due to the incentives of high stakes testing. Teachers whose students performed well on the exams could receive bonuses while teachers whose students didn’t perform well could be censured. Schools who did perform well also had the opportunity to receive more government spending than those who performed poorly. These incentives, are what caused a significant amount of teachers to change the answers on students scantrons. The incentives promised by both the school and the government were far greater than the risk of getting caught. In conclusion, Freakonomics explains why certain individuals are motivated by incentives and what they are willing to do to gain an advantage. The book explains the monumental lengths individuals are willing to go to because of incentives and the rewards that come with them. They help to motivate people to make decisions, whether they be positive or negative. Most importantly, incentives are used on a daily basis to help people get what they want.
Incentives have the power to act in different manners depending on what one may want to achieve. For example, positive incentives will motivate someone by promising a reward while …show more content…
negative incentives threaten a punishment. Economic incentives are created to make people behave in a certain way by offering them a reward or prize. When making a choice is the right thing to do and an individual's own moral values dictate their actions, moral incentives have been applied. A social incentive, however, is when behavior is motivated by a strong feeling to conform to society and what others think about an individual's actions.
In Freakonomics Paul Feldman studies the incentives of late pickups at day care and bagel thefts in a company he had started himself.
Paul Feldman had created a moral incentive when he would lay out bagels for people throughout different businesses and would also have an empty basket with a suggested price to pay for the bagels they took. What Paul found after collecting his earnings was that his collection rate was about 95%, making the majority of his customers honest. When people did cheat from him, he found trends from the data he collected. For example, immediately after September 11th, 2001, Feldman had a 2% gain in payments. He contributed this to the idea that many of his customers were patriotic because of their affiliation with national security. A social incentive can be seen in this very same experiment. The data Feldman collected suggested that smaller offices were more honest than larger offices. He believes that smaller officers were more honest because members would be put under a greater sense of shame if caught stealing. Negative incentives were put in place at a daycare facility when adults continued to pick their children up late. In order to combat late pickups, the daycare facility decided to enact a 3 dollar payment for each day they came to pick their child up late. The daycare service believed this incentive would prevent late pickups but, the number of late pickups rose because a 3 dollar payment was simply not enough
money.
Incentives play a similar role in the lives of cheating teachers and sumo wrestlers from Japan. Freakonomics explains how a positive incentive is used when sumo wrestlers perform at a high level. In Japan, sumo wrestlers will earn at least 170,000 dollars a year if they are ranked within the top forty while the seventieth ranked sumo wrestler will earn only 15,000 dollars per year. Sumo wrestlers are also being encouraged by an economic incentive, the more matches a sumo wrestler wins, the more money the sumo wrestler receives. Cheating teachers were caught in the Chicago Public School system due to the incentives of high stakes testing. Teachers whose students performed well on the exams could receive bonuses while teachers whose students didn’t perform well could be censured. Schools who did perform well also had the opportunity to receive more government spending than those who performed poorly. These incentives, are what caused a significant amount of teachers to change the answers on students scantrons. The incentives promised by both the school and the government were far greater than the risk of getting caught. In conclusion, Freakonomics explains why certain individuals are motivated by incentives and what they are willing to do to gain an advantage. The book explains the monumental lengths individuals are willing to go to because of incentives and the rewards that come with them. They help to motivate people to make decisions, whether they be positive or negative. Most importantly, incentives are used on a daily basis to help people get what they want.