Economic Incentive Essay

567 Words3 Pages
Economic incentives are used by businesses and government agencies to influence the behavior of people. These incentives are designed for the overall profitability of the business or agency and can have either a negative or positive impact on the individual. Today economics is largely incentive based. There are work incentives, production incentives, investment incentives and even purchasing incen-tives. To accomplish goals you must provide incentives, without them people have no reason to com-plete tasks (Laffont & Martimort, 2001). The incentive structure is essential to the study of economics. There are two primary forms of incentives, negative and positive. They are usually monetary but can be in the form of social or moral. A negative incentive will cost you something while a positive incen-tive will save you something. Negative incentives are typically viewed as penalties and leave you worse off financially or socially. Some examples of negative monetary incentives include late fees charged on library books or movie rentals, penalties and interest charged on taxes or negative balanc-es at financial institutions. Moral or social negative incentives would include a prison sentence for committing crimes or the risk of going to Hell for unrepented sins. Positive incentives on the other hand leave you better off financially and socially. Positive monetary incentives include coupons, sales, discounts and interest earned on investment accounts (Econedlink, 2013). Positive moral and social incentives would include helping others by donating blood, or giving funds to a charity to assist the less fortunate. Both negative and positive incentives motivate the behavior of people. A great example of an economic incentive that effects the monetary and the moral betterment of people would be the Hybrid Tax Credit. This credit was established in 2005 as part of the
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