magpiebrain

The Power of Incentives

As Steven D Levitt and Stephen J Dubmner’s book Freakonomics explains, Economics can be considered as nothing more than the study of how incentives affect people. Broadly split into three types – Financial (What’s it worth to me?), Moral (Is it the right thing to do?) and Social (Will society act in a bad way if I do this thing?) by understanding the incentives available to someone, you can understand how they will act in a given circumstance.

Taken further, Econmics allows you to alter the available incentives to alter how people act. Want people to reduce their carbon output? Well, you could explain how they’d save money by reducing their energy use (financial incentive). You could also create a groundswell of opinion stating that society views excessive energy use badly (social incentive, which could ultimately become a moral incentive).

A good example of changing incentives to change behaviour could be seen on BBC Breakfast this morning. Since 1998, using a mobile phone whilst driving has been illegal in Jersey. The simple act of making something illegal attempts to act as a moral incentive – with the punishment of a £500 fine acting as a financial incentive. On it’s own, this wasn’t enough. There wasn’t enough stigma associated with the act of using a mobile phone whilst driving for it to stop altogether. In the end it took a campaign, started by Paul Newman (no relation) and backed by the local Jersey Evening Post and more surprisingly mobile phone company Jersey Telecom. The resulting Hands Off campaign is attempting to create the social incentive – using a mobile phone when driving is unacceptable to society.

This entry was posted on Tuesday, October 31st, 2006 at 9:52 am and is filed under General. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site. It is tagged as freakonomics, economics, mobile, incentives, bbc, society over at Technorati