Article Review : "Incentive Matters" By Robert Russell
In this article, Mr Robert Russell explaining about the important of Incentive.
It start by explaining about history of Australia. England began sending convicts to Australia. The transportation was privately provided but publicly funded. A lot of convicts died along the way, from disease due to overcrowding, poor nutrition and little or no medical treatment. Between 1790 and 1792, 12% of the convicts died, to the dismay of many good-hearted English men and women who thought that banishment to Australia shouldn't be a death sentence. On one ship 37% perished.
But a different approach was tried. The government decided to pay the captains a bonus for each convict that walked off the boat in Australia alive.
This simple change worked like a charm. Mortality fell to virtually zero. In 1793, on the first three boats making the trip to Australia under the new set of incentives, a single convict died out of 322 transported, an amazing improvement.
Incentive its not all about money, he explain that there's also a non-monetary incentives. Despite a common belief that economics is about money, non-monetary incentives can be just as important as monetary incentives in affecting behavior. Time is one important non-monetary factor in what we do.
So money isn't all that matters. Adding time to the list of incentives isn't enough either. People care about their reputation and fame and their conscience. They care about glory and patriotism and love. All of these can act as incentives.
Source : http://www.econlib.org/library/Columns/y2006/Robertsincentives.html#
It start by explaining about history of Australia. England began sending convicts to Australia. The transportation was privately provided but publicly funded. A lot of convicts died along the way, from disease due to overcrowding, poor nutrition and little or no medical treatment. Between 1790 and 1792, 12% of the convicts died, to the dismay of many good-hearted English men and women who thought that banishment to Australia shouldn't be a death sentence. On one ship 37% perished.
But a different approach was tried. The government decided to pay the captains a bonus for each convict that walked off the boat in Australia alive.
This simple change worked like a charm. Mortality fell to virtually zero. In 1793, on the first three boats making the trip to Australia under the new set of incentives, a single convict died out of 322 transported, an amazing improvement.
Incentive its not all about money, he explain that there's also a non-monetary incentives. Despite a common belief that economics is about money, non-monetary incentives can be just as important as monetary incentives in affecting behavior. Time is one important non-monetary factor in what we do.
So money isn't all that matters. Adding time to the list of incentives isn't enough either. People care about their reputation and fame and their conscience. They care about glory and patriotism and love. All of these can act as incentives.
Source : http://www.econlib.org/library/Columns/y2006/Robertsincentives.html#
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