Thursday, November 20, 2008

More on incentives

While watching a concert I started thinking about the amazing cooperation needed for such a task - there are dozens of people on stage, playing various instruments in very specific ways, and hundreds of people in the audience, whose only responsibility for a successful concert is to stay quiet during performances and maybe applaud in between. The performers are rewarded financially if they perform well, and they risk being fired if they don't. The audience risks being fined or even jailed if they don't behave.

Given all that distinction - disassociation on one hand, jail on the other - who do you expect to cause more intentional trouble on the average? My money is on the audience, of course [grin].

Market incentives work a lot better than force incentives. To me, this is a beautiful example of capitalism versus socialism. Even though the risks of disobeying the state are much greater than the risks of disobeying an employer or a business associate (there's no meaningful distinction between employer and customer), cooperation is still more likely to be encountered in the market.

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