The limits of monetary incentives

For economists, incentives are everything. For the lazy economist, however, monetary incentives are everything. We tend to concentrate on dollars and cents, but our actions are often motivated by much more than cash. An example from Israel illustrates this beautifully. Day care centres in the city of Haifa found a common problem; parents were picking up their children late and the centres were forced to supervise uncollected kids past closing time. An easy solution beckoned; implement a fine. Surely by imposing a penalty, there would be an incentive for parents to be on time to collect their brood. Punish behaviour...

For economists, incentives are everything. For the lazy economist, however, monetary incentives are everything. We tend to concentrate on dollars and cents, but our actions are often motivated by much more than cash. An example from Israel illustrates this beautifully.

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