It might take decades for changes in incentives to affect behaviour. This is the thought prompted by Bryan Caplan's question: "Did tax cuts in the '80's spur Internet entrepreneurship twenty years later?"
I'd add other ways in which there might be long lags between changes in incentives and behaviour:
1. One reason why New Labour has been so keen to reduce the numbers of workless households is the belief that if children grow up in homes where neither parent works, they'll believe it's normal to be without work, so they won't look so hard for it when they grow up. Reducing worklessness, it thinks, can therefore raise labour supply in 10-20 years time.
2. Incentives can affect social norms slowly, as Assar Lindbeck argues here (pdf). For example, if a society has a strong work ethic, the introduction of sick pay or high marginal taxes might not reduce labour supply much immediately. But as the generation with a strong work ethic retires and is replaced by one more accustomed to generous sick pay and high tax, labour supply might fall.
3. In the 1980s incentives (and opportunities) to work in the public sector fell relative to incentives to work in the private sector. The upshot is that many people of my generation (early-mid 40s) who would have become academics or civil servants in earlier times went into the City. This might have created a supply of entrepreneurs and hedge fund managers that would not have existed otherwise.
My hunch is that changes in incentives are much more important in the long-run than short-run.
But that's all it is - a hunch. As Bryan says, it's hard to say for sure using formal empirical methods . And this raises a question. Why, when the full effects of policies are so uncertain, are so many people so dogmatic about their likely effects? Are introspection and common sense really sufficient to justify strong beliefs?