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February 16, 2016

Comments

Luis Enrique

I am not that familiar with contract theory but from what I know economists usually say that high powered incentives are rarely a good idea

TickyW

Perhaps economics trainees should be required to study industrial sociology/industrial psychology in tandem with their economics studies before they are let loose on the world with half-baked pure-economics ideas.

Interesting, I believe Noah Smith is advocating that empirics should be taught at 101 in tandem with economic theory. This may help too, as it could highlight the flaws in the latter and indicate to students that economics does not have all the answers.

Tom

I'm not sure O'Sullivan would have potted the final ball if there were no prize on offer. A similar thing happened in 2010, with him refusing to pot the final ball on a 147 because of a lack of a "special prize" (although in this case the tournament offered £4k to the player with the highest break, with the prize being shared if there were multiple 147s. Appreciate this still constitutes a prize, but it's not quite a "direct" one so to say).

http://www.theguardian.com/sport/2010/sep/21/ronnie-o-sullivan-snooker

Anomaly UK

Is bargaining for a better deal not covered in Econ 101?

https://twitter.com/paddypower/status/699599727474700288

From Arse To Elbow

This was the last game of a morning session, which gave O'Sullivan a 4-1 lead. At the time he chose the easier pink, there was still 1 red on the table. If he'd missed the black, his opponent might have conceded, or he might have decided to try some snookers (the optimum time is on the last red), either for some practice or just to rile Ronnie.

Leaving aside the confected publicity angle (Barry Hearn was involved), or the possibility of a betting scam, one possible explanation is that O'Sullivan had a pressing lunchtime appointment, so clearing the table and ending the session, even at the sacrifice of £10k, was more important to him.

Sad Lassie

Actually, your Carlin quote doesn't quite cover the attitude. The problem with giving too much money to the poor is not that it directly disincentivises them, but it reveals to them very clearly how difficult it is to do better by their own efforts, since the handouts are given to people who very clearly need them.

In contrast, the rich may well decide that they have better things to spend their time on propping up the Exchequer.

For those of us in the middle, taxation rates often make us angry and disinclined to support people who definitely do need support. I'm confident that taking nearly half of my income irritates me every time I see it spent badly or without any regard for economy. In real terms a few percent more or a few percent less makes no practical difference to my lifestyle, but I know which will change my attitudes and how

Deviation Fom The Mean

Incentives are a red herring. I have seen the argument used by left and right. But I will look at the left use to highlight my argument.

The left claim that co-ops are more productive than capitalist firms because workers will be incentivised to work harder, to apply themselves more etc. But in my experience the overwhelming majority of workers put in the effort and apply themselves regardless.

Incentive economics is one of those branches which attract wankers and tossers of all stripes ready to wow us with their trendy and modern sounding meta-theories. What incentive economics more often than not reveal are the prejudicial mind of the economist rather than any key insights into how economic actors behave.

Incentive economics comes straight from the managerial mindset and the rise of this sort of economics is a reflection of the rise of managerialism.

gastro george

@DFTM - Having worked in both co-ops and "capitalist" companies, I'd agree. IMHO the biggest incentive is to feel valued and that your voice can be heard.

TickyW

Just to add further to the mix.

Lord Freud and IDS make the mistake that benefit claimants respond solely to monetary rewards/penalties when they (Freud and IDS) enforce a harsh regime of benefits sanctions on unemployed claimants.

To my mind, this is another example of how an inappropriate economics framework has been used; in this case, to develop a "solution" to unemployment.

Underpinning benefit sanctions is the ugly idea of the creature "homo economicus", a coarse and base creature (in the eyes of its creators), which can only respond to "loss aversion" techniques. Deprive the creature of food for three weeks and it will look for, and find, paid employment.

Yes, a significant number of claimants do not renew their benefit claim following a sanction. Unfortunately, no-one knows why. Is it because they have found a job? Or are they subsisting on survival crime and / or foodbanks?

Lord Freud and IDS have declined to commission follow-up surveys so as to ascertain the destinations of non-returners. Again, an example of economic theory being applied, but without much empirical support for its efficacy.

gastro george

@TickyW - Do you get the impression that IDS cares?

George Dawes

@DFTM @GG So to clarify your comments, you both agree with the article that the right incentives are vital, you're just keen to note that incentives don't have to be monetary.

TZH

great article

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