By Anabel Kim

Introduction

The concept of economic incentives is important to understand. Incentives are rewards or punishments – usually monetary – that can be used to influence the behavior of individuals, organizations, and governments. They are an essential part of the economic system, as they can be used to promote certain activities, discourage certain activities, or even shape public opinion. In this blog, we'll explore what economic incentives are, the different types of economic incentives, and the role they play in the economy.

What are Economic Incentives?

Incentives, in general, are motivators. People are willing to do certain things, if they are motivated. They can be motivated by something tangible, such as money, or something intangible, like time or praise. In the economic world, economic incentives are rewards or punishments that affect people's behavior due to financial motivators. In behavioral economics, one of the key points is how incentives and money push people to do certain things, which allows the economy to grow. 

Examples of Economic Incentives in Action

For example, one type of economic incentive is promotions. When you have a job, you usually make a certain amount of money per year. However, if you go above and beyond in your job, you may be promoted by your boss. The idea of a promotion creates a positive incentive that motivates you to work harder in hopes of earning the promotion, and therefore making more money. Your boss/company also benefits from your hard work, so overall it is a positive situation. Another example of an economic incentive, this time a negative one, are fines. Say you are driving too fast in your neighborhood and a police officer pulls you over. You will probably get a speeding ticket or fine. You will end up losing money due to breaking the law, so there is an incentive to obey the law and drive within the limit. 

Conclusion

Overall, economic incentives are key in our society, and I encourage readers to recognize how these incentives are present in day to day life. This concept is integrated everywhere, and it is important to notice how economic incentives affect our actions.