Economists respond to incentives

October 29, 2010

Here’s my short take, following on Barbara’s post Wednesday, on economists:

1. The single most valuable and durable lesson of economics is that incentives matter. Monetary incentives don’t always matter more than other motivations, and sometimes people’s behavior regarding money is a little nutty. But as an organizing principle for a social science, incentives matter is pretty good.

2. Economists respond to incentives, too. Real and potential financial awards affect what they choose to study, how they go about it, and what conclusions they draw. This doesn’t mean all economists are evil sellouts. It means they’re human beings.

3. For people who purport to believe that incentives matter, economists can be strangely touchy when anyone brings up point No. 2.

Comments

No mention of @Nouriel v. @thestalwart battle royale today (and the former’s accidential or otherwise mistake that there is nothing on teh interwebs that is “off the record”)???

Posted by Anal_yst | Report as abusive
 

Incentives, eh? See Mankiw’s Principle 4: http://www.youtube.com/watch?v=VVp8UGjEC t4&feature=player_embedded#!

Posted by BarbaraKiviat | Report as abusive
 

yep, economists are people who respond to incentives; as a result, they believe everyone else does…

Posted by rjs0 | Report as abusive
 

I don’t like feeling the need to speak up for the economic profession, but this is seems ridiculous.

“Incentives matter” – if this is a ‘valuable and durable lesson’ then it presumably means more subtle than “some people will sell out their principles and their friends if offered enough”. Because if that’s what you really mean, you’re basically making a none-too-witty claim that economics is worthless (i.e. that their most valuable lesson to us is something the average caveman already was in no doubt about.)

Your point three links to someone angry at being accused (in his mind) of “literally of adopting ideas for pay”. Most academics would be outraged at this. Yet somehow because he works in an area which believes in a far more interesting, subtle, view of “incentives matter” – this is hypocrisy? For the record, the article linked to in #3 seems in my opinion to be thoroughly deranged … but I still think this is an totally superficial, thoughtless, attack.

If you would like to be constructive, please try to explain WHY you think “incentives matter” is a valuable lesson economics offers to us? In doing so, you should constantly apply the test ‘is the average 5-year old aware of this?’ noting that where this is so, you are either not saying anything interesting or are condemning economic research.

Posted by bxg5 | Report as abusive
 

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