Carrots Can Be Sticks

Abstract

If we were to choose a mantra for the economics profession, incentives should be among the most obvious. If resources are scarce, then they have alternative uses and an opportunity cost that must be compensated. Thus, for example, if people are rational –we are told– the higher the pay, the better the performance; and conversely: if I want great achievements, I need to provide large material incentives. Is it really so? Continue reading...