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Incentives = Economics (Vol. 38)

Updated: Feb 7, 2023

analyticsbox | Feb 09, 2022

Showing Economy

Incentives Direct our Actions

There are many powerful emotions that affect our lives - Love, Hate, Fear, Inertia, Incentives, etc. The one directly related to Economics: Incentives.

We all understand that we do what we are incentivized to do, what we think is in our best interest. Nothing new here. But let’s take a moment to relate this to economics and economic policy. Governing relates to doing the essential things a government should do and directing economic activity in many ways. Economic policy is a major part of what the Federal government does. And how it directs policy has a major bearing on our individual actions as well as the impact on the entire economy and, indeed, our future.

For example, The War on Poverty, as discussed in No Spin #10, may have been well intentioned, but is a miserable failure. Why? Because the incentives were misguided. Instead of eliminating poverty, it fostered a culture of dependency and entitlement. Clearly that was not the intention, and 20+ trillion dollars has been mostly wasted on policy that did the opposite of the intended results.

The government incentivizes the purchase of electric vehicles to help with reducing our dependence on fossil fuels thereby reducing the carbon emissions from automobiles. This may feel good, but the facts are that there is very little benefit to the carbon footprint as analyzed in No Spin #1.

And the biggest problem is the overall government fiscal and monetary policy intended to help our economy, which does just the opposite. It takes away the funds in the private sector which is the incentive and capability to grow the economy. See No Spin #16 - The Formula for Growth.

The end result of well intentioned but wrong headed policy, is that we are piling on debt to incentivize poorly thought out programs – which is leading us into a debt quagmire which will someday be our undoing.



The ‘voting public’ needs to understand fundamental economics and evaluate the incentives that are being released by these proposed policies. This makes all the difference as to where our economy is headed. Good, smart economic policy will incentivize us to improve our lives and grow the overall economy at a faster rate, which helps all of us.


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