Incentivisation

Incentivisation or incentivization is the practice of building incentives into an arrangement or system in order to motivate the actors within it.

Without incentivisation, systems can be counter-productive.

A simple example of negative incentivisation would be taxing people at 98% on all investment income, which happened in the UK in the 1970s (for the extremely rich).[1] This level of taxation gives individuals an incentive not to invest. This has the effects that:

  • People might stop investing
  • Taxes might stop being paid (due to people no longer investing)
  • The economy might behave poorly (due to lack of investment)

References

  1. ↑ Paul Graham (May 2004). "Mind the Gap". Retrieved 2011-04-26.


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