Rational Choice & The Public Good
• Self-interested behavior can create
collective problems (pollution, etc.)
• How to stop such behaviors: Incentives,
disincentives, constraints
• The belief that policies should mimic the
market whenever possible
– Create incentives or disincentives, not
prohibitions
Inducements
The Proverbial Carrot and Stick:
1. An incentive makes it easier or more
rewarding to engage in some behavior (tax
credits, federal funds to states)
2. Deterrence makes it harder or more costly for
certain actions: (tax penalties, sanctions)
• Note that reward contains an implicit penalty of
withdrawal, and every penalty contains an implicit reward
of cessation.
Stone: Complexity of Inducements
• Discouraging bad behavior and
encouraging good behavior is more
complicated than what the economic
model suggests
• Implementation of inducements is difficult
Inducement Theory
Inducements are a response to a problem. A
problem exists when there is a divergence
between private interests & public interests.
• Thee parts to the Inducement System:
1. Giver
2. Receiver/Target
3. Inducement itself
• All 3 need to work together for the desired
change under the premise that people are
rational by nature and will make the right
decisions based on a calculated thought process.
Assumptions (utilitarian model):
1. People have control over their own behavior
and are adaptable
2. Givers/receivers are rational, unitary actors
3. Receiver have an orientation toward the future
(how soon or far away will the inducement
occur?)
4. Based on purposeful notions of cause (when the
cause of a problem is understood as intentional)
Problems with Inducements
•
•
•
Using inducements doesn’t require us to
understand the causes of a problem or why
people do what they do. We are merely trying to
fix/change behavior. Politically, this is easier
than finding out the real problem and fixing it.
Negative inducements (fines, tariffs,
embargoes) can build resentment, forcing giver
to use more threats/penalties in the future
Positive inducements: if they work, both the
giver and receiver benefit. Becomes an
expectation. Difficult to get rid of, even when
problem is alleviated
Inducements in the Polis
•
•
In the polis, inducements are usually
designed by one set of people (policy
analysts, legislators, and regulation
writers), applied by another (executive
branch bureaucrats), and received by yet
a third (individuals, firms, and
organizations).
There is never a direct correspondence
between the inducement as proposed by
the designer and as applied by the giver.
Effectiveness of Inducements
•
Inducements may hurt the very thing one
is trying to protect, .i.e. Federal
government withdrawing funds from
states that don’t provide services to their
citizens (Medicaid, federal highway
subsidies, public housing), thus depriving
the very people they are trying to help.)
Effectiveness of Inducements
•
The most important reason for slippage
between the design of inducements and
the target’s response is that people are
strategic as well as adaptive. They will try
to reap a reward or avoid a penalty
without changing behavior.
Implementation of Inducements
•
•
•
Who is eligible?
When is an incentive used and when is a
disincentive?
Requires Rules
Rules
•
Mandate Behavior
– Requires Legitimacy
– Context and Interpretation
– Classification of violations
•
Acceptable (good) rules require a
balance between precision and flexibility
– Like cases are treated alike
– But special circumstances are taken into
account
The Myth of Neutral Rules
•
•
•
No system of inducements is selfexecuting, automatic, or apolitical
Rules require enforcement
Choices, Discretion