All The President's Men

Media Type: Film Clips Topic: Incentives

There are many sides to incentives. However, financial gain almost always plays a prominent role. In All the Presidents Men, the story of the Watergate scandal that led to the unraveling of the Nixon Administration in the early 1970s, a secret source called “Deep Throat” tells Bob Woodward, an investigative reporter at the Washington Post, to “follow the money.” Bob responds, “What do you mean? Where?” Deep Throat responds, “Just…follow the money.” That is exactly what Bob Woodward did. He eventually pieced everything together and followed the “money” trail all the way to President Nixon.

Understanding the incentives that led the participants in the Watergate scandal to do what they did led Bob Woodward to the truth. Economists use the same process to explain how people make decisions, how firms operate, and how the economy functions. In fact, understanding incentives, from positive to negative and direct to indirect, is the key to understanding economics.
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