Incentives
Incentives explain why we do what we do. Why are you looking at this website right now? What are you hoping to get out of this both on a short term and long term basis?
What if I told you that watching every video on this site would guarantee you an A+? You’d do it, right? Every action we take is motivated by conscious and unconscious incentives.
Why should I read this?
REAL WORLD EXAMPLES
See more examples in the
Studying vs. Partying
The choice to study for an exam the next day, as opposed to spending the evening with your friends, is based on the belief that doing well on the exam provides the greatest benefit.
You are incentivized to study, because you know than an A in the course will raise your grade-point average and make you a more attractive candidate on the job market when finished with school.
Incentivizing Innovation
Incentives also play a vital role in innovation, the engine of economic growth. The company was founded by Sergey Brin and Larry Page, while they were attending Stanford University in the late 1990s.
Google’s success was based on developing a better search algorithm for web users. In 2004, the company went public. Today, the company, which was founded less than twenty years ago in a garage in California, is worth more than 100 billion dollars and processes over one billion search requests every day.
Creating financial rewards for creativity
In the United States, the patent system and copyright laws guarantee inventors a specific period of time in which they can exclusively sell and market their work. This system encourages innovation by creating a powerful financial reward for creativity. Without patents and copyright laws, inventors would bear all the costs, and almost none of the rewards, for their efforts.
Why would a firm invest in research and development or an artist create new music if their work could be immediately copied and sold by others? To reward the perspiration and inspiration required for innovation society needs patents and copyrights to create the right incentives for economic growth.
