Sunday, February 12, 2017

Is it possible to align incentives to achieve desired outcomes?

As you read these two articles in preparation for Wednesday's (February 13, 4:30 to 6:00 p.m.) discussion, ask yourself:

  • Is it possible to avoid switching effects and rewarding or punishing wrong behaviors. 
  • Given the fact that people respond to incentives in unforeseen ways and the many margins of choice, will our incentive schemes always go awry?
  • Do charitable efforts do any good? 
  • Should we not act on our good intentions?

Incentives Matter

Slavery, Snakes, and Switching: The Role of Incentives in Creating Unintended Consequences 

As we discussed at last week's meeting, we would like you to blog a substantive comment AFTER the meeting before Sunday, February 19, at 11:59 p.m.


  1. 1. It isn't really possible to avoid people switching to alternatives. Eliminating an option does not do anything to eliminate the desire that caused people to pursue that option. A good example is the rarity of hard drugs in many Alaskan villages. The rarity and expense of illicit drugs has caused village teens to resort to huffing gasoline and other solvents. This behavior is arguably equal if not more dangerous than the use of drugs they would have purchased in urban areas.

    2. Incentive schemes need to be monitored and updated. We shouldn't expect them to continue to be effective in the long run. For instance, when I was a teacher, I would often give stickers to younger students. I would go to school supply shops and pick up stickers of popular animes. Naruto was incredibly popular for some time. Kids would work so hard for Naruto stickers, and they'd collect and trade the stickers with friends. However, that came to a screeching halt after the anime-du-jour switched over to Keroro Gunso. You couldn't give away a Naruto sticker at that point, and the desire to get a sticker did nothing to curb bad behavior or cause shy students to try to participate.

    Still, while Naruto stickers became a non-incentive, I found other ways to incentivize the kids (like Keroro Gunso stickers), and being flexible, varied, and updating incentives helped motivate the students. Incentives are good when monitor their effectiveness and don't simply assume that they will work the way we want them to.

    3. Charitable efforts absolutely do good, especially charitable efforts that allow people to become self-sufficient. That is why I do think infrastructure building in the third world, if appropriate, can be an amazing way to give people the opportunity to raise themselves up. I think the danger is when we simply drop food, clothes, medicine, or other products into poor areas. I've read of instances where the food/medicine drop happened and instead of starving villagers getting the supplies, the local rebel/terrorist group did. Even if the supplies get to the villagers, they can be shared inequitably. Being able to properly target the needs of the helped groups in as efficient manner as possible is critical.

    4. We absolutely should act on our good intentions, but we should also do our best to gather information and make wise decisions about how we can legally, most effectively and appropriately transition from good intentions to actions with a high likelihood of a positive outcome.

    1. After the meeting, I thought about some of the points made. I think that some people spoke briefly about the idea of switching when incentives are applied. In this case, we see what happens when incentives are not applied equally:

  2. I don't think it is possible to avoid switching effects; my opinion remains consistent with this even following our group discussion. I think incentives need to stay around, as they are essential for everyday life. They need to be kept up with in order, however, to keep them from going awry. I think charitable efforts do do well for society. I have always thought this, and probably always will. However, after the SWEET discussion yesterday, my eyes opened up to many different things that I didn't think about on my own. I agree with what Caleb said in that any aid needs to be individually assigned to be effective/helpful, because there is not any kind of blanket solution works. I think this mindset is very important for a lot of situations. Humans are a complex species than any kind of simple solution. I believe that charitable efforts do well depending on its allocation and intention. One form of charitable efforts that I highly support is student scholarships. This last weekend I attended UAF’s Blue and Gold Gala, which is an event in which student scholarship money is collected by donation. I think philanthropy is a sound business, and can be a great contribution to our growing society. However, I can understand why foreign aid and food aid are not the most effective forms of business. Giving aid and help does not always yield good results, especially when putting resource allocation in the hands of corrupt leaders. I think we should act on our good intentions, but as any other action that we put forward; our actions should be well informed and well thought out. Overall this was a good discussion, and I'm glad to have gained new insights in the meantime.

    1. When you say "individually assigned", I think you are helping reduce switching effects and other unintended consequences of the aid!

    2. That's true! I think that it is impossible to completely avoid it, as there are always unintended consequences (some we cannot even imagine), but there are ways to reduce them!

  3. 1. Is it possible to avoid switching effects and rewarding or punishing wrong behaviors?
    I think that it in not possible to avoid rewarding or punishing behaviors that are not the target behavior of an action. Every action or policy used to influence human behavior will have a wide variety of effects due to the very complex nature of humans.
    2. Will incentive schemes always go awry?
    Since the behavior is so complex, incentive schemes will always have consequences but it is subjective whether it could be called it “awry”. For example, the banning of asbestos from use in insulation. This policy has the positive effect as preventing illness from asbestos exposure, but it has the negative aspect of making it more costly for companies who produce insulation as well as incurring the cost of bureaucrats who oversee these companies. I would say that this is a policy that has not gone awry. Another person may have a different response.
    3. Do charitable efforts do any good?
    Charitable efforts definitely can do good, but I think it very much depends on the context. There is lots of examples of people who were “down on their luck” and have later become successful because of the charitable actions of others. In these cases and many others charitable donations have definitely had a positive effect.
    4. Should we not act on our good intentions?
    Good intentions are a fine thing to act upon as long as their is some thought put into what the affects of that action are. People should put in a little research before they make a donation to see if what they’re doing is really advancing the issue. This is not to say that people should never do anything if there’s no research available or if it’s unclear what the effects are. If people did that then nothing would ever happen. People learn by doing things and mistakes are going to happen.