Lecture Notes

 

Lesson Two

 

 

Incentive – The things that are used by to get another one to do something.

 

Incentives are rewards or punishment(s) that leads to habits. 

I want to change year behavior so that it would lead to a habit, lead to a lifestyle.

 

Incentives can work in two ways:

Positive = rewards (receive)

Negative = consequences (receive)

 

Positive usually work

Negatives usually don’t work.

 

You do the crime, get caught, you do the time.

 

Positive rarely fail negatives rarely work.

 

What you think is a consequence might be a reward to someone else. 

 

There are two of incentives:

 

-         monetary

-         (Actual exchange)

-         Non-monetary

-         (Psychic Income)

 

Non-monetary – The feeling you get fix doing something.  Trying to please the Authority.  Serve and do-on to others.

 

People become military personnel for the money.  There is a different value system for the money, that’s why people are becoming policeman and fireman.

 

Externalities

 

Positive

or

 

Negative

    

Positive externalities – The result when benefits are shifted to people who are not directly involved with the production or consumption of a good. 

 

You don’t make the choice but yet you gain from the choice.

 

Benefit – When you gain something from somebody else’s choice.

 

Positive = Benefit

 

Example:  You make the choices; someone else is benefited from the choices that you made.

 

Negative Externality

 

The result when costs are shifted to people who are not directly involved with the productive or consumption of a good.

 

Example:  Someone else make the choices, you pay the cost:  Someone has more direct controls of the choices, you will pay the cost.

 

Example:  Toya bought a bean burrito, she made the choice to eat the burrito and purchase the burrito.  I would pay the cost the cost because I have to sit there and smell it. 

 

Negative externalities:  Smoking 

 

Monetary is a very powerful, positive incentive.