People respond to incentives
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People respond to incentives is one of the most basic and widely accepted phrases of economics. This phrase captures the idea that in order to affect the behavior of people, and more generally, of decision-making agents, we need to alter the structure of incentives they face.
While this is in some way similar to the carrots and sticks idea of rewards and punishments, incentives do not explicitly need to be designed or labeled as rewards or punishments to function as such.
The phrase People respond to incentives was popularized by Steven E. Landsburg in his book The Armchair Economist, where he said, on the first page:
Most of economics can be summarized in four words: "People respond to incentives." The rest is commentary.
- The Armchair Economist by Steven E. Landsburg, 13-digit ISBN 9780029177761, 10-digit ISBN 0029177766 (paperback)More info, Page 3