Thursday, October 31, 2002

The carrot and the stick
As you undoubtedly know, conservative economic thinkers tend to stick to the line that the free-market capitalistic economy works well because, instead of trying to work against man's natural greed, it acknowledges it and uses it to further the system. You'll always hear words like "incentives" being tossed around all the time in this kind of economic logic: "we shouldn't tax this because it'll reduce incentives for innovation in the field", or whatever, is something I've heard a million times. Now, the general triumph of capitalism indicates that this way of thinking is, fundamentally speaking, pretty sound, and since I'm a pragmatist at heart, I certainly don't believe that systems which don't take this basic avarice into account can ever be successful.

But, as they say, the devil's in the details. Greed is a powerful motivator for innovation, but it's also a powerful motivator for dishonesty, and since the latter is usually easier than the former, the cost-benefit analysis doesn't always favor the former. You might think that it was something like Enron or WorldCom which inspired this post, or maybe, drawing from more recent material, this article arguing that the practice of billable hours in law encourages fraud (incidentally, I should point out that the more non-tangible the product being provided, the easier this is. If, as you might see in Econ 101, you claim to produce 60 widgets, then it's pretty easy to tell if you actually produced 60 widgets or not. But if you produce 60 "billable hours", that claim is a lot more nebulous). Actually, my train of thought started from an entirely different point and just kind of ended up here as a natural conclusion.

This article (for those too lazy to follow the link, it's talking about Johnnie Cochran's proposal to address the embarrassing paucity of black head coaches in the NFL by rewarding teams that interview more black candidates with extra draft picks, and conversely penalizing teams that don't) is actually what started me off thinking about this. This is incentives at their worst: aimed at a laudable goal, for sure, but so easily circumvented in dishonest ways that they're almost completely useless. I suppose the most optimistic person could believe that a club would bring in a couple of black candidates as a sham, and realize "hey, maybe this guy really is good!" But, like I said, I'm a pragmatist at heart, and I'm more than a little skeptical about this scenario. Not that I claim to be an NFL insider or anything, but everything I read about coaching situations indicates that it's very much a Good Ol' Boys network, and I don't think merely forcing clubs to bring in a few extra candidates is going to do much at all to change that situation.

That is to say, while I don't object to incentive-based thinking as a starting point, I think it's more than a little simplistic to take it as an ending point as well.

Whew, I was all over the map with that post, wasn't I? I guess that's what I get for writing at 4am, and that's what you get for reading it! Ha!

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