Incentivisation

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Incentivisation or incentivization is the practise of building incentives into an arrangement or system in order to motivate the actors within it.

Without incentivisation, systems are often counter-productive. For example, taxing people at 98% on all investment income[1] gives them an incentive not to invest. This has the effects that:

  • People stop investing
  • The taxes stop being paid (due to people no longer investing)
  • The economy behaves poorly (due to lack of investment)

The above is a simple example of negative incentivisation.

References

  1. ↑ Paul Graham (May 2004). "Mind the Gap". Retrieved 2011-04-26. 


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