When to Rob a Bank

Imagine for a moment the invisible hand guiding our daily decisions—not just in grand economic theories but in the simple act of buying a chicken wing or casting a vote. Incentives are the pulse of human behavior, quietly orchestrating choices from the mundane to the monumental. Take the curious case of a local fried chicken joint where the price of the third wing is actually higher than the first two. This seemingly odd pricing strategy challenges the usual expectation of quantity discounts, hinting at the complex dance between consumer psychology and business tactics. Perhaps the owner believes the third wing is a special treat or maybe it's just a pricing quirk, but the lesson is clear: prices are not always straightforward signals.

Now, consider the arena of politics, where the stakes are higher but the principle remains the same. Studies from Brazil and Mexico reveal that better-paid politicians and civil servants are not only more qualified but perform better. Money matters as an incentive, even in public service, attracting talent and aligning interests with society's needs. This insight challenges the common skepticism about political pay raises, suggesting that investing in those who govern can yield dividends in governance quality.

Voting, a cornerstone of democracy, also benefits from innovative incentive design. Imagine a system where you can cast multiple votes, but each additional vote costs more than the last. This mechanism captures not just your choice but how passionately you feel about it. Such a system could produce more efficient and representative outcomes by weighting votes according to intensity of preference. While unconventional, it provokes us to rethink the one-person-one-vote norm and explore how economics can enhance political participation.

These examples—from odd pricing to political pay and novel voting—illustrate the pervasive power of incentives. They remind us that beneath the surface of everyday transactions and institutions lies a web of motivations that economics helps us understand. Recognizing these incentives equips us to navigate the world more wisely and to design systems that better serve society.

As we close this chapter on the power of incentives, we prepare to delve into the shadowy world of cheating and crime, where incentives again reveal surprising truths about human nature.