Benefits of Incentives

In: Business and Management

Submitted By scjithin
Words 3169
Pages 13
INCENTIVES
An incentive is something that motivates an individual to perform an action. The study of incentive structures is central to the study of all economic activities (both in terms of individual decision-making and in terms of co-operation and competition within a larger institutional structure). Economic analysis, then, of the differences between societies (and between different organizations within a society) largely amounts to characterizing the differences in incentive structuresfaced by individuals involved in these collective efforts. Ultimately, incentives aim to provide value for money and contribute to organizational success.

Benefits of Incentives
Some benefits of incentives are:
1.) Spill-over Effects: The decision to employ incentives will not only influence the immediate behavior of the target, but will also have a "spill-over effect" on relations in general.
2.) Legitimacy: It is generally much easier and less controversial to increase another's prosperity in return for a desired action, than to forcibly deprive them of something if they do not conform.
3.) Market Forces: Eileen Crumm argues that market forces work against sanctions, while incentives can be tailored to maximize their value to the targeted actor.
4.) Addressing Needs: Conflict largely arises out of political, economic or security-related need.
Sanctions increase that need; by subtracting from the target's political, economic, or security baseline, they exacerbate the tensions and can precipitate conflict.

Problems
Problems with incentives include:
1.) Symbolism: David Baldwin argues that "negative sanctions have become psychologically linked with such characteristics as courage, honor, and masculinity," which are especially important in the international arena. Thus, he continues, "the statesman who would use
[incentives] risks being perceived by both…...

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