More quick thoughts on economics

I’ve said before the economic incentives are the most potent incentives in human behavior, and I think I ought to mention one of the main reasons I think this.

I’m not trying to say that people are unprincipled, or that economic incentives are always in opposition to others (ideally, they should always match up with what’s moral or correct). But economic decisions are the only things that people always deal with and consider on an individual, day-to-day basis.

For example, I’m one of the most environmentally conscious people I know. I actually worry about how things are aversely affecting the world around me. I know that having toilets with high-water volume is more wasteful than necessary, that you shouldn’t leave lights on all the time, and that burning gas causes a whole collection of negative effects.

But if I went around considering everything day-to-day on it’s overall ramifications, I’d go nuts very quickly. Which is why everyone uses somethings “price” to weigh the cost-benefit. When I turn lights out, usually I’m thinking that we don’t need to pay for electricity we aren’t using. When I decide to drive somewhere, I’ve decided it’s worth the price of gas to get where I’m going.

When you affect the mechanism that people use to make day-to-day decisions, you get tangible results very quickly. I bet that if gas prices keep going up, we’re going to see a sharp change in SUV sales and the overall amount of driving that goes on, as people begin to decide that some trips aren’t worth the money.

So, in short, much of the real potency comes from directly affecting people’s daily decision-making. That’s something that feelings and principles don’t always do.