Recent publications covering the application of economic thinking to everyday decision making and policy decisions appear to emphasize the fact that incentives are important for shaping behaviour. While I am largely in agreement, I retain the impression that this fact is oftentimes overstated. Leading publications here are probably Freakonomics by S. Levitt and S. Dubner on the one side and The Undercover Economist by Tim Harford.
However, nothing beats the real life application that the Prime Minister of Cambodia designed. It is argued that in the quest to undermine the opposition, a bill was brought before the legislature with the proposal substantially compromising the priviledge of immunity from prosecution for any speech while contributing to debates in the chamber. Contained within the same bill was a package consisting of pensions and other financial incentives. Legislators were then placed in the position where the rejection of one proposal meant that the whole bill would collapse.
The Economist Magazine dated 9th September 2006 reports on page 57 that the financial incentives, "..proved irresistible even to some in the opposition".
However, in respect of an adultery law, the PM had to resort to the majoritarian muscle of his party to pass a bill banning the practise. I wonder whether the same legislators would have opted to exchange the pensions and related privildges in order to prevent the imposition of criminal sanctions for adultery. Sometimes those who understand how incentives matter can get their way too easily. Apparently, Cambodian legsilators have led to the discovery of what legislative immunity is worth in financial terms.
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