What should policymakers think about incentives

Connor Sephton answered. Policy makers sometimes underestimate the power of using incentives, as they can be of a considerable influence for them. You are bound to get more of a better response if you encourage something, as opposed to discouraging something.

Get a job and surpass the program's income threshold and the aid disappears. Stay below this level and government pays you to stay unemployed or to remain in a low-paying job. Surely some hard-working people who earn slightly above the maximum allowed for certain benefits sometimes wonder if their efforts to take care of themselves are all worth it. In Michigan, families below certain income limits qualify for a laundry list of benefits.

The other way to look at it is as a list of the freebies low-income workers can get if they just work less. For example:. Recently, a commission appointed by Gov. For some Michiganians, that means it may be more lucrative to accept a low-paying job than it is to accept a higher paying one because the value of government benefits more than offsets the loss of income from more gainful employment.

In other words, the approach holds that the market will find its equilibrium without government or other interventions forcing it into unnatural patterns. Invisible hand, metaphor, introduced by the 18th-century Scottish philosopher and economist Adam Smith, that characterizes the mechanisms through which beneficial social and economic outcomes may arise from the accumulated self-interested actions of individuals, none of whom intends to bring about such outcomes.

Individuals seeking their own self interest benefit the economy as a whole. Keynes said government was the key to solving economic issues, while Smith believed government should take a hands-off approach. The invisible hand benefits society as it leads to the most optimal production of a good. When there is a shortage of a good, prices rise, which allows producers to increase the supply of that good and meet demand. At the same time, when there is an oversupply, prices decline to attract consumers and increase demand.

Karl Marx argued that in an attempt to cushion the effect of the fall in revenue on profit, the bourgeoisie would cut costs by cutting the wages they paid to the proletariat. Karl Marx referred to the French Revolution as an example of why capitalism would eventually collapse. Karl Marx was convinced that capitalism was destined to collapse.

He believed the proletariat would overthrow the bourgeois, and with it abolish exploitation and hierarchy. Marx brought to the discussion of his ironclad conviction that capitalism was nearing its collapse. Marx viewed capitalism as immoral because he saw a system in which workers were exploited by capitalists, who unjustly extracted surplus value for their own gain.

Capitalism has been criticized for establishing power in the hands of a minority capitalist class that exists through the exploitation of a working class majority; for prioritizing profit over social good, natural resources and the environment; and for being an engine of inequality and economic instabilities. Individual capitalists are typically wealthy people who have a large amount of capital money or other financial assets invested in business, and who benefit from the system of capitalism by making increased profits and thereby adding to their wealth.

Tell us more Hide this section if you want to rate later. Questions Courses. Why should policymakers think about incentives? Sep 09 PM. Ram A answered on September 11, Do you need an answer to a question different from the above? We want to correct this solution. Tell us more.