Incentivisation or incentivization is the practise of building incentives into an arrangement or system in order to motivate the actors within it.
Without incentivisation, systems are often counter-productive. For example, taxing people at 98% on all investment income gives them an incentive not to invest. This has the effects that:
- People stop investing
- The taxes stop being paid (due to people no longer investing)
- The economy behaves poorly (due to lack of investment)
The above is a simple example of negative incentivisation.
- Paul Graham (May 2004). "Mind the Gap". Retrieved 2011-04-26.
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