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 can be counter-productive.
A simple example of negative incentivisation would be taxing people at 98% on all investment income, which happened in the UK in the 1970s (for the extremely rich). This level of taxation gives individuals an incentive not to invest. This has the effects that:
- People might stop investing
- Taxes might stop being paid (due to people no longer investing)
- The economy might behave poorly (due to lack of investment)
- Paul Graham (May 2004). "Mind the Gap". Retrieved 2011-04-26.
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