Responding to Incentives

If your child is crying, begging for a toy from the store, do you buy it for him so he stops crying? What if you do that, and he continues to cry because he wants something else? Or the next time you are in the store he does the same thing (maybe he catches on to how you respond when faced in that situation). Now, what if you decide to reject their wants/demands?

Yesterday evening I accompanied my host family to an indoor play-place, similar to Chuckie Cheese in the States. As we moved up the escalator and reached the top, Rami and Lara bolted to the entrance. We walked around the complex and they went on different rides. David and myself went with Rami and Lara on the bumper cars – something I haven’t done for a number of years. After spending around 1.5 hours there, it was time to go. But Rami and Lara weren’t ready and let’s just say the entire building knew it as they were crying and screaming. And this did not stop when we left the building, it continued in the car ride home and even for 20-30 minutes at home. 

As I began to think about the questions posed above, it brought me back to a course I took last semester at Georgetown – Social Protection Around the World.

William Easterly along with other political economists state that people respond to incentives. In Brazil, the government implemented Bolsa Familia, which provides conditional cash transfers (CCTs) to families if they send their children to school. After its implementation, Brazil saw an increase in the number of children attending school. This program allows for two things: first, the mother receives additional money to improve here family; and second, more education should improve a child’s opportunity for a better life. So in this case, the Brazilian families who take part in the program have responded to the incentive given to them. But what happens if they do not respond to the incentive (like when Lara, my host sister, continued to make a fuss even after being offered a toy)? Obviously, the families would not receive the CCTs and most likely they would not be sending their children to school either. But is not the goal to reduce poverty and income inequality? Let's say they respond positively to the incentive but demand more, then what (like when Lara took the toy, but continued to cry about something else)? 

Here are a couple larger questions:

• Do governments or institutions know what is best for their citizens or the people whom they represent/serve? If so, how do they know this? 
• What is the best response from institutions towards the people who desire something and are willing to do anything to get it? 
• If an institution provides an incentive to the people, what prevents the institution from providing incentives time after time when the people demand something? 

I admit to not being anything close to an expert on this. Yet, I find this to be quite interesting and stimulating as there is no easy solution or answer, and in fact multiple responses exist. It frustrates me to think about the poverty I’ve seen firsthand, especially when I have so much more than many people in this world. And it makes me upset to think that there is no easy answer. But life is not easy. It takes a lot of work and focus to change something like the amount and degree of poverty in this world. Inshallah I can do something about it.