Incentives

Last week, I took my first economics exam, and in the true model of an exemplary student, I dropped all else to cram for it for the preceding 48 hours. (This is, of course, the best way to succeed in life -- nothing like a time crunch to get those brain juices flowing!) While this approach hopefully secured me a decent score, it also had the unfortunate side effect of causing me to walk around injecting nonsense into conversations, like, “Well, I really don’t think you’re maximizing your utility that way…” Scout’s honor, I actually said that. And got made fun of mercilessly.

Now, I know we’re not all econ majors and that most of you will never spout such rubbish, but if there’s one thing I can credit to my major, it’s my firm understanding of incentives. You see, the vast majority of people are entirely predictable and, thus, entirely controllable. It’s all a matter of properly incentivizing them, and I’m here to show you the way.

One of the basic principles of economics is that people will try to maximize their “utility,” which basically means they’ll act in their own best interests, come what may. Of course, this is common sense; we all know what it’s like to try and find housing -- every man for himself. But if you use this to your advantage, you’ll be able to out-utilize everyone else and twist their incentives until your and their best interests line up.

Let me give you an example. We all know what it’s like to work in a group project, AKA the closest thing to hell that you’ll ever find spelled out in a syllabus. The second your professor utters those dreaded words, “and now let’s partner up…” you know you’re a goner. Group projects always end one of two ways: Either your group consists entirely of slackers and you get a crappy grade, or else you’re the one Hermione in a crowd of Nevilles and end up burning the midnight oil to pull together a halfway decent attempt at the 11th hour.

But the trick to winning a group project is twofold. First, you must make it abundantly clear from day one that you have no intention of contributing in the slightest to the group’s success. This will differentiate you from the slackers who make some vague suggestions at the first meeting and then conveniently ghost out as the deadline approaches. But equally important is you making clear that the project is actually worth doing, and simply doesn’t affect you particularly. This can be accomplished with a few choice comments like, “Failing a class is still on my bucket list, and this one’s a frontrunner!” or, “Don’t you guys think it would be a cool social experiment to do everything wrong on purpose?”

Throw in a comment or two about your trust fund and voila! Group members will immediately label you as the one they should hide in the corner during the presentation, and you’re completely off the hook. What’s more, with slacker No. 1 position already claimed early on, everyone else will know they have to step up their game, and you might even walk away with a decent grade. All because you have now aligned your incentive (doing no work and getting a good grade) with theirs (having you do no work and getting a good grade).

Now, you may be thinking that this all sounds rather manipulative, and if you’re a softie it probably does. But hey, you say manipulation, I say persuasion. And if that doesn’t convince you that the dismal science is the way to go, just remember -- economists do it with models.