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Wednesday, December 22, 2010

Economism in Action

You often here economists denying that economics reduces the subjects it studies to having only base, material motives. And in the hands of some economists, it doesn't. But in the hands of lots more it sure does. Take, for instance, this piece, in which Karl Smith tries to solve the problem of "revolving doors" between the public and private sectors, in which people pick up inside knowledge and contacts working in government, then cash in on those assets by moving into the industry they had formerly regulated. Smith recommends higher pay for public officials as the solution, and then cautions:

"I do hope that economically oriented folks aren’t suggesting that we use moral suasion to control government corruption. People respond to incentives. If you don’t want them to sell you out then you have to pay them more."

In other words, for Smith, the mere desire to act morally cannot possibly be an incentive: incentives mean "material incentives" and only material incentives.

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