I blame old age, so there.
See, the thing is, I cannot for the life of me remember where and in what context I heard this line today: selection matters more than incentives.
It sounds like the kind of thing Tyler Cowen would say (and indeed, he’s written an entire book about it), but I cannot say for sure. So my apologies for not being able to attribute it properly, but whatay idea, no?
We’re big on the line “incentives matter” in these parts. In fact, if you click on that link in the previous sentence, you could spend a couple of hours, easy, going through my earlier posts on the topic. And don’t get me wrong – not for a moment am I suggesting that incentives do not matter. Of course they do!
But in the context of getting folks to do what you’d like them to, selection often matters more than incentives.
And as with so many other things in the world, it comes down to just two words: demand, and supply.
Example #1: You, as a college professor, would like students to do a really god job on their theses in their final year.
Example #2: You, as a manager of a team in an organization, would like your team members to execute a particular project really well, and on time.
Example #3: You, as a citizen of your nation, would like your elected leaders to do a good job.
In each case, you could (and should) ask about how to go about designing the best set of incentives in order to achieve your objectives. That’s supply.
But that being said, it sure would help if the folks you were designing these incentives for were good at execution in the first place! What is the demand like for these awesome incentives you’ve got lined up?
You could have the best incentives in the world, but if you don’t have the best students/team members/politicians to begin with, the incentives don’t matter much, now do they?
And so the story begins with a good selection mechanism: how do we get “the best” students into a college? How do we hire the best employees for an organization? How do we go about electing the best possible leaders?
Once we figure out the answers to these questions, we can (and once again, we absolutely should) figure out how to best incentivize them. But incentivizing good, talented and motivated folks is much easier than it is to incentivize average folks.
The primary constraint is getting the right people in place. Once you do that, getting the incentives right is the relatively easy part.
Or, as the title of this post puts it:
Selection > Incentives
EconForEverybody 