What incentives matter most?

Bryan Caplan argues that while a number of people respond to price incentives, one of humans' core motivations is to maintain social normalcy. Or, as he puts it, "people are sheep."

It is not too difficult, however, to reconstruct economics on a "sheepish" foundation. All we need to realize is that there are degrees of sheepishness. In any society, 5 or 10% care primarily about money, not what other people think about them. (Or perhaps they reason that once they're rich enough, people will think what they want them to think!) When prices change, the money-focused people change their behavior. That makes changing behavior less weird, which makes slightly more sheepish people willing to change their behavior. And that reduces the stigma further, and so on.

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Caplan has the glimmerings

Caplan has the glimmerings of an idea, but like most economists he thinks it's all about money.

Here's what it really boils down to: there are leaders and followers. Some leaders are motivated by money -- as are most of us -- but they also have that extra "something" (call it self-confidence or a penchant for risk-taking), so they invent, innovate, start businesses, build businesses, and so on. Then they hire the followers, who are also motivated by money, but who don't have that extra "something." Other leaders lead in other ways (some of which are linked to making more money): designing new styles of clothing, making new music, creating new art forms, exhibiting outrageous behavior, etc.

But the key to leadership isn't the pursuit of money, it's something deeper than that (call it "personality") which manifests itself sometimes as a pursuit of money, sometimes as a pursuit of fame or notoriety, and sometimes as a pursuit of power. Political leaders -- ranging from members of local school boards to dictators -- tend to lead because they desire power, not because they desire money.