Incentive effect

In economics, the term incentive effect describes the influence that attempts at political control have on the economy. The tireless pursuit of homo oeconomicus makes him particularly receptive to incentives. Examples of such tools are: VAT, international trade agreements, admission restrictions for foreign workers, unemployment insurance, interest rate policy, price monitoring, cartel bans, investment programs, subsidies, grants, banking secrecy.

An incentive does not always have the intended effect, so-called negative externalities . Regulatory interventions can be accompanied by undesirable or even counterproductive side effects (fees on garbage bags as an incentive to separate waste and produce less waste can lead to an increase in wild landfills. Alcohol prohibition promotes illegal distilleries, smuggling, switching to substitute drugs, black markets, and adulterated schnapps with death consequences and thus a general increase in crime). Attempts at political control are therefore always accompanied by uncertain side effects.