Friday, February 26, 2010

Incentives Influence Behavior

Mark Perry, who authors the Carpe Diem blog, has an article in the new issue of The American, the journal of the American Enterprise Institute.

It examines the difference between the Canadian and U.S. banking industry and how home mortgages are handled.

Now I know the fact that it's in The American means some people will refuse to read it, but I'm not asking that we all agree with Mark. I do suggest that his list of the key differences between mortgages in Canada and the U.S. presents an interesting thought experiment. Ask yourself or your students whether adopting policies similar to Canada's would result in a change in behavior in the U.S. when it comes to buying a home, and why?

Why should you do this? It's an example of how institutions (the rules of the game) affect incentives; and how those incentives impact our decisions. Let me know what happens, or just share your opinions. Have a good weekend.

No comments: