Question

1. What do economists ( and other social scientists) mean when they say that "incentives matter"?
2. How are concepts of Kaldor Hicks efficiency differ from the concept of Pareto efficiency?
3. How would game - theoretic thinking help us analyze property entitlements and contract-enforcements?
4. What did Ronald Coase mean when he said that all of society's methods of organizing production and exchange are " more or less failures"?

Answer 1

Incentives means a thing that encourages or motivates someone to do something. Actually that affects the human decision making.

For e.g. when the price goes up people buys less or when the prices comes down people buys more.

Another example when the prices of petrol/diesel goes up, people uses public transport system.

In social science the word incentive used to understand how the different individuals with their different objectives comes to a decision. How coordination comes, which helps to take a decision with understanding each other.

Sometimes the rules in society is strong enough to prevent cheating on the other hand sometimes it may failed to prevent cheating.