Summary Of The Second Chapter Of Wheelan's Naked Economics

Incentives, as read about in the second chapter of Wheelan’s Naked Economics, take on many different faces; good or bad, and all of them are selfish. Incentives are entirely fueled by self-interest and opportunity cost. In order to insure his audience fully grasped the concept of incentives, Wheelan illustrates a variety of example, leaving positive and negative effects on our modern society. Incentives, opportunity costs and self-interest are connected in a way that make the ideas more concrete, and we see that incentives own society. A lot of vital information can be deduced from looking at the incentives of our society. As stated in the chapter, “When we are paid on commission, we work harder” (Wheelan 34). The fact about commission based sellers is that they have an incentive to be sure the buyer walks away with a purchase. The reason they “work harder” than some paid hourly, is simply because they have to work for the money. Why should a Macy’s representative care enough to spend all of her time helping you find the perfect dress for Prom if they are already earning their wage by standing behind a counter? If you are lucky, however, they may be tired of standing, and their self-interest would be to do something to relieve their boredom. However, the monetary incentive of

CEOs can benefit from merging companies, however, the shareholders suffer large losses. The CEOs have their own incentives and their own self-interest, and the bad incentive of merging companies is truthfully good for them. The shareholders, unfortunately, get the short end of the stick. Economist postulate by giving the CEOs the ability to by stock at a set price, the incentive for them would be to improve the company, increasing the value in the stock. If a CEO can buy a stock worth fifty dollars for just ten, this has huge profitability for them. By creating this system, both the shareholders and the CEOs are happy with their