In: Economics
Incentives
Economics is about how people (or governments, firms, etc) make choices under uncertainty. We assume that people are rational, meaning that when they make decisions, they weigh the costs and benefits of the different choices, and then choose whatever will make them better off. Incentives are a reward or punishment. Combined with our rational actor, incentives give us a framework for trying to influence behavior. If we want people to drive more slowly in a school zone, we can change the costs of speeding or the benefits of driving slowly. Fines and cameras are (negative) incentives to get people to slow down. If we want people to stay at home during a pandemic, we just need to change the incentives. We are seeing this happen in real-time: some localities are arresting or fining people that ignore the stay at home order, raising the cost of leaving the house for an approved reason. Other approaches have tried to encourage people to stay home by increasing the benefit. For example, HBO has made many of their old shows available free online to encourage people to stay home (If you haven't seen them Silicon Valley and Barry are both highly recommended)
Incentives and Vaccines
We desperately need a vaccine if we are ever going to return to anything resembling normal life. So how can we use what we know about incentives to encourage people to develop new ideas like a vaccine? Watch the following video and then write a paragraph (or so) about incentives and vaccines.
For any consumer, the incentive towards consumption lies in the satisfaction of human needs and wants. Consumers are able to select among the various options available if they know that one option would give them higher satisfaction levels than the other. Generally speaking, a consumer is more likely to opt for higher satisfaction good than lower.
If we were to translate the same, into producer and their incentives, the producer would want to maximize their profits which has been explained in the context of this case study.
For overcoming the Corona Virus pandemic, it is essential that a vaccine is developed, to counter the negative effects which it currently has on the economics of countries. A vaccine is a medication which is given prior and helps the body to fight off the disease if it ever comes.
Further, the correct approach to induce people to develop ideas to combat the disease will come from additional incentives which all governments must give to such development. If governments have programs that heavily provide extended incentives to the creator of the vaccine, it would give an edge to them to produce the same as fast as possible.
Incentives or benefits are what creators always look forward to as it is the reason for their very existence. It gives them an edge over others and should always be used as a medium to create more goods and services specially for a sector like Vaccines, the absence of which has caused big problems for almost all countries across the globe.
Please feel free to ask your doubts in the comments section.