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Friday, May 21, 2004

Incentives Matter
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Michael Coffey has an instructive essay in yesterday's New York Times. (Free registration required.) The straightforward introduction of his topic belies the importance of the fundamental lesson: Motivation is a key ingredient of grand human achievements. He begins,

When Randy Johnson struck out Eddie Perez for the 27th and final out on Tuesday night in Atlanta, he became just the 15th pitcher in the modern era to pitch a perfect game. With the thousands upon thousands of games played since the era dawned in 1901, the perfecto is one of baseball's rarest, and certainly most celebrated, feats.

Of course, more time spent on life lessons that come from baseball would be good for most of us. Coffey makes it easy. He illustrates the oldest lesson of economics in a brief analysis of free agency and modern baseball: Incentives matter. Consider this trenchant graph:

What does money have to do with perfection? With free agency, players are aware that their best efforts will be fairly rewarded. They work harder -- and they have the financial incentive to do so. They also know that extraordinary accomplishments are wildly celebrated. Cooperstown calls for a piece of the gear used in the game. If this does not inspire the kind of mental focus a player needs to go the distance, I don't know what would.

Read the whole thing.

posted by @ 12:14 PM | General

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