is the practise of building incentives
into an arragement or system in order to motivate the actors within it.
Without incentivisation, systems are often counter-productive. For example, taxing people at 98% on all investment income gives them an incentive not to invest. This has the effects that:
- People stop investing
- The taxes stop being paid (due to people no longer investing)
- The economy behaves poorly (due to lack of investment)
The above is a simple example of negative incentivisation.