Incentivized Yet?

Incentives…
determine outcomes.

Former New York Governor Eliot Spitzer, in Slate

epiphoneme (eh-PIH-fo-neem), the memorable summary. From the Greek epiphonema, meaning “proclaim upon.”

Want to predict how a business or institution will behave? Follow the incentives. Former New York Governor Eliot Spitzer claims that incentives caused the BP oil spill and the financial meltdown; in each case, government assumed the risks while removing regulatory oversight and limiting legal liability. So, following the path of least resistance to profit, the guilty companies took chances that would have seemed insane 20 years ago.

This is complicated stuff, and it demands a simple summary. Spitzer provides one—sort of—in the form of an epiphoneme, a snappy sum-up that can stand on its own. Charles Darwin provided one of the greatest epiphonemes of all time here. Alas, Spitzer proved he is no Darwin by writing, “Incentives matter. In fact, they determine outcomes.”

Figaro stepped in where Slate’s editors feared to tread. If they had pushed the man just a little, Slate might even have produced an epiphoneme they could call Spitzer’s Law: Incentives determine behavior.

But then, some people may have wondered just what incentivized Spitzer to pay $15,000 for certain, um, outcomes.

Comments

[seanmcnall]

So to sum up: On Gulf oil spill, Slate shoots blanks.

[Figaro]

And scores.

[Sieg]

Is an epiphoneme the same as an epiphany?

[Figaro]

No. An epiphany is the manifestation of a god on Earth, while an epiphoneme is a witty summary.

[Michael Olson]

Not to stray from the topic, but would regulatory oversight have been necessary had the legal liability not been removed? Is this not a variation of moral hazard? Furthermore, could it not be argued that regulatory oversight contributed to this disaster since, to paraphrase one drilling expert, oversight drove drilling from shallow water (+-200') where it is significantly safer and easier to control, to deep water (+-2 miles) where it is extremely difficult to drill safely?