A trade-off

There is always the trade‑off between incentives and some form of insurance. If you eliminate every insurance, you have all incentives, then incentives are great but people are not particularly happy. You need to find the right trade‑off.

Those were remarks made by Luigi Zingales, from the transcript of the interview of Luigi Zingales by Tyler Cowen. Makes you rethink. It is fashionable for economist and public policymakers to talk of incentives all the time. There is a trade-off. People respond not just to incentives but also to insurance.

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