Skip to footer

Incentives matter

People respond to incentives, Karlsson writes. If they didn't, we wouldn't have seen companies make large advance payments of salaries and dividends because they expected a big increase in tax rates.

|
Romeo Ranoco/Reuters/File
A worker counts US dollar bills at a money changer in Manila. Dividend income jumped an annualized $268 billion in December compared to November, Karlsson writes, and by $302 billion compared to October

According to the first preliminary U.S. GDP report, nominal GDP increased at an annualized rate of just 0.5%-yet nominal disposable personal income rose at an annualized rate of 8.1%.
How is that possible? Well, in part it probably reflects so-called statistical discrepancy. Production- and income numbers are based on different data sources and this quarter, unlike previous quarters, the production numbers are probably weaker than the income numbers.
The second, and likely far more important, explanation is that companies made large advance payments of salaries and dividends because they expected a big increase in tax rates. The fact that dividend income jumped an annualized $268 billion in December compared to November, and by $302 billion compared to October illustrates the importance of this factor.

 

This will with near certainty be more or less entirely reversed during this quarter.

One of the lessons of this is that people do respond to incentives. If they hadn't, we wouldn't have seen these large advance payments of salaries to high income earners, and above all, dividends.

You've read  of  free articles. Subscribe to continue.
Real news can be honest, hopeful, credible, constructive.
What is the Monitor difference? Tackling the tough headlines – with humanity. Listening to sources – with respect. Seeing the story that others are missing by reporting what so often gets overlooked: the values that connect us. That’s Monitor reporting – news that changes how you see the world.
editor@csmonitor.com
Subscribe
Mark Sappenfield
Editor

Dear Reader,

About a year ago, I happened upon this statement about the Monitor in the Harvard Business Review – under the charming heading of “do things that don’t interest you”:

“Many things that end up” being meaningful, writes social scientist Joseph Grenny, “have come from conference workshops, articles, or online videos that began as a chore and ended with an insight. My work in Kenya, for example, was heavily influenced by a Christian Science Monitor article I had forced myself to read 10 years earlier. Sometimes, we call things ‘boring’ simply because they lie outside the box we are currently in.”

If you were to come up with a punchline to a joke about the Monitor, that would probably be it. We’re seen as being global, fair, insightful, and perhaps a bit too earnest. We’re the bran muffin of journalism.

But you know what? We change lives. And I’m going to argue that we change lives precisely because we force open that too-small box that most human beings think they live in.

The Monitor is a peculiar little publication that’s hard for the world to figure out. We’re run by a church, but we’re not only for church members and we’re not about converting people. We’re known as being fair even as the world becomes as polarized as at any time since the newspaper’s founding in 1908.

We have a mission beyond circulation, we want to bridge divides. We’re about kicking down the door of thought everywhere and saying, “You are bigger and more capable than you realize. And we can prove it.”

If you’re looking for bran muffin journalism, you can subscribe to the Monitor for $15. You’ll get the Monitor Weekly magazine, the Monitor Daily email, and unlimited access to CSMonitor.com.

Subscribe to insightful journalism

QR Code to Incentives matter
Read this article in
https://www.csmonitor.com/Business/Stefan-Karlsson/2013/0131/Incentives-matter
QR Code to Subscription page
Start your subscription today
https://www.csmonitor.com/subscribe