From “Incentive Furie” to “Incentives to Efficiency,” or the Movement of “Incentive” in Neoclassical Thought

Abstract

ABSTRACT Incentives, economists remind us, are foundational to any economy: They include strategies to induce consumers to purchase products, motivate employees to work harder, or invite businesses to new localities. This textbook term, however, has not always been yoked to economic activity per se. This essay traces the history of the term “incentive” in two phases, first, from its origin in the Latin term “incentivum,” referring to “the thing that sets the tune,” and second, from its uptake and concretization by neoclassical economic thought through Jeremy Bentham, Alfred Marshall, and Paul Samuelson. In neoclassical economics, incentives “set the tune” of behavior by compelling rational economic action through the postulates of methodological individualism, equilibration, and utility-maximization. The terminological shift of “incentive” from its poetic origins into economic thought entails that “incentives” become an objective, univocal “thing” that embeds an argument about the dangers of actions that contravene market logics.