EWOT Goggles #2

In recitation this week, we talked a little bit about incentives, which is a commonly discussed topic in economics.

Specifically, my TA Alex and I talked after class about the implication of a specific situation that I face in my real life on a weekly basis.

Three days a week, I go into downtown Rochester to work a job at a local radio station. I do not have a car on campus, thus transportation is often an issue for me.

To get downtown, I have one of two options:

1. Call a cab
2. Ask my friend who has a car to take me

Taxi is the way I'm getting to work from now on because
I now understand how significant it is for someone to
have a important incentive to properly get a job done.

Every single time I have went to my job this year, I have called a taxi and have had to spend $24 roundtrip. Each time though, I am tempted to ask my friend to get a free ride.

But as I learned in my recitation class, even though it is much more expensive, calling a taxi is actually there more economically intelligent way to travel. Here is why:

I need to get to work by 3pm. If I am late, I risk being fired, which would be very bad because my job is a very good resume booster for what I want to do with my life someday- be a sports radio personality.

Therefore, I really can't afford to be late to work and risk being fired- the opportunity to work where I work is a once in a lifetime opportunity and it will allow me to learn the requisite skills to someday become a successful sports talk radio host.

Because of the risk involved in not getting to work on time, I am better off calling a taxi because of the incentives each person would receive for taking me.

The taxi driver has the incentive of being paid. Because of this, he has a lot of reason to pick me up on time and be reliable, because if he doesn't, I might never call him again for business or will not give him a tip. In short, he is very likely to pick me up on time because his incentive is money, which is necessary to have in today's world.

My friend's incentive to take me is ultimately nothing- perhaps it is just feeling good about doing a favor for a friend. But, because there is not as great of an incentive for my friend, there is more of a chance that my friend will either:

1. forget to take me and not come
2. not be in the mood to take me, so just not come

Therefore, from here on out, I am definitely going to call a taxi to take me to work. It makes a lot of sense when thinking economically about it as well.

There is a much better chance that I will get to work on time when I call a taxi, because his incentive is so great. A taxi driver is a taxi driver for basically one reason only: to make money and to make a living. Therefore, money is a taxi driver's ultimate incentive. When an ultimate incentive is at stake, there is a much better chance that someone will get a job done- and do the job well.

Because the incentive for my friend to take me is not the "ultimate" incentive, there is less of a chance that he will be reliable and do that job he would be set out to do if he agreed to take me to work.