"If you subsidize something, you get more of it."
-Ronald Reagan
Everybody knows that incentives impact behavior. Parents provide allowances to get children to do their chores, businesses offer bonuses to motivate employees to reach their goals, and governments offer subsidies to encourage businesses to locate in their communities.
Positive incentives aimed at encouraging certain behaviors are called "carrots." Negative incentives aimed at deterring other behaviors are called "sticks." Everybody—from businesses to ballplayers—responds to incentives. Since they do, we need to be careful with their use and application, lest we produce grave unintended consequences.
What then are the implications of the recently-passed Emergency Economic Recovery Act of 2008 a.k.a. the economic bailout? Will it produce unintended consequences? With the clamor to save our economy through massive government intervention in the marketplace, what message are we sending the businesses and executives who got us into this mess? What behaviors are we incentivizing in the marketplace?