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We all learn to respond to incentives, negative and positive, from the outset of life. If you toddle over to the hot stove and


touch it, you burn a finger. But if you bring home straight As from school, you get a new bike. If you are spotted picking your nose in class, you get ridiculed. But if you make the basketball team, you move up the so- cial ladder. If you break curfew, you get grounded. But if you ace your SATs, you get to go to a good college. If you flunk out of law school, you have to go to work at your fathers insurance company. But if you perform so well that a rival company comes calling, you become a vice president and no longer have to work for your father. If you become so excited about your new vice president job that you drive home at eighty mph, you get pulled over by the police and fined $100. But if you hit your sales projections and collect a year-end bonus, you not only arent worried about the $100 ticket but can also afford to buy     that Viking range youve always wanted-and on which your toddler can now burn her own finger. An incentive is simply a means of urging people to do more of a good thing and less of a bad thing. But most incentives dont come about organically. Someone-an economist or a politician or a parent-has to invent them. Your three-year-old eats all her vegeta- bles for a week? She wins a trip to the toy store. A big steelmaker belches too much smoke into the air? The company is fined for each cubic foot of pollutants over the legal limit. Too many Americans arent paying their share of income tax? It was the economist Milton Friedman who helped come up with a solution to this one: automatic tax withholding from employees paychecks. There are three basic flavors of incentive: economic, social, and moral. Very often a single incentive scheme will include all three vari- eties. Think about the anti-smoking campaign of recent years. The addition of a $3-per-pack "sin tax" is a strong economic incentive against buying cigarettes. The banning of cigarettes in restaurants and bars is a powerful social incentive. And when the U.S. government as- serts that terrorists raise money by selling black-market cigarettes,