Describe three examples how incentives can result in unattending consequences.
Incentives are one of the key factors that drive the economy. One famous example of incentives has to do with the Prime Minister of England, Margaret Thatcher. The incentive was taxesm and the discrimination of the rich paying more than the poor. England thought that if you give everyone basically the same tax, that the rich would have more incentive to work and produce more. However, there were huge rebellions that resulted in bloodshed, and this tactic has not been tried again since.
Another example of incentives that can result in consequences is the poaching of black rhinos in Africa. Poachers come and kill all of the rhinos and have led them to extintion due to the selling of their costly horns. Because the price is so high, it raises incentives to go and kill all of the rhinos until there are none less. Now the black rhino is almost at the brink of extinction even with the efforts to help save them.
In Australia, only fishermen with permits are allowed to fish for lobster. Although this keeps the species alive because the price will remain high because there are only so many fishermen with permits who want to keep the price high, however this discriminates against all other fishermen that want to fish for lobster. Because of this the lobsters are being saved, however the other fishermen who were not born when the permits were issued are left jobless.
Your first paragraph on taxation is a little unclear. You make an essential point that taxation changes incentives but your explanation lacks clarity. You understood the main idea regarding the market for black rhinos but you could have expanded on how communal resources affect this market and the "vicious cycle" that results. You seemed to have missed the point regarding fish in Australia. Because fish are communal resources, overfishing will occur. The licenses essentially "privatize" the resource.
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