The Rise of Carrots and the Decline of Sticks

De Geest, Gerrit and Dari-Mattiacci, Giuseppe (2013), ‘The Rise of Carrots and the Decline of Sticks,’ 80(1) University of Chicago Law Review, 341-392

Amsterdam Law School Research Paper No. 2013-22

Amsterdam Center for Law & Economics Working Paper No. 2013-05

53 Pages Posted: 16 Apr 2013

See all articles by Gerrit De Geest

Gerrit De Geest

Washington University in St. Louis - School of Law

Giuseppe Dari‐Mattiacci

Columbia University - Law School

Date Written: April 16, 2013

Abstract

There is a remarkable tendency in modern legal systems to increasingly use carrots. This trend is not limited to legal systems but can also be observed in, for instance, parenting styles, social control mechanisms, and even law schools’ teaching methods. Yet, at first glance, sticks appear to be a more efficient means of inducing people to comply with legal rules or social norms because they are not meant to be applied (thus minimizing transaction costs and risks) and may cause fewer unintended distributional distortions. So how can we justify the widespread use of carrots? This Article shows that carrots can be superior in two cases. The first is when the lawmaker faces specification problems, which means that she does not know what to expect from each individual citizen (for instance, she may not know which citizen should spend time composing songs or which part of the cargo of a sinking ship should be rescued). In those cases, sticks are likely to punish citizens who are unable to comply with the norm and likely to cause wasteful transaction costs, risks, and undesirable wealth changes. The second is when the lawmaker needs to require significantly higher efforts from some citizens than from others. We use the term singling-out danger to refer to this problem. This is the case, for instance, when the lawmaker wants only some families to send a family member to the army, or only some families to sacrifice land for a highway project. In such cases, sticks would cause significant unintended distributional distortions (artificially impoverishing those from whom much is required), making carrots superior. Overall, our results predict that in societies with more specialization and division of labor, carrots will be used more often. But they also predict that within each society, carrots will be used more often in situations that involve a higher degree of complexity. Applications include patents, regulatory takings, contract bonuses, the duty to rescue, finders, information disclosure to contract parties, the Endangered Species Act, incentives in the military, slavery, health policy, and parenting.

Keywords: reward, punishment, carrot, stick, complexity, incentives, positive sanction, negative sanction, incentives

JEL Classification: K00, K42

Suggested Citation

De Geest, Gerrit and Dari-Mattiacci, Giuseppe, The Rise of Carrots and the Decline of Sticks (April 16, 2013). Amsterdam Center for Law & Economics Working Paper No. 2013-05; De Geest, Gerrit and Dari-Mattiacci, Giuseppe (2013), ‘The Rise of Carrots and the Decline of Sticks,’ 80(1) University of Chicago Law Review, 341-392 ; Amsterdam Law School Research Paper No. 2013-22; Amsterdam Center for Law & Economics Working Paper No. 2013-05. Available at SSRN: https://ssrn.com/abstract=2251835

Gerrit De Geest (Contact Author)

Washington University in St. Louis - School of Law ( email )

Campus Box 1120
St. Louis, MO 63130
United States
314-398-4941 (Phone)

HOME PAGE: http://www,degeest.wustl..edu

Giuseppe Dari-Mattiacci

Columbia University - Law School ( email )

435 West 116th Street
New York, NY 10025
United States

HOME PAGE: http://www.law.columbia.edu/faculty/giuseppe-dari-mattiacci

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