Sticks, Carrots, or a Hybrid Mechanism: The Test Case of Refusal to Divorce
I•CON (2020), Vol. 18 No. 3, 893–919
32 Pages Posted: 22 Mar 2021
Date Written: January 1, 2021
Various incentives may be used to persuade a person to desist from an activity that creates negative externalities. A stick in the form of an economic sanction may be applied, or a carrot such as a financial prize may be granted, to incentivize him to desist from that activity. Each of these incentives has advantages and disadvantages.
Literature and practice are familiar with various combinations of sticks and carrots. In most cases, the mechanism is “horizontal”, e.g. carrots are used with certain parts of the population, and sticks against other parts. The Article presents a novel, vertical, sequential mechanism, in the form of a “game” played in two consecutive, connected stages that trap the perpetrator of a negative action within the mechanism, with no possible way out. The first stage of the vertical mechanism centers on a carrot, which is combined with a social sanction (shaming). The second stage, which is activated only if the implementation of the first stage was unsuccessful, centers on a stick. The objective is to incentivize a person to engage in fruitful negotiations to end the harmful activity at the pre-mechanism stage, for after the mechanism begins operating and as time passes, he stands only to lose. An illustration will be offered of the negative social behavior of one-sided refusal to give or accept a divorce bill in the Jewish sector, namely, the intractable agunah problem, which is relevant anywhere in the world where there are Jews. The mechanism will be built primarily on the basis of theories from the field of law and economics: reversible rewards, dual-chooser rules, and modular liability rules.
The main argument will be that the use of a multi-part vertical incentives mechanism increases efficiency at minimal additional cost; it overcomes a moral problem of “rewarding the sinner” with a carrot; and it combines in optimal fashion the advantages entailed by activating the sticks and the carrots, while at the same time nullifying most of the disadvantages of each.
The Article has several contributions to make to legal and social sciences literature on the subject of incentives in general, and sticks and carrots in particular; it presents a unique case of integration of a social sanction within a legal mechanism, and it could constitute a model for the dissolution of business partnerships when deciding on the disposal of an asset that cannot be divided. Finally, the Article strengthens the connection between law and economics on the one hand and family law on the other – a connection that is considered to be less natural than that between law and economics and other branches of law.
Keywords: Sticks, carrots, incentives, carrot which become stick, reversible rewards, modular liability rules, four rules, moral hazard, externalities, divorce, law and religion, Jewish law, tort law, contract law, fund, shaming
JEL Classification: K13
Suggested Citation: Suggested Citation