Ownership and incentives
Also called: Incentive effect of ownership · Topic: Scarcity, Choice and Economic Systems · NCERT: Class 11, Ch 2 "Indian Economy 1950-1990"
Meaning
Ownership and incentives is the idea that people who own a resource work harder to use it well, because they keep the profit and bear the loss. If people do not own what they work on, their motive to raise output or quality becomes weak. This helps explain why centrally planned economies often produced poor results.
Example
In the former Soviet Union, farmers did not own the land they farmed. Some packed rotten fruit together with fresh fruit, because they gained no profit and suffered no loss either way. Farm output stayed poor even though the land was fertile. The same idea lies behind India's "land to the tiller" land reforms, which gave ownership to the people who actually farm the land.
Don't confuse with
- Private property: Private property is a pattern of ownership, where individuals own the means of production. Ownership and incentives is the behavioural effect that such ownership produces.