One cheer for performance pay!

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Adamsmithee points us to an NBER paper, 'The War for the Fare':

When you pay bus driver piece rates, waiting times drop ten percent.  But before we chalk one up to the optimal outcomes of income incentives, so keen do bus drivers become to pick up passengers that they are happy to run over a few to get to the rest: incentivised bus drivers are involved in 67 percent more accidents per kilometer driven.

I draw a slightly different conclusion... we should pay by the passenger, but make drivers liable for the people they run over. It's true, though, that strong incentives can be dangerous if they point only imperfectly in the right direction.

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