Unformatted text preview: possible outcomes of certain actions. One thing I found very interesting regarding incentive in the book is taxation. Tax is one of the greatest ways to regulate the economy within a country. It is crucial to make sure that the tax policy is properly evaluated before it carries out. A raise in taxes might not increase the revenue the government expects. For instance, if the tax rate gets too extreme to the point where individuals or even companies refuse to follow legal regulation, the tax income of the country might actually decrease. Because the cost of taking the risk avoiding taxes becomes less than paying it, many so called “underground economies” emerge rapidly. Again, in order to better understand economics and make proper adjustment to either maximize welfare or minimize cost, we have to gain more knowledge of people’s behaviors....
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- Fall '11