Political decision-making favors plunder over production 10. A common assumption underlying many policy proposals is that human behavior is somehow fixed, regardless of the new circumstances the policy would put in place. Economists, on the other hand, emphasize that human behavior by and large is the result of choices among alternatives. Any change in the alternatives available or the relative attractiveness of those alternatives will have an effect on peoples' choices. Incentives do matter.
Experience bears out the importance of incentives for altering behavior.
When Congress raised the tax on luxury goods like yachts, private jets, and fur coats they were shocked to learn that the higher tax reduced the revenue generated rather than increasing it. In the end the demand for these goods was so much lower that the taxes collected didn't even cover the cost of the additional paperwork. They gave little thought to the ways this changed incentives for producers of domestic computer software. Encryption technology today is included in almost any software that involves internet transactions or communication. By raising the cost of marketing new internet applications, Congress imposed disincentives against entering this market and gave the economic advantage to foreign software makers.