Introduction

The problem facing the economic policy-maker is that, given such strategic behaviour, there is no guarantee what-soever that rational behaviour by all single individuals will add up to a rational final outcome. ‘Incentive’ is a word with many different connotations. To some it implies rewards for those who behave in a certain way, to others penalties for those who fail to behave in that specific way. However, rational action on the first count necessarily precludes rationality on the second, as it is in the ‘interests of a neoclassical actor to disobey those rules whenever an individualistic calculus of benefits and costs dictate such action’. The threat against the viability of the state is embedded in the well-known ‘1/N problem’. In the market economies, various tax and subsidy schemes induce both individuals and organisations to spend time on activities that have no productive outcome, aiming merely to redistribute given wealth in one's own favour.