ABSTRACT
This chapter deals with compensation and incentives generally. It provides a number of examples of how the environment—taken in the broad sense of the word—and compensation have formed a happy marriage. The fundamental issue is sometimes summarized as, "Everything can't be measured in money. Damaging a town's social structure, its physical environment or the health of its citizens can't be mitigated by cash." In a comprehensive outline of the theory behind compensation, incentives and auctions, O'Hare evaluates this crucial issue. An auction system acts as a mixer, allowing the otherwise dissimilar environment and compensation to combine. It also leaves a good taste in the mouth. In most of the areas that Sam A. Carnes says are required for a compensation system to work—certainty, constancy, adequacy, ease of administration and local awareness—the auction method stands heads and shoulders above the system.
