For years it was one of the best-kept secrets in Jamaica. Coral Spring Beach was among the whitest and most glorious stretches of coast on the Caribbean island's north side. But then, one morning in 2008, developers building a hotel nearby arrived to discover something bizarre. The sand had gone. Thieves had been in under cover of night and stolen 500 truck-loads of the stuff.

Barrels of sand are more or less worthless in most parts of the world, but clearly not so in Jamaica. Who then committed the crime? Was it a rival in the tourist industry, who wanted the sand for their own beach; or was it a construction company planning to use it as a building material? Either way, one thing was clear, someone had taken desperate measures to get hold of the sand -- someone with a serious incentive for doing so.

Rather like the detectives working on this case, an economist's job is, all too often, to work out what drives people to take certain decisions. He or she must detach themselves from the moral, political or sociological questions behind why people do things and must instead empirically determine the forces that push them towards their decisions.

Finding the motive a criminal robs a bank because he judges the incentive of taking its cash as greater than the disincentive of time in jail. A country's citizens work less hard when tax rates are increased, since the higher charges on their extra cash means they have less incentive to put in that extra hour. People respond to potential rewards. It is the most fundamental rule of economics.

Think hard about why you and the people around you take certain decisions. A mechanic fixes your car not because you need to get back on the road again but because he is paid to do so. The waitress who serves you lunch does so for the same reason -- not because you are hungry. And she does it with a smile not merely because she is a kindly person, but because restaurants depend heavily on repeat business to survive.

Although money plays an important part in economics, incentives do not merely apply to cash. Men and women spend that little bit longer dressing up for a date because of the incentive of romance. You might turn down a well-paid job that demands long hours in favor of a less generous salary because of the incentive of having more free rime.

There are hidden incentives behind everything. For instance, most supermarket chains offer their customers reward cards, which give them occasional discounts off their shopping. The customer is given the incentive to shop more regularly with that outlet, which in turn guarantees the supermarket more sales. However, another important incentive for the supermarket is the fact that the card enables it to track closely what certain customers are buying. As a result it not only has a far better idea about what to stock on its shelves, but can entice customers with customized special offers and make some extra cash by selling details of the shopper's purchasing habits to external marketing agents, for whom such information is highly valuable. Because of the invisible hand both parties in the equation benefit, having along each step of the way responded to strong incentives.

Controversial as it is, one can even frame apparently altruistic acts as rational economic decisions. To what extent do people give to charity because of inherent kindness or because of the emotional reward (the contentedness and sense of duty done) that it endows? The same could be said of organ donors. Although behavioral economics has uncovered clear examples of humans responding in unexpected ways to rewards, the vast majority of decisions can be traced back to a simple combination of incentives.

Despite the fact that these incentives are not always financial, economists usually focus on money -- rather than love or fame -- because cash is easier to quantify than self-esteem or happiness.

Government and Incentives

In times of economic hardship, governments often cut their citizens' taxes -- as they did during the recession that followed the 2008 financial crisis. The aim is to give people an incentive to carry on spending, and therefore to lessen the scale of the economic slowdown.

But people respond as much to the stick as to the carrot, so governments often use disincentives to ensure their citizens conform to certain norms. Clear examples include the fines levied for parking or traffic offenses. Other examples include so-called sin taxes -- extra levies on harmful items such as cigarettes and alcohol -- and environmental taxes on petrol, emissions of waste products, and so forth. Ironically, such taxes are among the biggest revenue generators for governments around the world.

Incentives and disincentives are so powerful that history is littered with examples of governments causing major crises by attempting to prevent the push and pull of self-interest.

There have been numerous instances where food prices have rocketed and governments have hit back by imposing controls on them. The ostensible idea is to get more food to the poorest families, but such policies have repeatedly failed -- in fact, more often than not they result in even less food being produced. Because price controls undermine farmers' incentives to produce food, either they give up their jobs or they tend to produce less and hold back what they can for their own families.

In the most egregious recent example, President Richard Nixon, much against his own instincts and those of his advisers, imposed price and wage controls in 1971. The end result was major economic hardship and, ultimately, increased inflation. However, the Nixon administration had a clear incentive for imposing the controls: it was facing an election, and knew that the disagreeable effects of the policy would take some time to become apparent. In the short run, the plan was immensely popular with the public -- and Nixon was re-elected in November 1972 with a landslide.

Another example was the experience of the Soviet Union during communism. Because central planners enforced price controls on food, farmers had little incentive to plough even their most fertile fields; meanwhile millions starved to death throughout the country.

The lesson from such examples is that self-interest is the most powerful force in economics. Through the course of our lives we are drawn from one incentive to another. To ignore this is to ignore the very fabric of human nature.