My
dad rented a car recently for a business trip and these were the keys. Now I’ve seen a lot of rental car keys
before, but never one with a label right on it that said the replacement cost. This unusual tag got me to wondering about
the role of incentives in everyday life, as I’m sure it would do to any of
you. To start off, think about this, how
much does it actually cost to replace a car key? I highly doubt that it is really 225
dollars. After a minute of some search
research, I discovered that replacement keys for Kias actually cost around 150
dollars, more or less, depending on the locksmith you use. How much do the materials themselves
cost? There’s no easy way of finding
that out, but again, I would suggest it be much less than even 150. Now, to be fair, a markup is to be expected
for the cost of the smith services, but why does the rental car company charge
so much? 225 dollars for a key, after
all, is a lot of money for a key even if you take into account the trouble the
company has to go through to order a new one.
I
submit this explanation for the overpriced key.
No one wants to pay hundreds of dollars for a key and the car company
certainly does not want to have to go through the trouble of ordering a new
one. I’m going to cut to the main point
here and say that since no one wants to pay or have to deal with getting a new
one, the best way to ensure that the keys don’t get lost in the first place is
to charge an exorbitant price for its replacement. The result is that I suspect these car keys
don’t get lost very often. My dad
certainly did not lose it. The
effectiveness of this policy is best seen in its absence. People would probably be much more careless
with their keys if it was less. Case in
point: consider that my family has, in the past, lost our house keys fairly
often. These cost less than five dollars
to replace.
Look
at the incentives at work here. If you
want to discourage some actions, make it more costly for people to participate
in it. The ramifications of that statement
extend far beyond car keys. Think of
carbon taxes for pollution. Think of
prison sentences for various crimes. The
list goes on. Now I submit that society
could not exist in an orderly fashion without these incentive penalty
structures. Imagine what the country
would be like with everything from murders that never got punished all the way
down to library books that have no reason to ever be returned.
