The phrase “incentives matter” is ubiquitous in economics, from undergraduate teaching to economic policy debates. The mantra is especially popular in the growing literature targeted at the general public, which I’ve criticized before for its undue focus on incentives (see here and here). My point is that while it’s good to see economic ideas reaching a larger audience, it doesn’t help much if the ideas aren’t sound to begin with. Such is often the case with the concept of incentives.
To answer the question posed in the title, yes, incentives matter, in the sense that individuals have motivations, and it’s important to think about what those motivations are if we want to know how people act in the real world. For example, in the words of Steven Kerr, ignoring incentives often leads to “the folly of rewarding A, while hoping for B,” which produces managerial chaos.
Nevertheless, emphasizing incentives too much glosses over several problems: economic laws can make incentives irrelevant; incentives are in any case too narrow a concept to be the defining characteristic of economics; focus on incentives sometimes leads to a paternalistic view of economic policy.