This paper demonstrates through empirical work on tax evasion and community acceptance of NIMBY (not-in-my-backyard) projects that the economic analysis of institutional effects must include factors that go beyond relative price. It is shown that under certain conditions, external interventions such as reward or punishment may result in a Crowding-Out effect that undermines the intrinsic motivation to perform socially desirable activity. Two questions are discussed: 1. Do compensations increase community acceptance of NIMBY projects? and 2. Does increased deterrence raise (gross) tax revenue?
