Psychology

Psychology

The NY Times has a great op-ed about incentives. Here are some excerpts, but you should read the whole thing.

The logic of the plan reveals a second assumption that economists make: the more motives the better. Give people two reasons to do something, the thinking goes, and they will be more likely to do it, and they’ll do it better, than if they have only one. ... Unfortunately, these assumptions that economists make about human motivation, though intuitive and straightforward, are false. In particular, the idea that adding motives always helps is false. There are circumstances in which adding an incentive competes with other motives and diminishes their impact. Psychologists have known this for more than 30 years.

In one experiment, nursery school children were given the opportunity to draw with special markers. After playing, some of the children were given “good player” awards and others were not. Some time later, the markers were reintroduced to the classroom. The researchers kept track of which children used the markers, and they collected the pictures that had been drawn. The youngsters given awards were less likely to draw at all, and drew worse pictures, than those who were not given the awards.

Why did this happen? Children draw because drawing is fun and because it leads to a result: a picture. The rewards of drawing are intrinsic to the activity itself. The “good player” award gives children another reason to draw: to earn a reward. And it matters — children want recognition. But the recognition undermines the fun, so that later, in the absence of a chance to earn an award, the children aren’t interested in drawing. ...

An especially striking example of this was reported in a study of Swiss citizens about a decade ago. Switzerland was holding a referendum about where to put nuclear waste dumps. Researchers went door-to-door in two Swiss cantons and asked people if they would accept a dump in their communities. Though people thought such dumps might be dangerous and might decrease property values, 50 percent of those who were asked said they would accept one. People felt responsibility as Swiss citizens. The dumps had to go somewhere, after all.

But when people were asked if they would accept a nuclear waste dump if they were paid a substantial sum each year (equal to about six weeks’ pay for the average worker), a remarkable thing happened. Now, with two reasons to say yes, only about 25 percent of respondents agreed. The offer of cash undermined the motive to be a good citizen.

It is as if, when asked the question, people asked themselves whether they should respond based on considerations of self-interest or considerations of public responsibility. Half of the people in the uncompensated condition of the study thought they should focus on their responsibilities. But the offer of money, in effect, told people that they should consider only their self-interest. And as it turned out, through the lens of self-interest, even six weeks’ pay wasn’t enough.