In
economics, we have the rational choice model, which assumes that people are rational,
self-interested, and they respond to incentives. The incentives are usually a
monetary reward or punishment. If you want to change people’s behavior, just change
the incentives.
But
reality is not always that simple. Steve Levitt, the author of the book Freakonomics, once mentioned an interesting story about how he potty trained his toddler daughter Amanda. After Amanda's mom got frustrated at the results even after she had tried all the methods she read from the books, Steve decided to take over and handle this as an economist: let incentives to work its way. He promised Amanda that every time she went to pee in the potty, she got a bag of M&M's. It worked perfectly! Well, for the first couple of days. Eventually, this incentive scheme backfired: Amanda would go to the potty, trickle several drops, ask for a bag of M&M's, and go to the potty again, trickle several drops and ask for another bag of M&M's, and more potty, and more M&M's. Incentives can backfire, even in the case of a toddler.
Most social scientists agree that people have the intrinsic motivation to abide by norms, to care for others and to behave virtuously. Even economists agree that intrinsic motivation plays a role. But given intrinsic motivation, incentives should also work, right? Adding external incentives can only reinforce the behaviors driven by existing intrinsic motivation stronger, isn't it obvious? Well, the obvious may not always be true. Behavioral economists start to find more and more evidence that monetary incentives can crowd-out people’s intrinsic motivation (Frey and Jegen, 2001; Bohnet et al., 2001; Fehr and Gächter, 2001). Proposing pecuniary payment, for instance, reduced Swiss citizens’ willingness to host a nuclear waste facility (Frey and Oberholzer-Gee, 1997). Imposing a fine on parents who arrive late to pick up their children from a day care center actually increased the number of parents arriving late, and removal of the fine did not decrease the number (Gneezy and Rustichini, 2000b). Offering a monetary compensation for blood donors reduces the supply of prospective blood donors, especially among women (Mellström and Johannesson, 2008).
The assumption of self-interested individuals may be a self-fulfilling prophecy. Everyone who is in a marriage knows that the best way to kill a marriage is to consider the other person as lazy, unhelpful, and ungrateful. Doing that will make the your partner act that way. When you consider others as selfish egoists, it is very likely that they would start to act like one. Imposing incentives in situations like this can impair people’s intrinsic motivation.
Most social scientists agree that people have the intrinsic motivation to abide by norms, to care for others and to behave virtuously. Even economists agree that intrinsic motivation plays a role. But given intrinsic motivation, incentives should also work, right? Adding external incentives can only reinforce the behaviors driven by existing intrinsic motivation stronger, isn't it obvious? Well, the obvious may not always be true. Behavioral economists start to find more and more evidence that monetary incentives can crowd-out people’s intrinsic motivation (Frey and Jegen, 2001; Bohnet et al., 2001; Fehr and Gächter, 2001). Proposing pecuniary payment, for instance, reduced Swiss citizens’ willingness to host a nuclear waste facility (Frey and Oberholzer-Gee, 1997). Imposing a fine on parents who arrive late to pick up their children from a day care center actually increased the number of parents arriving late, and removal of the fine did not decrease the number (Gneezy and Rustichini, 2000b). Offering a monetary compensation for blood donors reduces the supply of prospective blood donors, especially among women (Mellström and Johannesson, 2008).
The assumption of self-interested individuals may be a self-fulfilling prophecy. Everyone who is in a marriage knows that the best way to kill a marriage is to consider the other person as lazy, unhelpful, and ungrateful. Doing that will make the your partner act that way. When you consider others as selfish egoists, it is very likely that they would start to act like one. Imposing incentives in situations like this can impair people’s intrinsic motivation.
If you
want to change people’s behavior, you should not rely exclusively on rewards, regulations or punishment. People, like water, can always find cracks in any
set of regulations. Sometimes, and more than often, the most effective way to change people's behaviors is to resort to their intrinsic motivation like ethics and norms.
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