Sunday, February 19, 2012

The Ethics of Incentives

Do incentives always work? If so, what kind of incentives? There is a new book out that discusses these issues called Strings Attached: Untangling the Ethics of Incentives by Ruth W. Grant. Here is a link to The New York Times book review: When Life Is a Bunch of Carrots by NANCY F. KOEHN. Excerpts:
"“How can legitimate uses of incentives be distinguished from illegitimate ones — bribery or blackmail, for example?” she asks. She puts forth three standards for evaluating incentives: legitimacy of purpose, the autonomy involved in choosing to accept an incentive, and the effect on the character of the parties involved.

She explains that the current notion of incentives emerged in three spheres in the early 20th century. The first was the young field of scientific management, in which Frederick Taylor experimented with paying workers by the task to increase productivity and reduce idleness.

Incentives also became an issue in the emergence of socialist economies: Would people be motivated to work if they weren’t rewarded according to effort? And, finally, the developing discipline of behavioral psychology also relied on incentives, in the form of outside action meant to “shift behavior from its usual paths,” Professor Grant writes."

"...incentives often undermine intrinsic motivation.

For example, British women who were offered cash in exchange for their blood were almost 50 percent less likely to accept the offer than women who were just asked to donate blood. This suggests that when both ethical and self-interested motives are present, they don’t act independently, Professor Grant says. “Instead, introducing self-interested incentives has negative effects,” she writes, “ ‘crowding out’ ethical motives while failing in themselves to produce the desired behavior.”

She says that paying children to elicit certain behavior may have destructive consequences in developing character, potentially nurturing self-interest at the expense of kinder motives. “Where students work in an environment that values only extrinsic rewards for learning,” she writes, “cheating goes up.”"


MrIlir said...

I could never keep the difference between ethics and morality straight, but I've got a dilema for an economics professor. Suppose the logical flaws of consumer theory, which is the foundation of the framework, can easily be demonstrated in a short video. Would any show it to the class? What if the video showed a single equation that ties it all together, that is quantity, quality, variety and convenience. Is it impossible to measure utility? Alex Gheg, a former PhD econ student at the U. of Rochester, will shock you.

Anonymous said...

The ethics of incentives is a nice title. The true foundation is whether those incentives are intrinsic or extrinsic. If those incentives are to sustain, they must be intrinsic (ceteris paribus), unless there is an infinite amount of resources to maintain the extrinsic incentives.

The 50 British women is an interesting study, but makes a lot of sense. I think i would rather give blood ethically, unless I was destitute and could not help it to the point i needed to sell.

Cyril Morong said...

Great points. Thanks for dropping by.

Steve said...

It's worth noting that in the blood donation study (Titmus), the offer of money didn't scare men away.

A recent study by Goette and Stutzer found that blood donations markedly increased when: 1) the incentive was a lottery ticket; and 2) everything was conducted privately so that there were no public image concerns.

Cyril Morong said...

Great comment. Thanks for dropping by.