28 May 2013 (Tuesday)
Time and Venue:
10.30am – 12.00pm MRB Seminar Room, 2-2
Economists often emphasize that “incentives matter.” The basic “law of behavior” is that higher incentives will lead to more effort and higher performance. Employers, for example, often use extrinsic incentives to motivate their employees. In recent years, the use of incentives in behavioral interventions has become more popular. Should students be provided with financial incentives for increased school attendance, for reading, or for better grades? Will financial incentives encourage higher contributions to public goods, like blood donations? Should programs to reduce smoking or to encourage exercise include a monetary incentive? These applications of incentives have provoked heated debate. Proponents of using incentives in behavioral interventions argue, for example, that monetary incentives can be helpful in getting people to study or exercise more. Opponents believe that using incentives in those areas could backfire, because extrinsic incentives may in some way crowd out intrinsic motivations that are important to producing the desired behavior.
This talk will discuss some general aspects of how extrinsic incentives may come into conflict with other motivations. For example, monetary incentives from principals may change how tasks are perceived by agents. If incentives are not large enough, this change in perception can lead to undesired effects on behavior. In other cases, incentives might have the desired effects in the short term, but they still weaken intrinsic motivations. Thus, once the incentives are removed, people may pursue the desired outcome less eagerly. To put it in in concrete terms, an incentive for a child to read more might achieve that goal in the short term, but then be counterproductive as an incentive for students to enjoy reading and seek it out over their lifetimes.
The talk will discuss the research literature on three important examples in which monetary incentives have been used in a non-employment context to foster the desired behavior: education; increasing contributions to public goods; and helping people change their lifestyles. The conclusion sums up some lessons on when extrinsic incentives are more or less likely to alter such behaviors in the desired directions.