Friday, 13 September 2013

Demoralising incentives

One of the books I've taken a punt on recently is Practical Wisdom by Barry Schwartz and Kenneth Sharp, which is a psychologically informed take on developing virtue (or as the strap line says "the right way to do the right thing"). Barry Schwartz is probably known to some as the author of The Paradox of Choice (well worth a read) but he's also obviously quite interested in Edward Deci type views of motivation.

Practical Wisdom has a whole chapter in it on the problems of relying on incentives to get people to do the right thing (incidentally, the book is also critical of relying on 'rules' to achieve this). None of this will be that new to anyone who has been following the intrinsic motivation vs behaviourism debate, but it's interesting to see it put in the context of a discussion about professional virtue. And the point that the authors are keen to make is that incentives can de-moralise decisions, as in undermine or eliminate the moral content (a version of motivation crowding).

He gives a couple of examples. One is the famous Israeli daycare centre one, where the introduction of a fine for picking kids up late led to an increase in people picking their kids up late. The argument here is that the fine enabled parents to reframe the fine as a payment for a service (an extra 15 mins or whatever of childcare). The other example he gives is of an experiment where people were asked by a stranger to help load a sofa into a van, with some of the subjects offered a payment and others simply asked to do it as a favour. Again this is a way that the application of an incentive can reframe the way  a person views a situation, and if an action becomes seen as a transaction they may be less willing to undertake it, unless the rewards are large.

Unsurprisingly, I find this compelling, and it underlines why I think, for example, trying to use financial incentives to improve corporate oversight of ESG issues may be a bad thing (rather than simply ineffective). However, it also makes me think about the use of fines to 'punish' companies (am thinking Pru /AIA deal as an example). It's possible that fines may become seen by executives as a reasonable cost to endure - or, more damagingly, a reasonable payment to make - to ensure that they can undertake the action they wish to in the manner they desire.

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