“Incentives matter” Says Exactly Nothing
The story goes like this: an Israeli day care centre found that parents were picking up their children too late, so they introduced a small charge of $3 to try and disincentivise lateness. However, instead of discouraging this behaviour, the payment served to legitimise it and buy the parents piece of mind. The result was that lateness actually increased. Bizarrely, the Freakonomics duo decided that this story is consistent with economist’s way of thinking, and used it as an introduction to the idea that “incentives matter”. They argue that people actually face three different types of incentives: economic, moral and social. The idea is that the charges “substituted an economic incentive for a moral incentive (the guilt)”, with the implication that the daycare centre simply didn’t get the amount right. However, if this were true, treating guilt would be as simple as paying somebody that you had wronged.
The way people respond to incentives is in fact highly complex and unpredictable. Incentives that are too big or too small can have perverse effects. What’s more, how people will respond to any incentive depends on the perceived motives of the person offering it, and the implied motives of the person receiving it. Studies show that incentives can easily backfire if these motives are questionable, something that has had an impact on the field of organ donation: when people were offered money for donating, donations decreased. People simply no longer felt that they were helping people, only that they were making a bit of money. The Freakonomics guys do not engage with any of these well established psychological tendencies; they simply select three arbitrary and incommensurable concepts and proceed as if their analysis were obviously true.
It’s only obvious to a thirteen-year-old boy who knows that he’s being “objective.”
“Incentives matter” is just used as a claim and a rhetorical hammer: “I, clear-eyed, objective realist that I am (unlike all those fools out there), understand all the incentives that are at play here, which ones are important, and how they interact. See? It’s obvious.”
Even Buchanan understood this, intermittently…
Cross-posted at Asymptosis.
reminds me of the time (past?) when it was carefully explained to us that people who helped others were really being selfish.. because it gave them pleasure to help others.
see. you can explain (away) anything to suit your political purposes.
it’s also efficient, see, since altruism is really a form of selfishness, we don’t need the word altruism anymore.
“we don’t need the word altruism anymore”
Love it!!
it’s all part of the science of the Big Lie.
“incentives matter” sounds so obvious and profound that people accept it and the policy being touted without further thought.
It can mean either that to get rich people to work harder you have to pay them more. Or that to get poor people to work harder you have to pay them less.
So when someone tries to point out that waitaminit givng people more… or less… money sometimes doesn’t work as advertised, they can show that “other incentives” are at play and therefore “incentives matter.” And then go back to saying “incentives matter” as though it was obvious and profound that people only work for money.
“Incentives matter” is axiomatic. It follows from the definition of an incentive: “Having the quality of inciting or arousing to feeling or action; provocative, exciting.” [OED] It’s like saying modifications change things. Yes, they do. I think there’s a definition of “sententious” that fits: “Of persons: Given to the utterance of maxims or pointed sayings. Now often in bad sense, addicted to pompous moralizing.” [also OED]