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Economic incentives and social behavior

July 13, 2012

When studying decision-making in neuroscience, experimenters like to have participants be rewarded with money – or units of juice or ‘points’ or suchlike.  Although this may seem like a natural way to measure decisions, we have to step back and ask ourselves whether using this as a basis for reward will affects decision-making in anyway.  Looking around, I found a recent review paper by Bowles and Polania-Reyes that examined how explicit economic incentives change motivation.  Even though it is meant for economists, it has good things to think about for everyone interested in decision-making, motivation, and interpersonal behavior.

Their motivation for this review is clearly set up by a great anecdote.  Before early 2001, Boston firemen were given unlimited paid sick days, trusting them not to abuse it.  In 2001 this policy was replaced with a 15-sick day limit, with penalties for those who went over.  What happened?  Firemen were ten times as likely to call in sick on Christmas and New Years Day, and the total number of sick days claimed more than doubled.  What had been a social privilege instead became an economic transaction.

Rewards are unlikely to be represented in the brain in a purely one-dimensional manner; not everything can be converted equivalently to ‘money’ in some way.  To wit:

Economists know that money is the perfect gift – it replaces the giver’s less well-informed choice of a present by the recipient’s own choice. But when the holidays come around few economists give money to their friends, family and colleagues. This is because we also know that money cannot convey thoughtfulness, concern, whimsy, or any of the other messages that non-monetary gifts sometimes express. A gift, we know, is more than a transfer of resources; it is a signal about the giver and her relationship to the recipient, and money changes the signal.

How we feel about money, reward, and trust is also socially contingent; Bowles and Polania-Reyes report two experiments in societies in Africa, Asia, and Latin America which showed that individuals from more market-integrated societies gave more in the Ultimatum Game.  But it’s not just that they are socially contingent; each offer of resources also sends a social message beyond the purely monetary one.  A low offer can indicate lack of trust, a lack of respect, or a wide range of other things.  The point is that monetary rewards will always have a social effect.  Since monetary offers are in essence social in nature, offers of money for behavior can have side effects on morality; being asked by society to perform an act for money may cause an individual to act more immoral because society has sent the message that morality is unimportant.  And the same offer of money for a behavior can have totally different social meanings depending on the culture:

The fact that fines often work more as messages than as incentives poses a problem for the sophisticated planner because the same intervention may bear radically different messages in different cultures. Bohnet and her co authors implemented a Trust Game in which in one treatment the investor had the option of reducing the payoffs of trustees who betrayed their trust (Bohnet, Herrmann, Al-Ississ, et al. (2010)). Compared to the treatment in which this socalled “revenge” option was not available, when they had the revenge option a substantially larger fraction of Saudi investors trusted their partner, while a substantially smaller fraction of American investors trusted. Making trust more incentive compatible thus had diametrically opposed effects in the two cultures.

Economists like to use revealed preference as a measure of desire or utility.  However, money is not just a reward to individuals, it also contains information and will have side effects on behavior.  This review paper is meant to guide policy makers on how to best provide incentives, with the point that the perceived intent of the incentive is just as important as the incentive itself.  For neuroscience, the point we should take is that we have a lot more to think about when we try to understand decision-making in all its messy glory.

Reference
Samuel Bowles, & Sandra Polania-Reyes (2011). Economic incentives and social preferences: substitutes or complements?  Journal of Economic Literature DOI: 10.1257/jel.50.2.368

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