Despite the body of evidence that shows that incentives can succeed in increasing participation, response rates, or productivity,1 there is an increasingly robust case that this only applies to particular contexts. Two strands of literature – from economics and social psychology – have independently reached the same conclusion: offering an extrinsic reward can actually discourage the desired response. The thought of extrinsic reward appears to erode intrinsic motivation, reflecting the see-saw relationship between intrinsic and extrinsic values.
The first academic discussion of this was in the 1970s, when it was suggested that offering monetary rewards decreased the incidence of blood donations.2 More recently, it was found that – rather than discouraging parents from picking up their children late from day-care – fining them actually increased the number of late arrivals.3 Studies into giving incentives for volunteering have found that although there is more volunteering when rewards are offered, the amount of time contributed by each volunteer significantly decreases.4 And schoolchildren given performance incentives collected fewer donations for charity than those not told they would be rewarded.5
The conclusions of one of many such studies are illuminating. A referendum was to be held in Switzerland to decide where toxic waste sites should be located, and two researchers carried out a number of large surveys of whether people would be happy to have the waste sites near their own communities.6 The population was very well informed, and were aware of the risks involved. When the offer of compensation was suggested, 25% of people said yes; without the offer, 50% did. These striking results led the researchers to conclude that thinking about civic responsibility alone was a stronger incentive than thinking about civic responsibility plus money: two motivations which appeared to compete, rather than complement. The intrinsic motivation was clearly present, but the extrinsic focus suppressed it – an effect also known in the literature as ‘crowding-out’.
The values research further suggests that the continued encouragement of certain values strengthens them and suppresses or weakens their opposites. Similarly, the lack of opportunity for the expression of certain values will weaken them. This may mean that not only is there a temporary, self-concerned response after an extrinsic appeal, but that the continued use of such appeals will actually strengthen extrinsic values over time, and suppress concern for the wellbeing of others and the environment.
-  Gibbons, R. (1997). Incentives and Careers in Organizations. In: Kreps, D. and Wallis, K., eds. Advances in Economic Theory and Econometrics, Vol.2. Cambridge: Cambridge University Press.
Prendergast, C. (1999). The Provision of Incentives in Firms. Journal of Economic Literature, 37(1), 7-63; Lazear, E. (2000). Performance Pay and Productivity. American Economic Review, 90(5), 1346-1361. ↩
-  Titmuss, R. (1970). The Gift Relationship. London: Allen and Unwin. ↩
-  Gneezy, U. and Rustichini, A. (2000a). A Fine is a Price. Journal of Legal Studies, 29(1), 1-17. ↩
-  Frey, B.S. and Gotte, L. (1999). Does Pay Motivate Volunteers? Institute for Empirical Economic Research, University of Zurich, Working Paper 7. ↩
-  Gneezy, U. and Rustichini, A. (2000b). Pay Enough or Don’t Pay at All. Quarterly Journal of Economics, 115(3), 791-810. ↩
-  Frey, B.S. and Oberholzer-Gee, F. (1997). The Cost of Price Incentives: An Empirical Analysis of Motivation Crowding- Out. The American Economic Review, 87 (4), 746-755. ↩