The Pied Piper: Prizes, Incentives, and Motivation Crowding-in

The “ideology of incentives” (Bruni 2015) goes well beyond the boundaries of economic relations. Grant (2011), who conducted the most systematic research on the history and nature of incentives, offers a vivid repertoire of situations in which incentives are applied and how: “express traffic lanes are set aside during rush hour for cars with more than two passengers. A will stipulates that a daughter will inherit only if she agrees to be a stay-at-home mom. West Virginia pays married couples on welfare an extra $100 per month, funded by a federal program to promote marriage. […] Legislators in South Carolina discuss a proposal to reduce prison sentences for prisoners who donate organs. A soup kitchen feeds the homeless only if they attend a church service first. […] A state legislator suggests paying poor women $1000 to have their tubes tied while others debate making welfare conditional on the use of the Norplant contraceptive device” (p. 1).

This is not to neglect that numerous economists are aware of the complexities and tradeoffs between the use of different types of incentives. For example, see Gneezy et al. (2011), Bowles and Polania-Reyes (2012) and Ashraf and Bandiera (2018) for surveys.

The agency model is a standard model in economics as well as in political sciences. It captures the strategic interaction in which an agent (employee/politician/CEO) is able to make decisions on behalf of the principal (employer/voter/shareholder).

Other few quoted examples of the incentive ideology are “Incentives are the essence of economics” (Prendergast 1999, p. 7); “Fame, power, reputation, sex, and love are all important incentives. Economists even think that benevolence responds to incentives” (Cowen and Tabarrok 2015, p. 2); “The basic ‘law’ of behavior is that higher incentives will lead to more effort and higher performance” (Gneezy et al. 2011, p. 1).

See also Manno (1831): “Since in Latin incentivus, whether applied to aerophones, such as flutes or trumpets, signified the sound (incentivum) of those instruments, it was later employed to express those aforementioned incitements and provocations. At that time, one intrepid orator came to realize that, being that man was as aroused by the voice of passion as soldiers were by the sound of trumpets, the transposition of tuba incentiva from the battlefield to humans’ hearts was a mere transliteration of a comparison into a metaphor.”

Among its different meanings, the word “praemium” in classical Latin also mean reward, prize, recompense, gift (Cicero spoke of honores et praemia bene de re publica meritorum et merentium). The Latin–German dictionary by Georges Karl (1998) specifies that this third meaning of praemium is intended as the opposite of “punishment.” A particular contractual dimension appears to be implied by the concept of prize; the medieval-patristic dictionary by Blaise and Chirat (1954) reports two meanings of the word praemium: (i) recompense, reward and (ii) gift, benefit (of redemption).

They are willing to accept to perform the task for a less generous remuneration.

This is a fairly standard task used in lab experiments. For a discussion see also Erkal et al. (2018). For a discussion of the use of lab experiments to understand issues related to effort and labor, see Charness and Kuhn (2011).

Three subjects (all women) who stated that they were over 45 years of age were excluded.

Admittedly, we do not have a good way to control for learning, as this would require additional treatments with no rewards introduced or withdrawn in any phase.

No systematic study has yet focused on the asymmetric adoption of publicity-based reward practices in for-profit companies and non-profit organization. Despite this gap in the literature, a comparative analysis of studies focusing on incentive/prize practices implemented in for-profit companies and non-profit organizations (see Oster 1998; Luthans 2000; Rodwell and Teo 2004; Theuvsen 2004; OpportunityKnocks 2011; Ben-Ner et al. 2011; Speckbacher 2013; Ben-Ner and Ren 2015; DeVaro et al. 2015; Gallus and Frey 2016; Frey and Gallus 2017a, b; WorldatWork 2018a, b) leads to highly suggestive evidence. Monetary incentives are unanimously considered essential in business companies, while public recognition represents a key element for staff retention in non-profit organizations.