Since I teach introductory economics, it’s not surprising that Greg Mankiw’s “10 Principles of Economics” are often on my mind. Given what I study, Economic Principle #4: People Respond To Incentives is usually the one that resonates most with me. I really like the idea that people (read, employees, students, etc.) can be influenced by the potential rewards put in front of them, since then the main challenge is one of being crafty in designing the reward system. However, apparently nothing is as simple as it would at first appear…while it may be true that “people respond to incentives,” it’s much less clear HOW they respond to incentives. So now you’re telling me that before I can design an awesome contraption of interlocking carrots and sticks I still have work to do in figuring out how and whether people chase after the carrots in the first place? *sigh*
Dan Pink gives a good TED talk on the subject. His thesis is that the traditional carrot/stick model’s success is limited to those tasks that are mechanical or don’t require (literally) out-of-the-box thinking, and he gives evidence that financial incentives actually serve to narrow thinking and are thus counterproductive in a lot of situations. He contends that, in more creative or thoughtful vocations, it is the desire for autonomy, mastery and purpose that form the basis for motivation, and that that this motivation is of a more intrinsic than extrinsic form.
Pink is not the first to bring this up- Paul Lawrence and Nitin Nohria, in their book Driven: How Human Nature Shapes Our Choices, assert that humans possess four basic drives: to acquire, to bond, to learn, and to defend. They then posit that these drives are relevant in the business context and must be addressed in order to get maximum results from paople.
Anyway, enough from me. Here’s the video so you can see for yourself:
Hehe, he got a little Southern Baptist minister at a Texas megachurch on us at the end there now didn’t he? 🙂
P.S. Am still waiting for my invite to give a TED talk. If any of you can make that happen, I’d be pretty pleased with you. kthx. xoxo, econgirl