Not Just for the Money: An Economic Theory of Personal Motivation

by Bruno S. Frey

In Not Just for the Money Professor Frey challenges traditional economic theory and argues that people do not act in expectation of monetary gain alone, nor do they work solely because they are paid. Furthermore, the author claims that higher monetary compensation as well as regulations crowd-out motivation in important circumstances. Offering higher pay may make people less committed to their work and may reduce their performance. They thus behave in exactly the opposite way the fundamental price-effect of economics predicts. The first part of the book considers the Crowding-Out Effect and the Motivational Spill-Over Effect. The second part explores a large number of applications to constitutional questions, various policy issues and the organization of firms. The final part discusses the substantial consequences for policy making and economic theory.
This path breaking book is bound to create controversy and debate. It will appeal not only to economists but to a wide range of social scientists who want to go beyond the traditional assumption of economic man.

Genres: Economics

168 pages, Paperback

First published January 1, 1997

Reviews

[Sher Afghan · Rating 4 out of 5]

This book introduces the importance of intrinsic motivation and the role of incentives in influencing it. I like the overall idea, however there is a lack of solid empirical evidence in the book. Most of the argument presented are based on conjectures (which I mostly agree with). Had this book written today there would be much more evidence to support the arguments made in the book. Interesting read if you like thinking about the psychology and economics of human behavior.

[Leonardo]

Citado en el artículo de M. Vansteenkiste, R. M. Ryan, y E. L. Deci de Capabilities and Happiness.

[Anthony · Rating 3 out of 5]

You're familiar with the standard behavioral microfoundations of present bias, hyperbolic discounting, status quo bias, and availability bias, among others. These are the lynchpins of behavioral economics which holds that aspects of individual decision-making do not cohere with the rational 'man' model of neo-classical economics. This book flips the relationship and explores how markets affect behavior, with a primary focus on 'intrinsic motivation'. The central thesis holds that markets may undermine this intrinsic motivation, with implications for policymaking. In so doing, Frey believes that some of the altruism, fairness, and reciprocity norms that exist among friends and family are destroyed through the impersonal nature of markets where the tenets of 'homo economicus' thrive. This book largely addresses 3 channels: crowding out, crowding in, and spillover effects.

Take for example the son who mowed the family lawn out of filial obligation as an anecdote to understand this. Pay him once for his good deed, and now the intrinsic motivation to cut the lawn without compensation has disappeared (supposedly). This exemplifies the crowding out effect where productive but unpriced activity is thwarted by the introduction of financial exchange. The 'spillover' effect results from this undermining arising in other facets, such as doing dishes, vacuuming, etc. now that Johnny expects remuneration for his services.

It's an interesting hypothesis, but Frey doesn't present sufficient empirical evidence to consider it a first (or even second) order effect. Sure, maybe some reciprocal goodwill has been lost in the expectation of payment, but it's really unclear how pervasive this is. Still, he believes the implications are significant and focuses on optimal environmental policy design which he believes should address these possibilities since pricing environmental bads may reduce the public's intrinsic willingness to accept them without compensation (e.g., siting of nuclear waste facilities). He cites a Swiss study which purports that communities autonomously possess a civic duty which would tolerate the construction of nearby waste facilities. If only there weren't transfers, then they'd accept! This intuitively doesn't seem right and I don't think this question can be effectively resolved using willingness-to-accept survey data.

If you're interested in how markets impact motivation, then this is a quick read which also features some nice references to related work examining norms and reciprocity. But the bottom line is that it's unclear how significant a lot of these effects are, and if these are the primary means by which markets truly do affect psychology, both individual and social.