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Incentives Demoralizes Professional Activity

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“Excessive reliance on incentives demoralizes professional activity.”

That’s a quote from a TED.com video I watched this week in which Barry Schwartz, Dorwin Cartwright Professor of Social Theory and social action at Swarthmore College and frequent contributor to the New York Times, calls for discusses how our society has gone mad with an abrupt loss of “practical wisdom” in the face of bureacracy, the failure of incentives, and rules often protect us from disaster but ensure mediocrity.

The whole video is worth watching but at around the twelfth minute, Barry Schwartz starts talking about the problem with incentives. A neighborhood was surveyed about the dangers of a toxic waste dump. When asked if they would agree to having a toxic waste dump located in their neighborhood, 50% agreed. They didn’t like the idea but they knew it had to go somewhere and they accepted that. When they another neighborhood was polled and given the incentive of six weeks of pay, only 25% agreed.

Why the difference? By adding the incentive of money (six weeks of pay), the decision stopped being about moral obligation (the dump has to go somewhere, here is as good as any other and we feel obligated to have it) and more about personal benefit and having a toxic waste dump is probably not worth six weeks of pay!

Talks Barry Schwartz: The real crisis? We stopped being wise:

If you have another twenty minutes after this video, I highly recommend watching The paradox of choice, another TED presentation in which he talks about the paradox of choice (how too many choices paralyzes us), the topic of his book by the same name.

(Photo: jesper)

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9 Responses to “Incentives Demoralizes Professional Activity”

  1. So I guess I need to convince my readers that subscribing to my RSS feed is a moral obligation… ;) Really though, that really is an interesting study! I wonder how it applies to blogging.

    Thanks,
    Nate

  2. Luke says:

    I wanted to really enjoy this video, but in the end found it mediocre.

    I truly applaud the call to a higher purpose and the need to not let the system and bureaucracy get in the way of what is right.

    His conclusions from the example of the toxic waste site in Switzerland seem too shallow and simple. Of course, if you ask someone to view a question from only a money standpoint, they will answer it from that standpoint. No one lives in a vacuum and all decisions are made after looking at multiple factors.

    Also, he really lowered himself with his jabs at George W. Bush. Everyone knows that GWB is not a good orator, nor a great communicator, which the quote that Mr. Schwartz used shows.

    On the other hand, Barack Obama is a great orator and can really talk the talk. In any event, it is the actions of each of these men that make them, not their words.

  3. I didn’t watch the video yet but I read The Paradox of Choice when it came out years ago. He makes good points and tries to illustrate them with interesting anecdotes. I wonder, though, if his moral imperative analogy would work throughout the world? My guess is not.

    However, I think that in an age where CEOs are receiving obscene “incentives” to perform at mediocre levels, at best, that “incentives” can be demoralizing especially if the incentive is purely financial.

  4. Take a read of Predicably Irrational. Some very good research describe that illustrates that paying for social services actually diminishes the perceived value. eg. paying late fees for daycare actually makes it okay to be late.

    • Jim says:

      Yep, I remember those points from Ariely’s book, which I recommend to anyone who is a fan of behavioral economics.

  5. Okey Doke. I watched the video. Very inspiring. Very uphill battle. TED was the right place to have the talk. A lot of thought leaders end up there.

  6. Ethan says:

    A co-worker (human factors expert) and I have had a few conversations about how too many options leaves you unable to make a choice. He went on to say that often people are more content with a purchase when they had fewer choices because more options make you wonder if you made the right selection.

  7. Paul Hebert says:

    I don’t think this is an indictment of incentives in general – but of putting incentives on a “moral” choice. As Ariely said in his book – when we cross the line from social to transactional – we get drop in performance. However, remove the social/moral constraint and incentives do work. We shouldn’t take a single application of incentives that didn’t work and apply it to all activity.


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