Incentives, The Fallacy of

The presumption that a person will not carry out a substantial task unless given an incentive over and above—separate from—the benefits derived from the task itself.

It is taken as a self-evident truth that the way to persuade people to make the effort to achieve a significant aim is to give them an incentive—a reward if they do, or a penalty if they don’t. The possibility that people may want to achieve an aim for its own sake is not taken to be a sufficient motivation. This carrot-and-stick theory is at the heart of the system of rewards and grades in education and public policy, and it is poised to be applied on a draconian scale to the measures which governments decide we must take in response to the climacteric. The reward is extrinsic, it is nothing to do with the intrinsic rewards of doing a good job or doing the right thing; it is about supplying the people with a substitute incentive because (it is assumed) they don’t care whether they are doing it right or not.

Extrinsic incentive schemes do work for simple quantity production. If the task consists of picking strawberries, it makes sense for earnings to be linked to the quantity of strawberries that a worker picks: the task is already specified; no judgment is needed. If designed for very routine tasks, or if sufficiently draconian and painful, extrinsic incentives can make people change their behaviour, although they cannot make them want to change their behaviour; nor can they make people apply their minds to inventing creative solutions to problems, and to sustaining their commitment to getting results over a long period. That is, where it is quality rather than quantity that matters—where the organisation needs its people to have the incentive to think—extrinsic rewards and punishments pre-empt judgment and trivialise the task. The person, the character, is discounted. Rewards for hitting quality targets—given to surgeons, for instance, as an incentive to carry out successful operations as distinct from botched ones—don’t work.I27

The case is illustrated by a simple experiment by Edward Deci, involving college students. Give two groups (with no contact with each other) an interesting task; tell just one of the groups that they will be paid for doing it. Let them start work and get into the task. Now call a coffee break. It is the group that isn’t paid that will carry on working through the break. The financial incentive here has in effect announced to the students that the task itself is not intrinsically interesting—that it is not in your interests to continue with it, unless you are paid to do so. The inference is that a programme which depends on people’s enthusiasm cannot buy it with financial incentives, with tricksy promptings of the carrot and stick. Instead, it has to win people’s interest and engagement on its own merits.I28

Alfie Kohn summarises an exhaustive review of research in the field:

Rewards usually improve performance only at extremely simple—indeed, mindless—tasks, and even then they improve only quantitative performance.

. . . Not a single controlled study has ever found that the use of rewards produces a long-term improvement in the quality of work. Extrinsic rewards reduce intrinsic motivation. . . . The central finding has been documented beyond any reasonable doubt.I29

The consistent finding of the research, then, is that the quality of the work produced by both adults and children is actually reduced by performance-related incentives. Sometimes the initial results are good—the initial offer of a reward is taken up, the required action is taken on the first day—but that establishes the action as something that no sensible person would do unless rewarded and the incentive to give the task any sustained attention is destroyed. Kohn suggests reasons for this.I30

First, the flip side of reward, of course, is punishment: if the hoped-for reward is not achieved, then the expectation is disappointed. Circumstances outside the subject’s control are likely to be blamed; the scheme is seen as manipulative.

Secondly, reward schemes can damage relationships: there is jealousy and a reluctance to cooperate. Winners have no need to cooperate with losers; losers have nothing to offer. And they damage relationships, too, with the authorities who have devised the scheme: their seniority and power is emphasised; the scheme is not seen as a cooperative partnership, but as a bribe.

A third reason is that incentive schemes reduce the willingness to take risks, to invent and explore: people go for the solutions and short cuts that have worked in the past. And once you have got the reward or grade, the job is done.I31

The central failure of incentive schemes, however, lies with the fourth problem: people who are engaged in an activity because they have been given an extrinsic incentive to do so (e.g., money) are less interested in what they are doing than people who are doing the same task under conditions which are identical except for the lack of an extrinsic incentive. If you have to be bribed to do something, you would not have done it without the bribe, so the task is a bore, on which you certainly aren’t about to waste much enthusiasm or creativity.


There are some subtleties here, and the shock of discovering that incentives are in fact disincentives requires a pause for thought. It does not follow, for instance, that being paid for a job means that people will be bored by it—and Kohn and his colleagues make a sharp distinction between the salary, which gets people through the door, and the performance-related incentive. He summarises,

The problem with financial incentives is not that people are offered too much money; earning a hefty salary is not incompatible with doing good work. Rather the problem is that money is made too salient. . . . Pay people generously and equitably. Do your best to make sure they don’t feel exploited. Then do everything in your power to help them put money out of their minds.I32

The implications of this are profound. It means—as the research reveals with disturbing candour—that much of the incentive structure around which modern life is organised is perverse, reducing success in achieving intended aims and making judgment obsolete. In this way, education is reduced to an exercise in playing the system—you go through the motions of doing what they want you to do. Who needs judgment when you can simply be given dog biscuits? A more miserable preparation for productive citizenship or for the intelligence and imagination we need would be hard to invent. It is, in fact, a reasonable suspicion that incentive schemes are used despite being known to demotivate. They are instruments of control. Our society’s political institutions do not dare to engage intelligence, which would change them. On the contrary, they feel threatened by it.I33

The writer Daniel Pink reflects on this. He suggests that, when motivation is properly understood, and institutions—schools, companies, public policy, our culture—get the cooperation of the people that live and work in them, three vital conditions of creative energy are released:

• Autonomy (the confidence and freedom to apply your mind);

• Mastery (the opportunity to be so engaged in the task that you begin to know what you are doing); and

• Purpose (the sense that what you are doing is worthwhile—the opposite of demoralisation).I34

Put all these together, moving on from primitive intervention with carrots and sticks, and we get that crucial outcome: flow. A phased withdrawal from fossil fuels will not be accomplished without it.


Related entries:

Presence, Common Purpose, Exhilaration, Lean Thinking, Energy Prospects.

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David Fleming
Dr David Fleming (2 January 1940 – 29 November 2010) was an economist, historian and writer, based in London. He was among the first to reveal the possibility of peak oil's approach and invented the influential TEQs scheme, designed to address this and climate change. He was also a significant figure in the development of the UK Green Party, the Transition Towns movement and the New Economics Foundation, as well as a Chairman of the Soil Association. His wide-ranging independent analysis culminated in two critically acclaimed books, Lean Logic and Surviving the Future. A film about his perspective and legacy - The Sequel: What Will Follow Our Troubled Civilisation? - was released in 2019, directed by BAFTA-winning director Peter Armstrong. For more information, including on Lean Logic, click the little globe below!

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