Incentives are meant to tempt and encourage people to do more of what we want them to do. Not always, as these incentives may be counterproductive. I start with giving real examples of incentives that were not and then explain the reasons why they did so.
- Solar cookers were donated to villagers to save women from spending half the day searching for wood to use as fuel for cooking. The donators came back a few months later to discover that the cookers were damaged or abandoned.
- The cobra incentives promised everyone who brought a dead cobra a fatty bonus, only for the number of cobras to increase in the city.
- School students were promised monetary incentives if they dressed in the school uniform, only for most of the students to abandon it.
- Enforcing people to wear masks during the COVID-19 crisis led in some places to demonstrations against them.
- The rich man promised every scorer of a goal in a derby match a huge monetary bonus, only for his team to lose miserably.
The above examples show the negative effects of incentives and their counter results. Why did this happen?
The answer is not the same for all cases above.
The Cobra Effect resulted from exploiting the situation. People started to breed cobras to kill them to qualify for the bonus. When authorities discovered that, they stopped abruptly the incentives. The reaction of the breeders was to set the cobras free, only to flood the city with them.
The reactance effect is when people feel that the incentives limit their choices, they react in the reverse direction and abandon the formal uniform.
It is the same reason why some promotional campaigns fail. Those campaigns warn customers that the product shall only be available at certain times. The customers feeling deprived of choices act to the opposite of what the campaign tries to achieve by deserting the product for an alternative one.
The same reasoning applied to people who refused to wear masks as they felt they had lost their personal freedom.
The solar cookers, even though given free to popularize them, failed because they disrupted the social life of the villagers. The wives wanted their husbands to stay at home to help them instead of going out while the wives collected wood to play games. The husbands did not like this and so pretended the food was not tasty anymore. They refuse to eat food cooked using solar collectors. Social factors can poison the effect of incentives.
The rich man incentive disintegrated the effort of the team, for each player wanted the score to get the bonus. The team understandably lost as it lost its cohesiveness.
Incentives have a sweet appearance, but their taste can be bitter. Beware of the effect they produce, or else, in due time, you may show results that negatively surprise you.
An example of this is the subsidies for the purchase of electric cars, which are certainly a powerful tool to promote sustainability goals. By making cars cheaper and more accessible, they encourage the use of private vehicles to the detriment of public transport. In practice, the incentive could result in a paradox: more electric cars on the roads, less public transport, and therefore a global environmental impact that remains significantly high.
More generally, we could remember that the incentive does not work in
things that cannot be bought, neither with money nor with other forms of non-monetary incentives: creativity is one of these, then there is loyalty, trust, commitment, enthusiasm, a sense of duty, the willingness to contribute to the public good, just to give a few examples. All elements that are valuable for companies and organizations, but which do not have a price and therefore cannot be exchanged, nor contracted, much less subject to extrinsic incentives.
It is a treat to wake up this morning and find your great comment my friend, Aldo
You focused on two main ideas about incentives that warrant deep consideration.
1- Subsidies for electric cars promote sustainability but may lead to a paradox: more electric cars on roads, less public transport, and a high global environmental impact.
2- Non-monetary incentives like creativity, loyalty, trust, commitment, enthusiasm, and a sense of duty are valuable but not subject to extrinsic incentives, making them less effective in promoting sustainable practices.
Thank you for providing two great examples why incentives fail short. Much appreciated.
It is a very relevant issue that you propose.
I have dealt with this issue, with the help of some consultants, before launching promotional campaigns or setting up economic benefits with motivational purposes for staff.
The effectiveness of incentives depends on a variety of factors, including the nature of the target behavior, the social context and the individual characteristics of the recipients.
To cite some examples, in general, incentives are more effective when they do not interfere with intrinsic motivations, are designed to reinforce long-lasting habits, do not negatively alter social norms, are adequately calibrated.
Therefore, the design of incentive schemes must carefully consider the psychological and social dynamics at play, to avoid triggering unwanted effects that undermine the objectives set.
I am in full agreement with your insightful and probing comment, Aldo.
You highlighted the complexity of incentives and what factors may lead to their deviation from their desired results.
The effectiveness of incentives depends on factors like target behavior, social context, and individual characteristics. Incentives are more effective when they don’t interfere with intrinsic motivations, reinforce long-lasting habits, don’t negatively affect social norms, and are adequately calibrated. Therefore, incentive schemes must consider psychological and social dynamics.
You here add a very important fact about the need of motives not to disturb intrinsic values. I am sure you have examples of this and how this led to making incentives almost fruitless.
Thank you for your support and for your friendship.
Always my pleasure Aldo