Podcast Summary
The Capacity to Help Each Other: In times of crisis, policies that assume people are motivated purely by self-interest can harm our ability to help others. Humans are capable of altruistic behavior and public policy should recognize and support this capacity.
During times of crisis, people tend to go into survival mode and put their self-interest over the well-being of others. However, there are also those who look for ways to help each other. While public policy focuses on keeping bad people from doing bad things, behavioral economist Sam Bowles believes that policies that underestimate people's capacity to do the right thing can actually harm our ability to help others. The assumption in economics that humans are motivated purely by self-interest turns us into a new species called Homo economicus, but in reality, humans are capable of both self-interest and altruistic behavior.
Challenging the prevailing belief of selfish rationality: The belief that people only act in their own self-interest is flawed and alternative models for behavior should be explored. Examples like tipping waiters show that people act beyond rational self-interest.
The idea that rational behavior is selfish behavior has percolated beyond economics and is now present in popular culture, politics and policymaking. This prevailing belief assumes that everyone is motivated only by self-interest and that government policies should be designed around this assumption. However, the standard economic model, Homo economicus, fails to explain why people do many things including tipping waiters when they will never see them again. This contradiction suggests that the prevailing belief needs to be questioned and alternative models need to be explored.
The Limits of Homo Economicus in the Workplace: Despite the prevalence of self-interest in decision-making, values and norms also play a crucial role in shaping our professional and civic lives, particularly in fields that rely on people's desire to do a good job.
The model of Homo economicus does not accurately predict human behavior when it comes to acts of generosity and self-sacrifice, which are often seen in many workplaces. In jobs where it's difficult to assess the quality of work, such as scientific research, teaching, caring for the elderly or kids, relying on people's desire to do a good job is paramount. Values and norms play a crucial role in shaping our economic, professional and civic lives, but we must not discount the role of self-interest in decision-making.
Why Narrow Self-Interest is Not Enough for Our Economy: Combining self-interest with moral sentiments creates a more successful economy and public policy. Harsh policies can often lead to more problems, so it's important to find ways to utilize both motivators in a synergistic way.
Behavioral economist Sam Bowles argues that economic models which reduce people to their narrow self-interest fail to acknowledge the various motivators driving human behavior. His argument is that we should find ways to rely on both self-interest and moral sentiments in our economy and public policy. This approach is in line with Adam Smith's idea of combining material interests with moral sentiments. The Boston Fire Department's experience proves that implementing harsh policies to constrain supposed knaves can backfire and create more problems. Therefore, policies should be designed in a way that combines both self-interest and moral sentiments to work together synergistically.
The Unintended Consequences of Incentives: Imposing fines or limits can backfire as it changes the framing around a behavior, causing people to act in ways that were unintended. So, incentives should be carefully considered before implementation.
Incentives are often suggested as a way of motivating people to do things, but research shows that they can have unintended consequences. A study in Israel found that imposing fines on parents for being late to pick up their children from day care actually doubled the amount of lateness. This is because the fine framed being late as a moral question, rather than a practical one. Similarly, when sick leave was unlimited, people only took it when they were genuinely ill or injured. But when a limit was imposed and punishment threatened for going over it, people started taking sick leave when they didn't need it, just to avoid losing it. This shows that changing the framing around a behavior can have unintended consequences, and incentives should be carefully considered before being implemented.
The drawbacks of using fines to enforce ethical behavior and how to avoid them: Using fines as a sole motivator for ethical behavior can replace intrinsic motivation with transactional thinking and lead to a deficit of moral sentiments. Finding ways to mobilize people's desire to be good citizens can avoid this.
Introducing fines to enforce ethical behavior can crowd out the intrinsic motivation to do the right thing and replace it with a transactional mindset. This is because ethical judgments and cost-benefit decisions are processed in different parts of the brain. While monetary incentives can lead to conformity, it also means starting with a deficit of moral sentiments, which may require excessive penalties to restore compliance. Crowding out can be avoided by finding ways to mobilize people's desire to be good citizens, rather than relying solely on financial incentives.
The importance of intrinsic motivation in designing effective incentives: Incentives can either increase or decrease intrinsic motivation, which comes from within and is driven by a sense of pride and satisfaction. Aligning incentives with intrinsic motivation can bring positive outcomes in behavior change.
People are motivated by different reasons such as money, pride, and habit. However, if incentives are not designed effectively, they can demotivate individuals. The concept of crowding in and crowding out helps to understand how incentives can amplify or undermine intrinsic motivation. Intrinsic motivation comes from within and is driven by a sense of pride and satisfaction in doing the right thing. Incentives that align with intrinsic motivation can increase motivation and bring positive outcomes. For instance, Ireland's government aligned incentives with the national pride felt by individuals and successfully reduced plastic bag usage. The case highlights the importance of considering intrinsic motivation when designing incentives to drive behavior change.
Incentives and Cooperation in Building a Better Society: Public incentives work when they align with people's moral values, but can have negative effects if they signal distrust. Building trust and common purpose through effective leadership and communication is key to sustaining public cooperation.
Public incentives can be effective when they increase the salience of the moral component of a behavior. However, incentives may backfire if they signal distrust and lead to defensive and possibly hostile reactions. Contracting every single detail can also be self-defeating and limit creativity. The COVID-19 pandemic has shown the power of public cooperation, but sustaining it requires building trust and a sense of common purpose. Effective leadership and communication can foster social capital and encourage people to adopt behaviors that benefit everyone.
Reconsidering the Value of Ethical Values in a Post-Pandemic World: It's important to value communities, neighborhoods and our obligations to one another, beyond just self-interest. As we navigate the pandemic, let's strive for a better understanding of how to harness the positive aspects of kindness and cooperation, while guarding against zealotry and hatred of outsiders.
The COVID-19 pandemic has highlighted the need to reconsider the value of ethical values as an important part of organizing a society. It is important to rely on communities, neighborhoods, and obligations we have to each other which are not self-interested. While governments and markets are essential, there should be a third dimension of thinking - community or civil society. People are not entirely selfish, and economists need to learn that lesson. Our susceptibility to kindness and cooperation comes along with a susceptibility to zealotry and hatred of outsiders. We need to have a better understanding of how to have the better part of those values without having the worse.
