PsychologicalDUAL-USE

Extrinsic Incentives Bias

What it is

People believe that others are motivated mainly by money and external rewards while attributing their own motivation to interest, meaning and pride — a folk model that makes cynical explanations feel true and incentive schemes feel sufficient.

How it works

Chip Heath found in 1999 that people believe others are motivated mainly by pay, security and benefits while describing their own motivation in terms of learning, meaning and pride; MBA students, managers and Citibank customer-service representatives all rated extrinsic incentives as more important to their peers than to themselves. Miller and Ratner had shown the previous year that people overestimate the role of self-interest in others' attitudes, expecting smokers to oppose smoking restrictions far more strongly than smokers actually did. The bias is a theory-of-mind error: we have direct access to our own reasons and only a folk model of everyone else's, and the folk model is economic. Two persuasion consequences follow. Managers and policymakers who hold the folk model reach for bonuses and fines, which can crowd out the motivation people already had: Gneezy and Rustichini found that fining late parents at day-care centres increased lateness, because the fine turned an obligation into a price, and the crowding-out literature, though contested between the Deci and Cameron camps, finds intrinsic interest can fall when rewards are attached to it. And audiences who hold the folk model are easy to move with cynicism: “follow the money” and “paid protesters” feel like explanations because the bias makes self-interest the default account of any opponent.

Real-world examples

  • •Heath's Citibank study: customer-service representatives ranked their own top motivator as learning and developing skills, and predicted that their colleagues' top motivator was pay.
  • •Gneezy and Rustichini's 2000 day-care study in Haifa: introducing a fine for late pick-ups roughly doubled the number of late parents, and the rate stayed high after the fine was removed.
  • •In 2009 Nancy Pelosi called Tea Party protests “astroturf,” and in 2017 Donald Trump described airport and town-hall protesters as paid; the charge persuades on both sides because audiences assume nobody turns out for free, though documented cases of paid crowds are rare.
  • •Companies redesign compensation around bonuses on the theory that staff want money above all, then find engagement surveys and exit interviews citing meaning, autonomy and respect — the motivations the designers attributed only to themselves.
  • •Titmuss argued in 1970 that paying blood donors would reduce supply; the later field evidence is mixed, with Mellström and Johannesson finding in 2008 that offering payment reduced willingness to donate among women in Sweden.

Ethical guidelines

Where the line is

Offering honest pay and rewards for work, and asking what people actually want, is ordinary management; asserting that others act only for money in order to discredit sincere positions, or managing people with rewards that predictably crowd out the motivation they already had, turns the bias into a tool.

  • ●Ask people what motivates them rather than assuming it; Heath's finding is that the assumption is systematically wrong in the same direction.
  • ●Attach money to work only where it will not displace the reason people already do it; and if you must, say so and be ready for the price to replace the norm.
  • ●Do not explain an opponent's sincere position by self-interest without evidence; “who benefits” is a question to investigate, not an answer.

How to defend against it

  • ►When you catch yourself explaining someone's position by their pay, ask whether you would accept the same explanation for your own; if not, you are applying the bias.
  • ►Treat “paid,” “bought” and “follow the money” as claims requiring documentation — names, amounts, sources — rather than as explanations that stand on their own.
  • ►Before accepting an incentive scheme for yourself or your team, ask what it will do to the motivation that already exists; a fine or bonus can convert a norm into a price that is then cheerfully paid.
  • ►In negotiations, offer and ask about non-monetary terms — autonomy, recognition, time — because the other side is probably discounting how much they matter to you, and you to them.

References

  1. Heath, C. (1999). On the social psychology of agency relationships: Lay theories of motivation overemphasize extrinsic incentives. Organizational Behavior and Human Decision Processes, 78(1), 25-62
    The founding studies, including the Citibank representatives who attributed pay motivation to peers and learning motivation to themselves.
  2. Miller, D. T., & Ratner, R. K. (1998). The disparity between the actual and assumed power of self-interest. Journal of Personality and Social Psychology, 74(1), 53-62
    People overestimate how much self-interest drives others' attitudes, including smokers' views of smoking restrictions.
  3. Gneezy, U., & Rustichini, A. (2000). A fine is a price. Journal of Legal Studies, 29(1), 1-17
    The Haifa day-care study: a fine for lateness increased late pick-ups and the effect persisted after removal.
  4. Deci, E. L., Koestner, R., & Ryan, R. M. (1999). A meta-analytic review of experiments examining the effects of extrinsic rewards on intrinsic motivation. Psychological Bulletin, 125(6), 627-668
    Meta-analysis finding that expected tangible rewards undermine intrinsic motivation.
  5. Cameron, J., & Pierce, W. D. (1994). Reinforcement, reward, and intrinsic motivation: A meta-analysis. Review of Educational Research, 64(3), 363-423
    The opposing meta-analysis; the crowding-out effect remains contested in scope.
  6. Mellström, C., & Johannesson, M. (2008). Crowding out in blood donation: Was Titmuss right?. Journal of the European Economic Association, 6(4), 845-863
    Field experiment in which payment reduced willingness to donate blood among women.
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