Incentives & creativity

"Incentives matter" is a cliche. But is it true? One new paper suggests not. German researchers got subjects to find words from a set of letters - a task requiring some creativity and inventiveness - and found that their ability to do so was barely affected at all by whether they were paid a flat fee, by results or by giving a prize to the better solvers. They concluded:

Neither on the aggregate nor on the individual level do we find effects of incentives on performance.

This is consistent with a claim made by Daniel Pink - that financial incentives can actually be bad for creativity:

For more right-brained undertakings - those that demand flexible problem-solving, inventiveness or conceptual understanding - contingent rewards can be dangerous. Rewarded subjects often have a harder time seeing the periphery and crafting original solutions. (Drive, p 46)

Research by Theresa Amabile, summarised here (pdf), corroborates this.

All this, though, runs into a question. Tim Harford and Robert Allen say that the industrial revolution - the burst of creativity that most transformed human life - occured in Britain because of incentives; high wages gave inventors an incentive to look for labour-saving machines. How can we reconcile this with the laboratory evidence that incentives don't spur creativity? I suspect there are two ways.

One is that attention (pdf) is a scarce resource, and incentives act to draw our attention to problems. So, for example, England's high wages in the 18th century drew attention towards the question of how to save labour costs, in a way that didn't happen in lower-wage nations.

Secondly, there's a selection effect. Incentives might not motivate a given group of people to be creative, but they might change the composition of that group, by - at the margin - attracting some able people to the task*.

My point here is that there's a big difference between believing that incentives matter and actually designing an effective incentive scheme. Instead, incentives matter through elusive, long-term and hard-to-manage channels, and are often unintended consequences. After all, nobody actually consciously designed the structure of incentives that gave us the industrial revolution.

* I'm not sure how strong this is. Do many potentially great musicians or artists really give up their creative careers because they believe there's not much money in them? Or is it only the would-be second-raters who do so?

Comments

[Metatone]

I think part of the problem here is a mixing of definitions. It's not that the high wages problem incentivised the invention of labour saving technologies - it incentivised the adoption and investment in and refinement of labour saving techs...

[Luis Enrique]

maybe the word "creativity" is masking some important variation in what's going on - the variety of creativity involved in writing good music probably differs markedly from that involved in thinking up a more efficient supermarket supply chain.

In some circumstances, maybe you do need to feel there's nothing at stake except the quality of the thing itself that you create, in order to let your juices flow and take risks.

Then again, it's hard to imagine somebody creating a new more efficient battery unless we had some reason to want to store electricity. And whilst dreamers might dream up things for the fun of it, adoption by producers no doubt requires incentives.

[Chris Purnell]

Possibly the 'Headline' Industrial Revolutionaries were in fact not the actively creative people that history has marked them out as being. Many inventions were in fact created by others who had their inventions 'developed'. Thus the inventors invented because they were inventors and the capitalists- properly incentivised- built industrial empires. Those empires, in so far as they were commercially successful, are then generically described as being the 'Industrial Revolution'. It follows that incentivising inventors is a waste of time but we ought to be incentivising rapacious exploiters: or Venture Capitalists' as they are now known.

[Pete]

Do many potentially great musicians or artists really give up their creative careers because they believe there's not much money in them?

Well for certain values of "not much money", this one answers itself. If you can't make any money from your creativity, you don't really have a creative career, so much as a hobby that isn't really gong anywhere.

This also chimes with something that the other two said. Calling the industrial revolution an extraordinary burst of creativity is slightly misleading - they were toying with the steam engine in 1st century Alexandria. But if you're a Greek scholar, then the steam engine doesn't really look like the solution to much. It's only once you've got a sizable group of people looking to reduce labour costs that it's hailed as a stroke of genius.

So I think your implied model of creativity - that it involves identifiable problems to which people are drawn - is a little bit misleading. As metatone said, it's not like a whole load of people were drawn to the problem of how to invent labour saving technologies. People were drawn to manufacturing, and it's only at that stage that they became aware of a labour costs problem to solve.

Of course, all of this just reinforces your bigger point about incentives not being as straightforward as a lot of the folks who like to go on about them seem to assume.

[john malpas]

praise or applause is often valued above cash

[Rob]

"How can we reconcile this with the laboratory evidence that incentives don't spur creativity?"

It's possible that we're not making an adequate distinction between invention and exploitation (in the positive sense of the word) here. Coming up with an idea may be something best done without financial incentives, but the exploitation of that idea is something that is something that only happens when the incentives are right.

A back-of-a-fag-packet sketch would look like this:

Many of the innovations of the early industrial revolution were not new ideas - it has long been said that the Romans could have had the industrial revolution 1700 years earlier, but they had no need for steam power given an inexhaustible supply of slave labour. Indeed, steam power may have been seen as a bad idea that was only made feasible because of the extremely high labour costs of the time. Once steam power came into use, this drew many people's attention to the possibilities. Some of these will have been inventors - the "geeks" of their age, interested in machinery for its own sake - and some will have been businesspeople keen to exploit technology. It's entirely possible that all of the new ideas came from the inventors, and the businesspeople did the job of figuring out which ideas could work in practice. To the inventors, the industrial revolution may not have looked like a flashing neon sign saying "here's a chance to make some money" but "here's a chance to solve some really interesting problems", with the reverse being true of the businesspeople.

This creates a problem for incentive-setters, because it suggests that incentives are different for different people. It also suggests that those who deserve the greatest rewards might not be those who seek them.

[chris]

@ Gentlemen - I fear you're taking too narrow a view of creativity. It's not just about inventing things from scratch. The man who sees that a pre-existing device can be used to solve a problem is also being creative.
Sure, the steam engine was old tech even in the 18th century. But using it to pump water, drive machines or move carriages were exercises in creativity too.

[Tim Newman]

I suspect that what this tells us is that Germans do a good job regardless of how they are paid. Now, let's see the same experiment tried on Nigerian subjects.

[Tonylo]

You're absolutely right that incentives require other conditions. Noting that technology is not just about replacing human capital but provides other efficiencies too, whether that is producing higher value goods or enabling construction projects which would not be possible or affordable otherwise.

In the case of the industrial revolution if there was a larger demand for technology to be used (for labour saving), it follows that a larger number of creators of that technology would be needed too.

Critical mass is very important for developing innovative technology, although there are exceptions most technology companies are concentrated in a relatively small number of locations, think Silicon Valley etc.

[Metatone]

The steam engine had been imagined to pump water, drive machines and move carriages before the 18th century.

The incentive factor is that it's use became widespread because alternatives (labour) were in short supply.

The technology factor (which economists always ignore) is that metallurgy improved at this time which enabled steam engines to actually work well enough to be more useful.

Once you factor in the technology, there's an element of path dependency and luck - probably more important than the incentives. Economists really need to learn than incentives aren't everything.

[Wily]

Thank you.

Laboratory games are fundamentally out-of-context, devoid of compelling purpose, draw very little from prior purpose-driven experiences (the 10,000 hours), and fail to engage and trigger the imagination in any meaningful way. In other words... Yawn!

Compare Kennedy's space race call-to-arms: "We choose to go to the moon. We choose to go to the moon in this decade and do the other things, not because they are easy, but because they are hard, because that goal will serve to organize and measure the best of our energies and skills, because that challenge is one that we are willing to accept, one we are unwilling to postpone, and one which we intend to win, and the others, too."

... with...

"here are 12 random letters that we want you to make as many words from as possible, for which you will get X amount (pish-posh) of money per hour."

They are not the same.

Let's look at a love-sick young musician who has had his heart broken by having his super hot girlfriend taken from him by another guy... he's in deep soulful pain and in a bid to express and communicate it he writes an incredible song... just to get it out of himself.

Does the trigger for his creativity compare to a human lab rat feeling mildly ticked off that he can only come up with four five-letter words, and so he won't earn as many €-credit points?

What incentivizes and engages our minds, and can it ever be the same for everyone?

Obviously money can be an incentivizing force:

"Bring me $1,000,000 in 3 days or you'll never see your child again," says the kidnapper.

"You have until Thursday to find the rent, or you're out on the street, and I'm keeping all your stuff," says the landlord or bailiff.

Suddenly it's time to hussle.

However, for many, who are financially "comfortable enough" right now, it is just part of a package of things that are nice additions to have rather than massive driving force motivators.

Financial recognition helps you keep the spinning plates of creativity spinning with an occasional light touch but it's not always enough to get them set them up and give them maximum momentum in the first place.

I guess those who study incentive structures will have to find a way to map an individual's prime conscious and non-conscious motivators, if they are ever to find ways of maximizing creativity and productivity. And they will probably have to apply on an individual basis rather than looking for a one-size fits all, unless the mapping process throws up certain dominant patterns that they can exploit across a wider range of people.

Thank you.