Complicated motives

This week Boris Johnson claimed that the roll-out of the vaccine was the result of capitalism and greed; Goldman Sachs workers complained about long hours; and I got my jab. There’s a link here. All three episodes shed light on the role of motivations.

Johnson is of course wrong. The Oxford vaccine was discovered by academics and is being produced by AstraZeneca at cost, and the Biontech vaccine was discovered by people who were already billionaires. It’s nearer the truth to say that the vaccines’ discovers were motivated less by greed and more by intellectual curiosity. And this, of course, is only one of countless motives, which include pride, ego, loyalty to colleagues, force of habit, fear of failure, peer pressure, altruism, and so on.

And these non-financial motives are powerful things. The vaccine roll-out has been conducted with impressive efficiency by people who were working either for nothing or for lowish wages. That contrasts with the failure of Test and Trace which has spent millions on expensive consultants. A sense of vocation or of doing good can produce better results than the cash nexus: this is why workers in the public sector are more likely to do unpaid overtime than those in the private sector.

Of course, money matters; it is what gets workers through the door.  But whilst it is usually necessary to get a job done, it is not sufficient to get it done well, at least where contracts and worker supervision are incomplete. Instead, it gives us workers who, as Homer Simpson says, go in every day and do it really half-assed. Those Goldman Sachs employees who leave before getting their bonus remind us that we need more than money to induce us to work long hours.

Which brings us to the problem. Trying to motivate people by appealing to their greed can crowd out these many other motives (pdf). Don Revie discovered this in 1974 when he became England manager and proudly announced to the team that he’d raised their appearance money. He immediately lost the respect of players such as Emlyn Hughes who would have paid for the privilege of playing for England.

In the same vein, high-powered bonuses encourage bankers to take on too much risk. Or they encourage managers to focus on what can be measured (such as the next quarter’s earnings) rather than important things that cannot such as innovative activity or a good corporate culture, as Jean Tirole and Roland Benabou have shown (pdf). High CEO pay can incentivize office politics and selfishness as senior bosses jockey for the top job. And as John Kay showed in his book, Obliquity, companies such as ICI and Boeing were more profitable when they focused on making chemicals and planes than when they shifted to focusing on shareholder value.

There are several different mechanisms causing crowding out. One is a selection effect: if you offer big pay you’ll tend to attract people who are motivated by money who might well be more selfish and less moral than others. Also, financial incentives change people’s self-identity. The man who thinks “I’m a prudent banker” won’t take reckless risks but the one who thinks “I could get a big bonus” will. And then there’s the risk of a loss of reciprocity: if all you are offering is money, workers are less likely to feel respect or loyalty to you, as Emlyn Hughes demonstrated.

All this might explain two big facts. One is the serial failure of government outsourcing. Subcontracting replaces what Julian Le Grand called “knightly motives” (pdf) such as public service with the cash nexus. The other is that labour productivity has slumped as neoliberal management has spread, with its emphasis on target and incentives rather than other motives.

But, but, but. The crowding out of intrinsic motives by cash incentives is only part of the story. It’s also the case that financial motives can crowd in these other motives, as Sam Bowles has shown (pdf). This is the message of George Akerlof’s classic paper (pdf), Labour contracts as partial gift exchange. Good pay can sometimes promote reciprocity and hence get workers to put in more effort than necessary. It also allows workers to focus more on their jobs because they are less worried about money. Or financial incentives can serve as signals: a small tax on plastic bags, for example, told us all to use less plastic.

It cuts both ways.

You might think this just shows the weakness of economics. When done properly, it often concludes: “it all depends.”

But there is a strong message here. It’s that the network of motivations within any organization is a delicate eco-system which is sensitive to context. Any manager who blunders in with faux-cynical theories of human behaviour like Johnson’s risks destroying this system. Sometimes – and only sometimes – things are more complicated than they seem.

Comments

[Nick Drew]

As you say, a delicate eco-system with loads of fators at work: anecdotes abound, that can ofetn be taken different ways.

Example: Enron paid salaries that were ordinary (relative to the industry) but paid merit-based bonuses that were distinctly above ordinary for the industry. Wasn't the only attraction of Enron (working in an ultra positive & creative environment was another) but the end result of this eco-system was the most motivated & productive workforce imaginable, that moved mountains in the energy sector and left an enduring legacy

The people who brought the company down went beyond big bonuses and devised literally criminal ways to loot the company. Greed, certainly, but nothing directly to do with the compensation on offer

[rsm]

Doesn't Hayek say that price is all that matters? Who gets to decide when a time is a sometimes or not? Is the opportunity cost of a prudent banker greater liquidity for little guys?

[rsm]

From the "risk" link in the blog:

"The paper discusses possible answers to the challenging questions: what is the source of rainmaker rents and how are they sustained over time? Answers to these questions can help guide debates over the appropriate regulation of financial markets."

"Rents is the wrong way to think of it. Money is created. Balance sheets expand indefinitely, sustainably. Public capital easily expands when for whatever arbitrary, irrational reason traders get themselves into a panic and private liquidity manufacturers shut their windows.

[Gerry Mulligan]

For at least the last five years business fashion has taken on board the lessons in this blog About human motivation. Most large companies not try to set out their purpose and what they stand for to create “ purpose driven companies”. This proved to more difficult than may first appear as this leads to tough choices but research indicates companies with clear purpose outperform. In many ways this factor is similar to the often underestimated influence of “identity” in national politics as opposed to rational voter theories

[Jan Wiklund]

Here is a funny animated lecture about what Chris says: https://www.youtube.com/watch?v=u6XAPnuFjJc - "The surprising truth about what motivates us"

[aragon]

Great Video along with other Dan H. Pink videos. Just let Youtube autorun them.

Just think what a comfortable basic income could produce:

Education, Science, Art and Software!

J.K Rowling wrote the first Harry Potter on the dole.

Wikipedia does not pay.

Music and Software development ...

Science used to be a pursuit of Gentlemen.

Education: Self improvement, curiosity.

Sport: Physical mastery.

Open Source does not pay. (Source code and executable must be made available).

Abolish copyright it concentrates wealth: e.g see J. K. Rowling.

Motivation:
Autonomy, Mastery, Purpose. once money is sufficient!

For those whom lack intrinsic motivation they can supplement their comfortable basic income without rudimentary cognitive skills.

The ability to self-determinate may be source of satisfaction.

McLeod, S. A. (2020, March 20). Maslow's hierarchy of needs. Simply Psychology. https://www.simplypsychology.org/maslow.html

"The growth of self-actualization (Maslow, 1962) refers to the need for personal growth and discovery that is present throughout a person’s life. For Maslow, a person is always 'becoming' and never remains static in these terms. In self-actualization, a person comes to find a meaning to life that is important to them."

[Alex]

"Faux-cynical"? Come on, the only thing about him that's not faux is the cynicism

[ltr]

France has had a disastrous coronavirus experience, and Macron has proven a disastrous administrator. Terribly sad.

[Blissex]

As to France (and peripherally Macron) here is a wonderful article that attacks some french intellectuals for dissenting from the "whig"/"woke" line that worker/class/economic issues of "the many" are a distraction from race and gender pilitics dear to "the few":

https://www.theguardian.com/commentisfree/2021/mar/12/academics-french-republic-macron-islamo-leftism
«These two respected scholars lament what they see as the substitution of “class struggle” with “race struggle”. They scorn the “gender bandwagon”, are dismissive of intersectionality and criticise the “racialisation” of social problems and public discourse. [...] By asserting the primacy of class, and an idealised account of republican values, France’s culture warriors devalue the ideas and movements that help to better understand – and act against – current social injustices.»

[ltr]

Blissex recommends a superb article:

https://www.theguardian.com/commentisfree/2021/mar/12/academics-french-republic-macron-islamo-leftism

March 12, 2021

Are 'woke' academics a threat to the French republic? Ask Macron's ministers
By Didier Fassin - Guardian

[Dipper]

I would contend this is the last time a major multinational company does something at cost.

[ltr]

I would contend this is the last time a major multinational company does something at cost.

[ This contention makes no sense to me, since a company taking this stance would be actually sacrificing its broad interests. ]