Incentives are a deceptively complex area of program design, where the answer is usually not intuitive. I just read this very clear statement that might be useful:

“Incentives are messages. The mere presence of an incentive, which attaches a positive or negative signal to a choice, can be more important than the magnitude of the incentive. Individuals interpret this message within a particular social context, and incentives thus interact with social preferences in important ways. Careless use of incentives can backfire by displacing and “crowding‐out” beneficial social preferences, while well‐designed incentives will instead “crowd‐in” and strengthen social preferences.

“Whether crowding‐out or crowding‐in predominates is determined by the interpretation of the incentives. Incentives are more likely to backfire when they are seen as manipulative or imposed from above; when they are arbitrary, difficult to act upon, or unfair; when they encourage selfish maximisation behaviour; or when they suggest that an activity is unpleasant and therefore must be compensated. Individuals are more likely to see an incentive as legitimate if they understand and endorse its purpose, and if they perceive the incentive as imposed by their peers for the good of the group as a whole. Pro‐social preferences can be strengthened when small incentives are used to reiterate group norms.

“Finally, note that incentives tend to be less effective for addressing imperfect optimisation biases. An excellent example is the design of an aircraft cockpit: early designs were extremely complex, with hundreds of buttons, levers and instruments. Clearly pilots have every possible incentive to fly well, given their very survival depends upon it—and yet the complexity of the environment led to critical errors. In such a case, further incentives are clearly futile. Optimisation biases are better countered by nudges (such as making the choice problem easier, or the incentives easier to understand), as well as mandates and in some cases transfers, although incentives may be used to suggest a useful strategy for solving a complex problem (e.g. small incentives for investors to diversify their portfolio). “

Source: Reuben Finighan, Beyond Nudge:
The Potential of Behavioural Policy (2015)

Melbourne Institute Policy Brief No. 4/15, Melbourne Institute of Applied Economic and Social Research The University of Melbourne

https://www.melbourneinstitute.com/downloads/policy_briefs_series/pb2015n04.pdf

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