by Art Young

Created on: March 29, 2009

The multi-million dollar bonuses that were paid to financial service company salesmen have drawn the wrath of the American taxpayers who are bailing out these companies. In spite of this, the senior management of these enterprises insists that these huge financial incentives are the only way they can get these financial wizards to come to work and be productive.

These controversies over the necessity of incentives being paid to employees who meet their company's objectives are high profile because of the economic collapse. However, there are many more banal questions about the efficacy of "incentives" that have been confounding social scientists. Some of these include:

(1) Getting a 5-year old to eat his vegetables by offering a tasty dessert

(2) Fining parents for late pickups of children at daycare centers in Israel

(3) Stopping littering on our highways by using the threat of fines

(4) Paying people to donate blood

The example of paying people to donate blood was the basis of a study conducted by British social scientist Richard Titmuss in 1970. His book, "Gift Relationship: From Human Blood to Social Policy" has been re-released and this has motivated behavioral scientists to begin thinking about incentives in a more detailed manner. Their incentive might be a nice, tenured professorship!

So, do incentives work? In the case of Titmuss's landmark study on blood donation, they don't.

In the Titmuss study, and subsequent article in the "Harvard Business Review" by behavioral scientist Dr. Samuel Bowels, director of the behavioral program at the Santa Fe Institute, found that "offering to pay women for donating blood cuts the number willing to donate by almost half and that letting them contribute the payment to charity reverses the effect."

Thus, in the case of blood donation among women in England, offering financial incentives without a moral or public spiritedness aspect proved to be counterproductive. Bowels notes, "People want to be esteemed by others and seen as ethical and dignified. Rewarding blood donations may backfire because it suggests that the donor is less interested in being altruistic than in making a buck."

In the case of using incentives to motivate a child to eat healthy foods, a recent book by Australian economist, Joshua Gans, "Parentonomics," suggests that a reward for action is far from a "sure thing." In his book, Gans sees parenting as trying to persuade children "to do various things, from sleeping, eating, toileting, and to refrain from

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