File Name: when and why incentivedon twork to modify behavior .zip
The effects of offering monetary incentives for performing environmentally desirable behaviours are investigated in the context of a pay-by-weight scheme for garbage collection. The study shows that the latter group delivers more material to recycling and composts more in the garden. A substantial proportion of the effect is mediated through perceived self-efficacy and personal norms.
- Motivation crowding theory
- When and Why Incentives (Don't) Work to Modify Behavior
- The Incentive Theory of Motivation
- Changing health behaviors using financial incentives: a review from behavioral economics
Motivation crowding theory
Policy-makers have two broad types of instruments available for changing consumption and production habits in society. They can use traditional regulatory approaches sometimes referred to as command-and-control approaches that set specific standards across polluters, or they can use economic incentive or market-based policies that rely on market forces to correct for producer and consumer behavior.
Incentives are extensively discussed in several EPA reports:. Two basic types of traditional regulatory approaches exist. The first, a technology or design standard, mandates specific control technologies or production processes that polluters must use to meet an emissions standard. The second, a performance-based standard, also requires that polluters meet an emissions standard, but allows the polluters to choose any available method to meet that standard. Performance-based standards that are technology-based, for example, do not specify a particular technology, but rather consider what available and affordable technologies can achieve when establishing a limit on emissions.
At times, EPA may completely ban or phase out the use or production of a particular product or pollutant, as it has done with chlorofluorocarbons CFCs and certain pesticides.
Regulations can be uniform or can vary according to size of the polluting entity, production processes, or similar factors. Regulations are often tailored in this manner so that similar regulated entities are treated equally.
While traditional regulatory and voluntary approaches are valuable policy tools for some types of environmental problems, incentive based policies are becoming increasingly popular as tools for addressing a wide range of environmental issues, from acid rain to climate change.
Market-based approaches or incentives provide continuous inducements, monetary and near-monetary, to encourage polluting entities to reduce releases of harmful pollutants. As a result, market-based approaches create an incentive for the private sector to incorporate pollution abatement into production or consumption decisions and to innovate in such a way as to continually search for the least costly method of abatement.
A criticism of command-and-control policies is that firms are only encouraged to reduce to a regulated level.
With market incentives, firms will reduce their emissions as long as it is financially valuable for them to do so, and this generally happens at a point where marginal abatement costs are equated across all regulated firms. Cost savings to firms also often translate into cost savings to customers who purchase products from regulated firms, resulting in lower overall social costs. The main disadvantage associated with economic incentives is that they can be inappropriate for dealing with environmental issues that pose equity concerns.
Emissions trading programs, for example, could have the unintended consequence of concentrating pollution in economically-disadvantaged areas pollution hot-spots. Example market-based approaches include:. In addition to the instruments listed above, hybrid approaches — those that combine aspects of command-and-control and market-based incentive policies — are often discussed in the literature and increasingly used in practice. These approaches are appealing to policymakers because they often combine the certainty associated with a given emissions standard with the flexibility of allowing firms to pursue the least costly abatement method.
However, hybrid approaches are not always the most economically efficient approach because either the level of abatement or the cost of the policy is greater than what would be achieved through the use of a market-based incentive approach.
Examples of hybrid approaches include:. EPA has also pursued a number of non-regulatory approaches that rely on voluntary initiatives to achieve improvements in emissions controls and management of environmental hazards. These programs are usually not intended as substitutes for formal regulation but instead act as important complements to existing regulation.
Others have been developed to improve environmental quality in areas that policymakers expect may be regulated in the future but are currently not regulated, such as greenhouse gas emissions and non-point source water pollution. An example is the U. Acid Rain Program, a cap-and-trade system that cost-effectively reduced sulfur dioxide emissions from electric utilities. Other examples include voluntary carbon trading schemes, such as the Chicago Climate Exchange; and nutrients trading programs between water polluting firms and agricultural producers that aim to reduce excessive loading of fertilizer and pesticides into water bodies.
Fees, charges, and taxes are widely used incentives which generally place a per unit monetary charge or fee or tax on pollution emissions or waste to reduce the overall quantity.
The main drawback is that fees, charges and taxes cannot guarantee a specific amount of pollution reduction, only that those who pollute will be penalized.
Examples include pollution taxes, water user fees, wastewater discharge fees, and solid waste disposal fees. Subsidies are forms of financial government support for activities believed to be environmentally friendly.
Rather than charging a polluter for emissions, a subsidy rewards a polluter for reducing emissions. Examples of subsidies include grants, low-interest loans, favorable tax treatment, and procurement mandates. Subsidies have been used for a wide variety of purposes, including: brownfield development after a hazardous substance contamination; agricultural grants for erosion control; low-interest loans for small farmers; grants for land conservation; and loans and grants for recycling industrial, commercial and residential products.
While subsidies offer incentives to reduce emissions similar to a tax, they also encourage market entry to qualify for the subsidy. Deposit-refund systems are a prominent example of a Tax-Subsidy incentive approach.
Take, for example, a beverage container recycling program. First, a product charge or tax is initiated that increases the upfront cost of purchasing the container. Second, a subsidy is rewarded to the consumer for recycling or properly disposing of the container. Deposit-refund systems are also available for lead-acid batteries, automobile parts, pesticide containers, propane gas containers, large paper drums, and beer keys.
Pollution standards set specific emissions limits, and thereby reduce the chance of excessively high damages to health or the environment but may impose large costs on polluters. Emissions taxes restrict costs by allowing polluting sources to pay a tax on the amount they emit, but because there are no emission limits, taxes leave open the possibility that pollution may be excessively high. A combination of standards and pricing mechanisms, referred to as a "safety-valve", may be used to limit both costs and pollution in these cases.
This combination imposes the same emissions standard on all polluters and all polluters are then subject to a unit tax for emissions in excess of the standard. This policy combination has some attractive features. First, if the standard is set properly, proper protection of health and the environment will be assured since the standard provides protection against excessively damaging pollution levels.
Second, high abatement cost polluters can defray costs by paying the emissions fee instead of cleaning up. Liability assignment is most often targeted at producers of waste or emissions that are easily identifiable and hazardous to public health. The purpose of liability is to not only hold polluters accountable for the proper management and disposal of their waste or emissions, but also for cleanup and remediation costs.
There are two major U. These two laws not only give polluters an incentive to make more careful and socially conscious decisions, but also hold them financially responsible to the victims of pollution. Information disclosure programs are designed to influence firm behavior through the dissemination of information on items such as production processes, labor standards, and pollution levels, to the federal, state and local government agencies, or to the public.
By making business owners, employees, shareholders and customers a part of the regulatory process, all parties have an incentive to practice behavior that is socially responsible. Both voluntary and mandatory reporting programs exist in the United States. An EIS is a report specifying potential environmental damages and alternative approaches to the agency action to minimize adverse impacts. Labeling schemes are widely used voluntary reporting programs.
Generally, a non-profit organization or government agency sets standards for a product to meet environmentally sustainable goals. Voluntary programs are useful for policy-makers who wish to test potential policy options or who want to encourage better production or consumption practices. Goals of voluntary actions include providing participating firms with a competitive edge firms that participate in a voluntary program might have larger social appeal than those that do not , increase-value added to businesses, and reduce pollution.
Most voluntary programs are designed and implemented by the U. Environmental Protection Agency. There are several benefits available to companies who wish to join a voluntary program. First, participation can improve their public image. Second, the program might offer technical or other types of assistance in exchange for participation. Third, because voluntary programs are sometimes initiated as a pilot test to a regulation, participation can help the company to more quickly transition to a formal law, and possible limit potential litigation and monitoring and enforcement costs.
A general problem with voluntary action programs is that it is quantitatively difficult to assess the success of the program. Program evaluators have developed several statistical methods, however, to research success rates.
The selection of the most appropriate market-based incentive or hybrid regulatory approach depends on a wide variety of factors, including:. The first is the failure of firms or consumers to integrate into their decision-making the impact of their production or consumption decisions on entities external to themselves. Market-based or hybrid instruments that incorporate the costs of environmental externalities from pollution i.
The second type of market failure is the inability of firms or consumers to make optimal decisions due to lack of information on investment options, available abatement technologies, or associated risks. Information disclosure or labeling are often suggested when this occurs because policy makers believe that private and public sector decision-makers will act to address an environmental problem once information has been disseminated.
The use of a particular market-oriented approach is often directly associated with the nature of the environmental problem. Do emissions derive from a point source or a non-point source?
Do emissions stem from a stock or flow pollutant? Are emissions uniformly mixed or do they vary by location? Does pollution originate from stationary or mobile sources? Point sources, which emit at identifiable and specific locations, are much easier to identify and control than diffuse and often numerous non-point sources, and therefore are often amenable to the use of a wide variety of market instruments. Although non-point sources are not regulated under EPA, the pollution emitted from a non-point source is.
This makes the monitoring and control of non-point source emissions a challenge. In instances where both point and non-point sources contribute to a pollution problem, a good case can be made for a tax-subsidy combination or a tradable permits system. Under such a system, emissions from point sources might be taxed while non-point source controls are subsidized. Flow pollutants tend to dissipate quickly, while stock pollutants persist in the environment and tend to accumulate over time.
While it is possible to rely on a wide variety of market and hybrid instruments for the control of flow pollutants, stock pollutants may require strict limits to prevent bioaccumulation or detrimental health effects at small doses, making direct regulation potentially more appealing. If the limit is not close to zero, then a standard-and-pricing approach or a marketable permit approach that defines particular trading ratios to ensure that emission standards are not violated at any given source are potentially practical options.
These same instruments are appealing when pollutants are not uniformly mixed across space. In this case, it is important to account for differences in baseline pollution levels, and in emissions across more and less polluted areas. Stationary sources of pollution are easier to identify and control through a variety of market instruments than are mobile sources.
Highly mobile sources are usually numerous, each emitting a small amount of pollution. Emissions therefore vary by location and damages may vary by time of day or season.
For example, health impacts associated with vehicle traffic are primarily a problem at rush hour when roads are congested and cars spend time idling or in stop-and-go traffic. Differential pricing of resources used by these mobile sources such as higher tolls on roads or greater subsidies to public transportation during rush hour is a potentially useful tool.
The choice between price-based instruments e. If uncertainty associated with the costs of abatement exists and policymakers wish to guard against potential high costs borne by polluters as a result of regulation, then they can limit these costs by using a price instrument. If, on the other hand, more uncertainty associated with the benefits of controlling pollution exist and policymakers wish to guard against high environmental damages, they can limit these damages by using a quantity instrument.
The policymaker also should be aware of any discontinuities or threshold values above which sudden large changes in damages or costs could occur due to a small increase in the level of abatement required. Instruments that cause firms to further restrict output may create additional inefficiencies in sectors in which firms have some amount of market power.
When and Why Incentives (Don't) Work to Modify Behavior
What forces are behind your actions? Do you get up and head to the gym each day because you know it's good for you, or is it because of some type of external reward? Sometimes people are motivated to act because of internal desires and wishes, but at other times, behaviors are driven by a desire for external rewards. According to one theory of human motivation, actions are often inspired by a desire to gain outside reinforcement. Incentive theory began to emerge during the s and s, building on the earlier drive theories established by psychologists such as Clark Hull. Rather than focusing on more intrinsic forces behind motivation , the incentive theory proposes that people are pulled toward behaviors that lead to rewards and pushed away from actions that might lead to negative consequences.
Skip to search form Skip to main content You are currently offline. Some features of the site may not work correctly. DOI: Gneezy and S. Gneezy , S. First we discuss how extrinsic incentives may come into conflict with other motivations. For example, monetary incentives from principals may change how tasks are perceived by agents, with negative effects on behavior.
Thus, once the incentives are. When and Why Incentives (Don't) Work to Modify Behavior. □ Uri Gneezy is Professor of Economics and Strategy, Rady School of.
The Incentive Theory of Motivation
Policy-makers have two broad types of instruments available for changing consumption and production habits in society. They can use traditional regulatory approaches sometimes referred to as command-and-control approaches that set specific standards across polluters, or they can use economic incentive or market-based policies that rely on market forces to correct for producer and consumer behavior. Incentives are extensively discussed in several EPA reports:. Two basic types of traditional regulatory approaches exist.
Metrics details. Incentives are central to economics and are used across the public and private sectors to influence behavior.
Changing health behaviors using financial incentives: a review from behavioral economics
Copyright for this article is retained by the author s. Author s grant s the American Psychological Association the exclusive right to publish the article and identify itself as the original publisher. Method: We conducted a conceptual analysis to compare definitions and operationalizations of the effect, and reviewed existing evidence to identify potential moderators of the effect. Results: In the psychological literature, we find strong evidence for an undermining effect of tangible rewards on intrinsic motivation for simple tasks when motivation manifest in behavior is initially high. In the economic literature, evidence for undermining effects exists for a broader variety of behaviors, in settings that involve a conflict of interest between parties. By contrast, for health related behaviors, baseline levels of incentivized behaviors are usually low, and only a subset involve an interpersonal conflict of interest.
Motivation crowding theory is the theory from psychology and microeconomics suggesting that providing extrinsic incentives for certain kinds of behavior—such as promising monetary rewards for accomplishing some task—can sometimes undermine intrinsic motivation for performing that behavior. The result of lowered motivation, in contrast with the predictions of neoclassical economics , can be an overall decrease in the total performance. The term "crowding out" was coined by Bruno Frey in , but the idea was first introduced into economics much earlier by Richard Titmuss ,   who argued in that offering financial incentives for certain behaviors could counter-intuitively lead to a drop in performance of those behaviors. While the empirical evidence supporting crowding out for blood donation has been mixed,  there has since been a long line of psychological and economic exploration supporting the basic phenomenon of crowding out.
Paul Schultz, Discussion Papers. Roland G. Fryer, Jr, Thomas C.