In a TED talk released yesterday (filmed in July), Dan Pink explains that extrinsic incentives work in only a surprisingly small set of simple activities with clear goals. He goes so far as to say that in all other cases -- including any task which involves just a tiny bit of creativity, which is probably 99% of the things you do every day -- extrinsic incentives not only don't work, but actually do harm, leading to decreased productivity relative to no extrinsic incentives. He argues this is one of the most robust findings in the social sciences. His conclusion is that businesses should pay people fairly but without any additional incentives, and should give employees lots of autonomy so that their intrinsic motivations may shine.
I just saved you 18 minutes (you're welcome), but you still might like to watch the entertaining video below.
I tried examining this argument in depth, but the results are not ready for public viewing yet. I am afraid I might actually agree with him. Hopefully some smarter economists will come along and poke some holes in the theory before I say anything stupid. More to come soon...
