Crowding-out Effects of Laws, Policies and Incentives on Compliant Behaviour

Abstract

Laws, policies, and incentives provide people with extrinsic reasons to engage in desired behaviours. But by doing so, they may attenuate or displace people’s intrinsic reasons for complying. In this chapter, I review theorising and empirical evidence on such crowding-out effects. I outline perspectives from psychology and economics on how laws, policies, and incentives may undermine people’s intrinsic motivation. Moreover, I describe how such insights have been applied to explain why laws, policies, and incentives may fail to increase compliance—or may even undermine it. The chapter will then review the empirical evidence on these processes in environmental, organisational, and other legal settings. Although it is plausible that laws, policies, and incentives will affect intrinsic motivation to comply, I conclude that empirical evidence of these processes is still modest. I conclude by outlining some important directions for future research, and some (tentative) recommendations for policy.

Keywords: crowding-out effect, incentives, intrinsic motivation, extrinsic motivation, law, rules