Extrinsic Incentives, Intrinsic Motivation, and Motivational Crowding-Out in Health Law and Policy

Abstract

Commentary on carrots and sticks abounds; indeed, all law may be viewed as a system of rewards and penalties. Conventional economic theory would suggest that offering incentives for good behavior is likely to yield more of it, while penalties are likely to deter bad behavior. But behavioral economics scholarship prompts a second look at how incentives and incentive-based policies may have counterintuitive effects. A subset of this work concerns motivational crowding-out: a process by which imposing an extrinsic reward or penalty may reduce individuals’ “intrinsic” motivation for good behavior (Frey and Jegen 2001; Gneezy et al. 2011). Controversial scholarship in this area has raised concerns that echo throughout law, philosophy, and economics. These concerns include not only instrumental worries about efficiency and behavioral impacts of incentives, but also deeper concerns about whether incentives impair autonomy (Grant 2012) or prompt the deterioration of individual or collective morality over time (Bowles 2008; Grant 2012; Sandel 2012; Schwartz and Sharpe 2010). This Chapter sets aside moral concerns to focus on instrumental impacts; that is, whether motivational crowding-out can render an incentive inefficient or detrimental for behavior.

Keywords: incentivized behavior, motivational crowding-out