Money, incentives, and motivations - the new complexity

You want someone to work harder offer them more money. Want them to work even harder offer even more rewards. The rational economist will state that every motivation has a price. If someone is willing to work less it is because of the work leisure trade-off. Some makes enough to start to value leisure more.

Daniel Pink's book Drive: The surprising truth about what motivates us looks past the standard rational economic man approach and describes why money may not be the only motivator. In fact, the research is well documents that money does not always make us work harder or think better. It can actually cause the opposite effects. When payment is associated with performance, there are perverse results like less motivation and poorer results. The natural inquisitiveness and desire of humans may be an intrinsic motivator. This is especially true for more complex problems.

While I do not agree with many of his conclusions, the evidence for motivators beyond money are clear However, this does not mean that bonus should be capped or positions. We just have to be aware that rational behavior may put value on more than just dollars. None cash incentives do have value.