This setting lets you change the way you view articles. You can choose to have articles open in a dialog window, a new tab, or directly in the same window.
Open in Dialog
Open in New Tab
Open in same window

Journal of Economic Literature: Vol. 50 No. 2 (June 2012)

Expand

Quick Tools:

Print Article Summary
Export Citation
Sign up for Email Alerts Follow us on Twitter Subscription Information
(Institutional Administrator Access)

Explore:

JEL - All Issues

JEL Forthcoming Articles JEL Indexes (Members Only)

Economic Incentives and Social Preferences: Substitutes or Complements?

Article Citation

Bowles, Samuel, and Sandra Polania-Reyes. 2012. "Economic Incentives and Social Preferences: Substitutes or Complements?" Journal of Economic Literature, 50(2): 368-425.

DOI: 10.1257/jel.50.2.368

Abstract

Explicit economic incentives designed to increase contributions to public goods and to promote other pro-social behavior sometimes are counterproductive or less effective than would be predicted among entirely self-interested individuals. This may occur when incentives adversely affect individuals' altruism, ethical norms, intrinsic motives to serve the public, and other social preferences. The opposite also occurs—crowding in—though it appears less commonly. In the fifty experiments that we survey, these effects are common, so that incentives and social preferences may be either substitutes (crowding out) or complements (crowding in). We provide evidence for four mechanisms that may account for these incentive effects on preferences: namely that incentives may (i) provide information about the person who implemented the incentive, (ii) frame the decision situation so as to suggest appropriate behavior, (iii) compromise a control averse individual's sense of autonomy, and (iv) affect the process by which people learn new preferences. An implication is that the evaluation of public policy must be restricted to allocations that are supportable as Nash equilibria when account is taken of these crowding effects. We show that well designed fines, subsidies, and the like minimize crowding out and may even do the opposite, making incentives and social preferences complements rather than substitutes. (JEL D02, D03, D04, D83, E61, H41, Z13)

Article Full-Text Access

Full-text Article

Authors

Bowles, Samuel (Santa Fe Institute and U Siena)
Polania-Reyes, Sandra (U Siena and U College London)

JEL Classifications

D02: Institutions: Design, Formation, and Operations
D03: Behavioral Economics: Underlying Principles
D04: Microeconomic Policy: Formulation; Implementation; Evaluation
D83: Search; Learning; Information and Knowledge; Communication; Belief
E61: Policy Objectives; Policy Designs and Consistency; Policy Coordination
H41: Public Goods
Z13: Economic Sociology; Economic Anthropology; Social and Economic Stratification


Journal of Economic Literature


Quick Tools:

Sign up for Email Alerts

Follow us on Twitter

Subscription Information
(Institutional Administrator Access)

Explore:

JEL - All Issues

JEL - Forthcoming Articles

JEL Indexes (Members Only)


Virtual Field Journals


AEA Member Login:


AEAweb | AEA Journals | Contact Us