There is a widely held belief that when designing public policy or legal systems, it makes the most sense to assume that all citizens are entirely self-interested and amoral. It’s a theory known as “homo economicus” or “economic man.” But, economist Samuel Bowles argues against that belief in his book The Moral Economy: Why Good Incentives are no Substitute for Good Citizens. Bowles laid out the case for his argument during a recent talk at UC Berkeley.
Bowles says there are two key reasons to move away from the economic man idea. First, he says polices that follow the paradigm can be self-fulling – making the assumption of universal amorality truer than it might otherwise be under different policies. Second, he argues that fines and rewards often do not work as intended.
The problem Bowles argues, is that incentives can “crowd out” otherwise altruistic motives people might have for any given action. He cites the classic example of a daycare that imposed a small fee for parents who showed up late. The result? Many more late parents. The thinking goes that the fee turned being late into a commodity rather than an inconsiderate action. Thus, the incentive backfired, and ended up having the opposite of its intended effect.
However, Bowles says incentives themselves are not to blame. He argues they can be designed in a such a way to encourage good civic behavior, while avoiding possible pitfalls. For example, when Ireland wanted to get rid of plastic bags, lawmakers imposed a small tax. But, they paired the tax with a huge media campaign about not trashing the Emerald Isle. Appealing to citizens better nature made the difference, and most shoppers stopped using plastic bags within weeks.