Yesterday, economist Samuel Bowles explored the risks and rewards of incentivizing moral behavior in his lecture titled “The Moral Economy: Why Good Incentives are No Substitute for Good Citizens.” Bowles’ talk was part of the Arrow Lecture Series on Ethics and Leadership sponsored by the McCoy Family Center for Ethics in Society.

Bowles currently serves as professor and head of the behavioral sciences program at the Santa Fe Institute, where his research interests lie in the areas of political hierarchy and wealth inequality. His work attempts to challenge the idea that people are motivated entirely by self-interest — instead, he argues that ethical and altruistic motives are commonplace.  

In his lecture, Bowles discussed how incentives for moral behavior paradoxically encourage people to behave immorally. He said that people are apt to turn down opportunities to strive for moral correctness when they see immoral behavior as the status quo, rather than as an active violation of moral norms.

“The problem with the incentive is not that it’s an incentive or that it’s money,” he said. “It’s that it is often used to dominate and control people.”

People are naturally resistant to this kind of incentive, a phenomenon Bowles called “crowding out.” Instead, he suggested that governments and other institutions wishing to affect people’s behavior should employ the strategy of “crowding in.” To do this, incentives must be carefully crafted to complement social preferences rather than substitute them.

As an example of a “crowding out” incentive, he presented a case in which a fire chief thought his firefighters were abusing their ability to call in sick, so he enacted pay cuts for taking sick days. Instead of reducing the number of sick calls, the calls significantly increased because “by giving it a price, it took it out of the realm of morals,” Bowles said.

In contrast, Bowles said that in the city of Bogota, the mayor instituted a policy where law-abiding taxi drivers were celebrated while drivers who violated the law were publicly shamed. This policy, Bowles explained, effectively managed to increase safe driving in the city.

“We are willing to bear some cost to uphold social norms,” he said.

Bowles urged governments to be mindful of moral incentives when developing policy.  

“Through public education and political discourse, governments are heavily involved in shaping preferences,” he said. “We cannot be indifferent to the preferences we and our fellow citizens have.”

Contact Sophie Regan at sregan20 ‘at’ stanford.edu.