Simon Duffy

Thoughts, Bemusements & Arguments

Tag: public policy

Incentives Can be Badly Misused

The effect of high rewards or similar in creative jobs is thus very often to encourage people to misallocate their effort between tasks, to fixate on a given target, to take too much or to little risk, to have fore-shortened time horizons, to behave unethically in order to get what they want, and to experience debilitating levels of stress and anxiety. In short rather an accurate description of the culture of many parts of the current financial markets. 

Jesse Norman in The Big Society

The author is right – but he may have also added the whole of the political elite and their current efforts to ‘manage’ for public service improvement through over-complex contracts, cumbersome commissioning arrangements and fancy ‘social impact bonds’. The notion that somebody might just do their job properly because they loved it and wanted to do it well has entirely disappeared from contemporary policy-making.

The problem is profound. If you want to use incentives to achieve specific goals then you have to be really confident that you know what it is you really want. Within the context of one policy objective – reducing unemployment – it may seem natural to incentivise things that you think will meet that goal.

But reality is more complex than that.

In our own life we know that we have to balance many considerations and that no one thing is ‘the point’ of our activities. Often aiming at one thing has perverse consequences that we didn’t expect. If we can control our own circumstances then we adjust and regain balance. But if we are made to work to some overarching but primitive target we quickly find that balance is lost – and things fall apart.

Cultivate Yourself First

The sage of old cultivated himself before he attempted to help others. If you yourself are not cultivated, what help could you possibly be for others? Do you know how virtue is lost and how mere knowledge arises? True virtue can be destroyed by fame, and mere knowledge is often reached by conflict. Fame is something that can be used to beat down others and knowledge is used to attack others. Both are instruments of evil and the sage has no need of either.

Confucius quoted in the Tao Te Ching

Confucius is talking to an enthusiastic do-gooder who wishes to tutor a tyrannical prince. The whole discussion is very interesting. Each time the young man suggests that he has found the right way to influence power then Confucius explains how the strategy will fail.

To seek to do good, through the agency of another person, is an exciting dream and it is hard not to indulge it. We may think we know exactly who the football manager should pick for his team or we may think we know exactly what the Prime Minister should do for the best. But it is a kind of cheating – instead of trying take on that role – with all of its responsibilities we wish simply to act as puppeteer: do this, do it my way.

However I am not sure how Confucius would respond to the logic of democratic politics and the need for debate and policy. Equality and citizenship allows, in fact should encourage, debate and mutual tutoring because these things are proper to the function of the citizen. This kind of influence is not a dream it is a responsibility – but there can be no short-cut through the agency of the powerful.

Churchill and the Persians

Churchill observed “America will always do the right thing… but only after exhausting all other possibilities.” He could have deduced this from Katz’s Law which is that “Men and nations will act rationally when other possibilities have been exhausted.”

We can treat this as a cynical statement about our weakness and our tendency to always fall for the easy, but wrong, alternative. However it is also tells us something about the demands of rationality. If it is true  – don’t despair – think things through, make safe experiments, argue things out.

We are all prone to this weakness – we all want the quick and easy win – we resent the unintended and unforeseen consequence. So we need to develop some better habits to help us see things from different perspectives.

Herodotus says that the Persians used to review their plans both while they were drunk and while they were sober. Only if they thought the plan was good when drunk and sober would they commit to it.

The problem we face today in developing good public policies is not that we are often wrong. Our biggest problem is that we are so frightened of being seen to be wrong that we will never learn how to be right – we will never exhaust any of those other possibilities. We are stuck with what we’ve got and we have to make it seem right despite all evidence to the contrary.

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