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.