Economic Incentives and Social Preferences: A Preference-Based Lucas Critique of Public Policy
50 Pages Posted: 5 Aug 2009
Date Written: July 1, 2009
Abstract
Policies and explicit private incentives designed for self-regarding individuals sometimes are less effective or even counterproductive when they diminish altruism, ethical norms and other social preferences. Evidence from 51 experimental studies indicates that this crowding out effect is pervasive, and that crowding in also occurs. A model in which self-regarding and social preferences may be either substitutes or complements is developed and evidence for the mechanisms underlying this non-additivity feature of preferences is provided. The result is a preference-based analogue to the Lucas Critique restricting feasible implementation to allocations that are supportable given the effect of incentives on preferences.
Keywords: public goods, behavioural experiments, social preferences, second best, motivational crowding, explicit incentives
JEL Classification: A13, C90, D02, D63, D64, H41, D78, E61, Z13
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Incentives and Prosocial Behavior
By Roland Bénabou and Jean Tirole
-
Incentives and Prosocial Behavior
By Roland Bénabou and Jean Tirole
-
Incentives and Prosocial Behavior
By Roland Bénabou and Jean Tirole
-
Do Incentive Contracts Crowd Out Voluntary Cooperation?
By Ernst Fehr and Simon Gächter
-
Do Incentive Contracts Crowd Out Voluntary Cooperation?
By Ernst Fehr and Simon Gächter
-
Psychological Foundations of Incentives
By Ernst Fehr and Armin Falk
-
Psychological Foundations of Incentives
By Armin Falk and Ernst Fehr
-
Do Incentive Contracts Undermine Voluntary Cooperation?
By Ernst Fehr and Simon Gächter
-
The Hidden Costs and Returns of Incentives - Trust and Trustworthiness Among CEOS
By Ernst Fehr and John A. List
-
Honesty in Managerial Reporting
By John Evans, R. Lynn Hannan, ...