26 Nov 2008

Carrots and Sticks

As someone well-versed in corruption, asymmetric information, self-interest, etc.,* I am a HUGE skeptic of regulations designed to "make people do the right thing," and this experimental paper [PDF] provides some useful evidence of how things really work:
We conducted a series of framed public goods experiments in fishing communities off the Caribbean coast of Colombia to investigate the relative effectiveness of regulatory pressure and pro-social emotions in promoting cooperative behavior.

The random public revelation of an individual’s contribution and its consequences for the rest of his or her group leads to higher public good contributions and higher social welfare than regulatory pressure, even under regulations that are designed to motivate fully efficient contributions
Not surprisingly, peer reputation (and pressure) is more effective than rules -- even clever ones.

Bottom Line: The best system is one that people want to belong to. Use more carrots and fewer sticks.

* We all drive under the speed limit, drink responsibly, etc. -- right?

1 comment:

  1. Social Marketing (carrots) is the only real option open to NGOs to foster change in public behavior, but not for government. Government is like a big dumb gorilla. Take gangs for instance. The US Government traditionally legislates or mandates morality--which retains stupid draconian drug laws that don't work. The top motivator for the gangs is money, then peer pressure, then fear/punishment/negative reinforcement. The large sums of money to be made outweigh the fear of getting caught. The higher good becomes the good of the gang, and fear keeps the members in line (fear of each other, not the cops). Uncle Sam would do better to use the techniques of Social Marketing, empty the prisons of drug offenders, take the incentive away from organized crime, and save or even make money taxing the drugs. Sticks are easier than carrots--sticks are no brainers. Carrots require research, investing in PR, time, and perserverance--not the easy answers (sticks) the government relies upon.


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