Advertisement

European Journal of Law and Economics

, Volume 48, Issue 3, pp 417–438 | Cite as

How to turn crowding-out into crowding-in? An innovative instrument and some law-related examples

  • Antoine Beretti
  • Charles FiguièresEmail author
  • Gilles Grolleau
Article
  • 86 Downloads

Abstract

Using a simple decision-theoretic approach, we formalize how agents with different kinds of intrinsic motivations react to the introduction of monetary incentives. We contend that empirical results supporting the existence of a crowding-out effect under various legal procedures hide a more complex reality, where some individuals contribute thanks to these additional monetary incentives while others reduce their contributions. Our approach allows us to study the theoretical ability of the self selection mechanism (Mellström and Johannesson in J Eur Econ Assoc 6:845–863, 2008; Beretti et al. in Kyklos 66(1):63–77, 2013) to reduce the likelihood to backfire against the cause it is meant to promote. This mechanism consists of a monetary payment for the pro-social behavior and it offers agents the choice to either keep the money for themselves or to direct it to a charity. We show that this legal procedure dominates others more classical procedures because it taps wisely into the motivational heterogeneity of individuals. It uses a self-selection mechanism to match adequate monetary incentives with individuals’ types regarding intrinsic motivations. It may even turn a situation subject to crowding-out into a crowding-in outcome.

Keywords

Crowding-out Heterogeneity Moral motivation Environmental regulation 

JEL Classification

D03 D64 H23 Q58 

Notes

References

  1. Atiq, E. H. (2014). Why motives matter: Reframing the crowding out effect of legal incentives. Yale Law Journal, 123(4), 1070–1117.Google Scholar
  2. Ayres, I., & Braithwaite, J. (1992). Responsive regulation: Transcending the deregulation debate. New York: Oxford University Press.Google Scholar
  3. Bar-Gill, O., & Fershtman, C. (2005). Public policy with endogenous preferences. Journal of Public Economic Theory, 7(5), 841–857.Google Scholar
  4. Bénabou, R., & Tirole, J. (2003). Intrinsic and extrinsic motivation. Review of Economic Studies, 70, 489–520.Google Scholar
  5. Bénabou, R., & Tirole, J. (2006). Incentives and prosocial behavior. American Economic Review, 96, 1652–1678.Google Scholar
  6. Beretti, A., Figuières, C., & Grolleau, G. (2013). Using money to motivate both saints and sinners: A field experiment on motivational crowding-out. Kyklos, 66(1), 63–77.Google Scholar
  7. Bernheim, D., & Rangel, A. (2007). Toward choice-theoretic foundations for behavioral welfare economics. American Economic Review, 97(2), 464–470.Google Scholar
  8. Bernheim, D., & Rangel, A. (2009). Beyond revealed preference: Choice theoretic foundations for behavioral welfare economics. Quarterly Journal of Economics, 124(1), 51–104.Google Scholar
  9. Bolle, F., & Otto, P. E. (2010). A price is a signal: On intrinsic motivation, crowding-out, and crowding-in. Kyklos, 63, 9–22.Google Scholar
  10. Bowles, S. (2008). Policies designed for self-interested citizens may undermine “The Moral Sentiments”: Evidence from economic experiments. Science, 320, 1605.Google Scholar
  11. Bruno, B. (2013). Reconciling economics and psychology on intrinsic motivation. Journal of Neuroscience, Psychology, and Economics, 6(2), 136–149.Google Scholar
  12. Capron, A. M., & Danovitch, G. (2014). We shouldn’t treat kidneys as commodities, Los Angeles Times. Retrieved August 21, 2019, from http://www.latimes.com/opinion/op-ed/la-oe-0630-danovitch-and-20140630-story.html.
  13. Cooter, R. (2000). Do good laws make good citizens: An economic analysis of internalized norms. Virginia Law Review, 86, 1577–1601.  https://doi.org/10.2307/1073825.CrossRefGoogle Scholar
  14. Dwenger, Nadja, Kleven, Henrik, Rasul, Imran, & Rincke, Johannes. (2016). Extrinsic and intrinsic motivations for tax compliance: Evidence from a field experiment in Germany. American Economic Journal: Economic Policy, 8(3), 203–232.Google Scholar
  15. Ellingsen, T., & Johannesson, M. (2008). Pride and prejudice: The human side of incentive theory. The American Economic Review, 98(3), 990–1008.Google Scholar
  16. Feld, L., Frey, B., & Torgler, B. (2006) Rewarding honest taxpayers? Evidence on the impact of rewards from field experiments. CREMA, Working Paper no. 2006-16.Google Scholar
  17. Feldman, Y., & Lobel, O. (2010). The incentives matrix: The comparative effectiveness of rewards, liabilities, duties, and protections for reporting illegality (June 7, 2009). Texas Law Review, 87, San Diego Legal Studies Paper No. 09-013.  https://doi.org/10.2139/ssrn.1415663.
  18. Feldman, Y., & Perez, O. (2012). Motivating environmental action in a pluralistic regulatory environment: An experimental study of framing, crowding out, and institutional effects in the context of recycling policies. Law and Society, 46(2), 405–442.Google Scholar
  19. Fleurbaey, M., & Schokkaert, E. (2013). Behavioral welfare economics and redistribution. American Economic Journal: Microeconomics, 5(3), 180–205.Google Scholar
  20. Frey, B. S., & Oberholzer-Gee, F. (1997). The cost of price incentives: An empirical analysis of motivation crowding-out. The American Economic Review, 87, 746–755.Google Scholar
  21. Frey, B. S., Benz, M., & Stutzer, A. (2004). Introducing procedural utility: Not only what, but also how matters. Journal of Institutional and Theoretical Economics, 160, 377–401.Google Scholar
  22. Frey, B. S., & Stutzer, A. (2005). Beyond outcomes: Measuring procedural utility. Oxford Economic Papers, 57, 90–111.Google Scholar
  23. Gneezy, U., Meier, S., & Rey-Biel, P. (2011). When and why incentives (don’t) work to modify behavior. Journal of Economic Perspectives, 25(4), 191–210.Google Scholar
  24. Gneezy, U., & Rustichini, A. (2000). A fine is a price. The Journal of Legal Studies, 29(1), 1–17.Google Scholar
  25. Goette, L., Stutzer, A., & Frey, B. M. (2010). Prosocial motivation and blood donations: A survey of the empirical literature. Transfusion Medicine and Hemotherapy, 37(3), 481–502.Google Scholar
  26. Holmås, T. H., Kjerstad, E., Lurås, H., & Straume, O. R. (2010). Does monetary punishment crowd out pro-social motivation? A natural experiment on hospital length of stays. Journal of Economic Behavior and Organization, 75, 261–267.Google Scholar
  27. Kahneman, D., Wakker, P., & Sarin, R. (1997). Back to Bentham? Explorations of Experienced Utility, The Quarterly Journal of Economics, 112(2), 375–405.Google Scholar
  28. Kanbur, R. (2001). On obnoxious markets. Revised version published. In S. Cullenberg & P. Pattanaik (Eds.), Globalization, culture and the limits of the market: Essays in economics and philosophy. Oxford: Oxford University Press (2004).Google Scholar
  29. Kelly, D. (2011). Yuck! the nature and moral significance of disgust. Cambridge: MIT Press.Google Scholar
  30. Lee, W., Reeve, J., Xue, Y., & Xiong, J. (2012). Neural differences between intrinsic reasons for doing versus extrinsic reasons for doing: An fMRI study. Neuroscience Research, 73, 68–72.Google Scholar
  31. Lindenberg, S. (2001). Intrinsic motivation in a new light. Kyklos, 54(2/3), 317–352.Google Scholar
  32. Mellström, C., & Johannesson, M. (2008). Crowding-out in blood donation: Was titmuss right? Journal of the European Economic Association, 6, 845–863.Google Scholar
  33. Morishima, Y., Schunk, D., Bruhin, A., Ruff, C. C., & Fehr, E. (2012). Linking brain structure and activation in temporoparietal junction to explain the neurobiology of human altruism. Neuron, 75, 73–79.Google Scholar
  34. Murray, T. H. (1992). The moral repugnance of rewarded gifting. Transplantation & Immunology Letter, 8(1), 5–7.Google Scholar
  35. Paulos, J. A. (2010). He conquered the conjecture, the new york review of books. Retrieved August 21, 2019, from http://www.nybooks.com/articles/2010/04/29/he-conquered-the-conjecture/.
  36. Reiss, S. (2005). Extrinsic and intrinsic motivation at 30: Unresolved scientific issues. The Behavior Analyst, 28, 1–14.Google Scholar
  37. Ryan, R. M., & Deci, E. L. (2000). Intrinsic and extrinsic motivations: Classic definitions and new directions. Contemporary Educational Psychology, 25, 54–67.Google Scholar
  38. Roth, A. E. (2007). Repugnance as a constraint on markets. Journal of Economic Perspectives, 21(3), 37–58.Google Scholar
  39. Salant, Y., & Rubinstein, A. (2008). (A, f): Choice with frames. Review of Economic Studies, 75(4), 1287–1296.Google Scholar
  40. Sandel, M. J. (2012). What money can’t buy: The moral limits of markets. Farrar, Straus and Giroux.Google Scholar
  41. Seamone, E. R. (2002). A refreshing Jury Cola: Fulfilling the duty to compensate jurors adequately. Legislation and Public Policy, 5, 289–417.Google Scholar
  42. Suzumura, K. (1999). Consequences, opportunities, and procedures. Social Choice and Welfare, 16(1), 17–40.Google Scholar
  43. Suzumura, K., & Xu, Y. (2001). Characterizations of consequentialism and non consequentialism. Journal of Economic Theory, 101, 423–436.Google Scholar
  44. Suzumura, K., & Xu, Y. (2003). Consequences, opportunities, and generalized consequentialism and non-consequentialism. Journal of Economic Theory, 111(2), 293–304.Google Scholar
  45. Tan, C., & Low, D. (2011). Incentives, norms and public policy. In D. Low (Ed.), Behavioural economics and policy design: Examples from Singapore (Chap. 2, pp. 35–49). World Scientific Publishing Co.Google Scholar
  46. Thøgersen, J. (2003). Monetary incentives and recycling: Behavioural and psychological reactions to a performance-dependent garbage fee. Journal of Consumer Policy, 26, 197–228.Google Scholar
  47. Titmuss, R. M. (1970). The gift relationship: From human blood to social policy. Sydney: Allen and Unwin.Google Scholar
  48. Underhill, K. (2016). When extrinsic incentives displace intrinsic motivation: Designing legal carrots and sticks to confront the challenge of motivational crowding-out. Yale Journal on Regulation, 33(1), 213–279.Google Scholar
  49. Vohs, K., Mead, N. L., & Goode, M. R. (2007). The psychological consequences of money. Science, 314, 1154–1156.Google Scholar

Copyright information

© Springer Science+Business Media, LLC, part of Springer Nature 2019

Authors and Affiliations

  1. 1.Montpellier SupAgroMontpellierFrance
  2. 2.CNRS, EHESS, Centrale Marseille, IRD, AMSEAix Marseille UniversityMarseilleFrance
  3. 3.Burgundy School of Business-CERENUniversity Bourgogne Franche-ComtéBurgundyFrance
  4. 4.CEE-M, CNRS, INRA, SupagroUniversité de MontpellierMontpellierFrance

Personalised recommendations