By Samuel Bowles
Why do policies and business practices that ignore the moral and generous side of human nature often fail? Should the idea of economic man — the amoral and self-interested homo economicus — determine how we expect people to respond to monetary rewards, punishments, and other incentives? In The Moral Economy Samuel Bowles answers with a resounding “no.” Policies that follow from this paradigm, he shows, may “crowd out” ethical and generous motives and thus backfire.
But incentives per se are not really the culprit. Bowles shows that crowding out occurs when the message conveyed by fines and rewards is that self-interest is expected, that the employer thinks the workforce is lazy, or that the citizen cannot otherwise be trusted to contribute to the public good. Using historical and recent case studies as well as behavioral experiments, Bowles shows how well-designed incentives can crowd in the civic motives on which good governance depends.
Andreas Hess on The Irish Times wrote:
"In his tightly argued and illuminating book, The Moral Economy, Bowles makes the case that appeals made to our self-interest can undercut instinctive moral impulses; and that when these impulses are weakened, crucial institutions work sub-optimally, if at all. This is the case even for markets, institutions which the dogma holds up as exemplars of the unique organising power of greed. [...] The book [...] demands very little in the way of technical knowledge of economics or game theory. It is not, however, light reading; the arguments and examples, succinct as they are, require careful attention. It is worth the effort. We all invoke the cliché that 'not everything has a price,' as an offhand rejection of economic analysis and an appeal to more humane considerations. Bowles shows why we should instead treat the slogan as a basic premise of sound economic thought."
Bob Holmes on New Scientist wrote:
"There is a strange disconnect between the stated aim of widening the horizon of our thinking related to economic performance and incentives, and the rigorous and, allegedly, “scientific” method employed. In terms of the means Bowles is obviously a hardcore defender of the social sciences as sciences. He seems unburdened by the question of whether it takes perhaps a more qualitative approach to understand the different customs and political cultures that influence and condition incentives. [...] Another weakness is that Bowles relies far too much on economistic 'straw man readings' of the classics, only to conclude what intellectual historians and other attentive readers of Hume, Adam Smith or Emile Durkheim knew all along. Thus, Bowles’ 'discoveries' seem more directed at die-hard economists than those who always suspected that the world was more complex than could be expressed in an algorithm."
Henry J. Aaron on Democracy; A Journal of Ideas wrote:
"Bowles makes an appealing case that virtue has a place in the world of economics. Unfortunately, much of his argument – which can be heavy going, at times – rests on economic theory or, more often, on the results of games played out in labs, such as the prisoner’s dilemma. Real-world tests would be more accessible and more persuasive, but are hard to come by. Still, Bowles’s book adds to a tide of research (such as the work of economist Elinor Ostrom and evolutionary biologist David Sloan Wilson) showing that selfishness is not the only human virtue in the real world."
"Bowles gives readers a clear and accessible explanation in plain English of some pretty advanced economics, including Nobel Prize-winning research on the conditions under which markets can achieve 'optimal' outcomes, and of 'system design,' a new field that explores how to structure choices to produce the best possible results. This ramble through economics is not a side trip, but is central to Bowles’s larger message. The theoretical conditions under which markets dependably produce 'optimal' results are never fully satisfied in practice. Not everything can be traded. Contracts seldom specify all possible contingencies and establish payments for them. In such cases, trust and mutuality come into play. [...] It is hard to translate the results of the research Bowles describes into concrete advice about how to use incentive-based policies to develop social preferences, because the complexity and richness of human interactions and motivations make each situation close to sui generis. Two pages near the end of the book summarize the qualitative suggestions."
Samuel Bowles on Incentives and Morality
Table of Contents of The Moral Economy
- The Problem with Homo economicus
- A Constitution for Knaves
- Moral Sentiments and Material Interests
- Incentives as Information
- A Liberal Civic Cuture
- The Legislator's Dilemma
- A Mandate for Aristotle's Legislator