Saturday, December 3, 2011

FT Caldwell Article on Colleague Ruth Grant's Book

Prof. Ruth Grant has a terrific new book, "Strings Attached."

Christopher Caldwell of FT writes a nice extended review and commentary. Here is an excerpt:

In Ruth Grant’s latest book, Strings Attached: Untangling the Ethics of Incentives, the professor of political philosophy at Duke University gives one the sense that day-to-day rules of American life are being set in a crooked fashion. Police officers hand out traffic tickets according to a daily quota. A South Carolina legislator proposes reducing prison sentences for inmates who donate their organs. The federal government collects billions in taxes for state road building projects, but will release the money only if states surrender their constitutional right to set the legal drinking age.

These stories all involve government incentives. The policy bestseller Nudge by Richard Thaler and Cass Sunstein has lately brought a similar approach into vogue. Nudge suggests displaying vegetables more prominently than desserts in school cafeterias and automatically enrolling company employees in retirement plans unless they protest. Prof Grant identifies the Thaler-Sunstein approach as “choice architecture”, a slightly different programme than the “incentivisation” she assails. But both offer politicians a way to herd citizens like cattle, while purporting to set them free.

There are two basic ways to get people to do something: coercion and persuasion. Both have their problems. Coercion is cruel. Persuasion doesn’t always convince. That is where incentives come in – you can offer someone something to do something he would not do otherwise. It is a trade. But it is also an exercise of power. These incentives are employed to counteract people’s natural motivations.
That is the way people understood the word “incentive” when it entered public-policy discussions a century ago. It was part of the American world view of the Progressive Era, a strange combination of utopianism and two-dimensional, “let’s get down to brass tacks”, “every man has his price” cynicism. This was the world of Taylorism and Charlie Chaplin’s Modern Times and social engineering proposed without embarrassment.

Incentivising is not only the market’s alternative to coercion. It is also powerful people’s alternative to persuasion. It can render governing classes unaccountable. Rulers get the outcome they desire, while the masses on whom it was imposed get the responsibility for having chosen it. An incentive is not a reward, something that can be fair or unfair. It is just a hedonic incitement. Prof Grant notes that the controversial bonuses paid to AIG employees after the insurer’s $180bn bail-out were revolting to those who think of bonuses as wages but acceptable to those who think of bonuses as incentives.

Dubious incentivisation is the hallmark of much of the US public sector.

ATSRTWT! And congrats to Ruth, a really good job on the book. It is an important achievement.

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Do you have suggestions on where we could find more examples of this phenomenon?