Incentives vs. Virtue

Jason sent me this article on the financial incentivizing of today's youth:

Across the country, school systems are paying children to do better in school. In New York, fourth and seventh graders can get up to $500 for improving their scores on the city’s math and English tests. Schools in Georgia pay eighth and 11th graders $8 an hour to attend an after-school learning program.

...“Incentives” include iPods for attending Saturday study sessions and a flat-screen television for making the all “A” honor roll.

... Greensboro, North Carolina, is paying teenage mothers $1 for every day they are not pregnant.

I wholeheartedly agree with the author's conclusion:

It doesn’t surprise me that these “nudges” can have a short-term positive effect. But it’s difficult to imagine these programs making a long-term difference.

On the contrary, the “long term damage” mentioned earlier may very well include creating a generation of people for whom incentives will become a necessity, not a nudge.

To put it in Christian terms, incentives will replace virtue. Instead of doing the right or prudent thing because it’s what a moral person does, people will do what they do because they get something out of it. This doesn’t build character—it builds calculators.

What’s more, in the real world, people don’t always reward you for doing the right thing. But there are still consequences for behaving foolishly. How will people raised on a steady diet of nudges avoid these pitfalls?

The answer is that many won’t avoid them because they never learned that, for the virtuous person, doing the right thing is incentive enough.

Financial incentives are analogous to firearms in the sense that just because they work, and can often be means to a desired end, doesn't mean they should be used as a universal policy tool. Unfortunately, behavioral economics is seen by politicians as a powerful new AA-12, and they want to "solve" every problem they see by riddling it to death with financial incentives. The problem with an "incentives make right" approach, much as with "might makes right," is that the benefit is often short lasting and the long-term consequences unwelcomed.

Financial incentives, as well as moral and physical incentives, are tools of coercion. They exist naturally to influence behavior, and are a, if not the, key component to a properly functioning marketplace of both goods and ideas. That said, I don't like the like the idea of government beating a person into submission or morally castigating someone into submission, and so I don't much fancy the idea of government bribing or taxing an individual into submission.