Saturday, December 19, 2015

Love or money

Leo Babauta discussed the idea that "earning money for what you love [might] make you stop loving it."
In the old days, I had no problem with incentives. I took my Econ classes and nodded my head. You want something to happen, you pay someone to make it happen, that's how it works.
Then I noticed that this didn't work so well when it came to the war on drugs. Legal penalties and crack-downs raised both the price and the risk associated with drugs, but people didn't obey the incentives.
Next I read a book by Alfie Kohn titled "Punished by Rewards." His basic theme was, psychologists who study motivation found that incentives could go wrong. People are more motivated when they care about the result of what they're doing more than what they're getting paid. There was another interesting book titled, "Do what you love and the money will follow."
Think of the price system as a proxy for social benefit. It works better than a bunch of central planners, but is it good enough? We can do better when we keep things at a small scale. Can we do better at a large scale? Or combine many small scale units into a large scale system?
The price system measures only the exchange economy. It ignores housework, editing Wikipedia, other unpaid but useful tasks, the gift economy. It is imperfect as a proxy.
Imperfect metrics give imperfect results, so the price system will never be perfect.
On the other hand, letting some dictator or central committee use their biased judgement to measure social benefit is likely to work much worse. Even if they don't give in to corruption, their guesses would not work. Most start-up companies funded by venture capitalists fail. Picking winners is really hard, unless you can cheat for them, which in this case would defeat the purpose.

No comments: