Financial incentives and behaviour change

In austere times, can bribery be healthy? : A special report by Reuters

Click here to view the full report—a largely balanced discussion of the pros and cons of financial incentives. Some further points of consideration based on Collaborative Change’s empowerment-based approach to behaviour change follow.

Behavioural economics (BE) is cited as the inspiration for incentive-based programmes, but we now know that loss-aversion (a more salient BE principle) is a more powerful driver. See for some excellent applications of this. Also, financial incentives pre-suppose that rational self-interest overrides other non-rational behaviour drivers—again casting doubt on the provenance of incentives as a BE principle.

We must note the important difference between intrinsic motivation and extrinsic motivation—especially in relation to the following considerations:


Such a crude extrinsic motivation may be useful for short-term effects, but is it conducive to long-term behaviour change? If you take this seriously, consider the ‘conveyor belt’ response that could possibly provide justification. The incentive motivation is crude and extrinsic, but it may tip the citizen onto a conveyer belt of change that leads them through positive habit formation and ultimately to long-term behaviour change. This leads us to a related philosophical question around:


At one-level it is not empowering because incentives are a crude prod that involve little internal reflection and change on the behalf of the agent. This could be countered by the conveyor belt argument but at a more fundamental level.


If we ‘train’ citzens to require financial incentives to affect lifestyle changes, are we robbing them of an opportunity to build self-efficacy and potentially disempowering them from making changes in other areas of their lives (i.e. areas in which financial incentives are not available)? (see the ‘Crowding out/crowding in’ discussion in the Mindspace framework document for more on this and a potential counter argument.