Perverse financial incentives

by Rob Horning

16 September 2006


Apart from being an unconvincing defense of Benthamite utilitarianism, economist Richard Layard’s Happiness is little more than a compendium of hedonics studies and some general conclusions about their implications—it is useful as a bibliography if nothing else. One group of studies he cites has to do with performance-related pay, which he is anxious to reveal as a source of stress and hedonic ineffiency. (He also optimistically suggests we should celebrate the income tax as a wonderful way of encouraging a healthy work-life balance.) But what I found most interesting was this: “Economists and politicians have tended to assume that when financial motives for performace are increased, other motives remain the same. In fact, these motives can change.” Layard then cites studies that demonstrate that financial motives tend to compromise pre-existing motivations; it erodes what impulses we might have had to perform an action for its own sake: one found that people paid to solve puzzles will work at them less than those encouraged them to solve them merely for the satisfaction of solving them. Apparently once we are paid to do something, we begin to believe that the pay compels us to do it, and the activity takes on the qualities of disutility economists associate with jobs in general—that we must be compensated financially to waste our time working rather than enjoying leisure. It seems that being paid is good way to destroy whatever pleasure we take in something; so strong is the alienating tendency of money and profit-tallying that when it intervenes we begin to separate from our involvement in what we are doing in the moment and revert to position of calculation—thinking about the future, thinking about theoretical maximation ratehr than actualizing any of that potential in the present moment. This would seem to have the effect of keeping work and leisure unfortunately opposed to each other, a separation that seems to begin with the compulsion to sell one’s labor on the open market for wages.

So as long as we remain dilettantish about our hobbies, we can enjoy them; when we professionalize, we turn them into chores. This explains part of my failure to pivot from researching a dissertation to defending one—I enjoyed learning as long as it was a hobby of mine to understand trends in 18th century cultural production, but when it became a matter of packaging and selling that knowledge, I balked. This is what makes me something of a loser as far as our economy goes; I lack the willpower to be able to stomach the loss in pleasure that comes with professionalization—another word for that ability to power through that hedonic loss? Ambition, which may be a desciption of the internal quality of finding pleasure in professionalization rather than tumult and combat and compromise and self-reification. I feel the same way about making music: As long as I have no ambition other than to get together with my friends and make music, I enjoy the pleasures of creation; but if we begin to try to market our band as cultural producers, we’re likely to enjoy it less and see it as yet another job, a set of imposed responsibilities from without. But I still perceive these feelings as a kind of failure in myself, balking at the moment when “reality” requires me to summon up ambition and confront the world as it is and integrate the product of my creativity with it in the only apparent way possible: commercially. This is probably why I resent certain bands who are on the brink—because their music suddenly seems about making those compromises and finding the wellspring of ambition to be more than dilettantes, to be content with more than just their own pleasure.

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