Incentivisation

Incentivisation or incentivization is the practice of building incentives into an arrangement or system in order to motivate the actors within it. It is based on the idea that individuals within such system can perform better not only when they are coerced but also when they are given rewards.[1]

Concept

Incentivisation aims to motivate rather than encourage enthusiasm so that individuals perform better. It is distinguished from a bribery system in the sense that it provides the "spark to motivate, stimulate, move, arouse, and encourage workers to strive for a personal best."[2] It is proposed that without incentivisation, systems can be counter-productive. This is supported by the theory that all individuals react in response to extrinsic motivators.[3]

An incentivisation strategy can leverage an existing system of measures to address interrelated issues such as those involving risk, cost, and performance.[4]

An individual's response to incentivization appears to be controlled by the ventromedial prefrontal cortex.[5] The brain can express a decreased response to incentivization after experiencing damage to or near the nucleus accumbens. However, people may become more sensitive to incentives when there is damage to the subgenual ventromedial prefrontal cortex.[5]

Examples

A simple example of negative incentivisation would be taxing people at 98% on all investment income, which happened in the UK in the 1970s (for the extremely rich).[6] This level of taxation gives individuals an incentive not to invest. This has the effects that:

  • People might stop investing
  • Taxes might stop being paid (due to people no longer investing)
  • The economy might behave poorly (due to lack of investment)

Another example of this is the driving behaviours of bus drivers in South America. They have been shown to exhibit numerous dangerous behaviours that put the children at risk, and incentivization was used to successfully lower the level of dangerous driving behaviours.[7]

See also

References
  1. Demirkaya, Yüksel (2016). New Public Management in Turkey: Local Government Reform. Oxon: Routledge. ISBN 978-1-317-27954-9.
  2. Fairholm, Matthew R.; Fairholm, Gilbert W. (2009). Understanding Leadership Perspectives: Theoretical and Practical Approaches. New York: Springer Science & Business Media. p. 63. ISBN 978-0-387-84901-0.
  3. Herrmann-Pillath, Carsten; Boldyrev, Ivan (2014). Hegel, Institutions and Economics: Performing the Social. Oxon: Routledge. ISBN 978-1-317-90754-1.
  4. Chang, Chen-Yu (2018). Incentivizing Collaborative BIM-Enabled Projects: A Synthesis of Agency and Behavioral Approaches. Project Management Institute. ISBN 978-1-62825-624-6.
  5. Manohar, Sanjay G.; Husain, Masud (2016-03-01). "Human ventromedial prefrontal lesions alter incentivisation by reward". Cortex. 76: 104–120. doi:10.1016/j.cortex.2016.01.005. ISSN 0010-9452.
  6. Paul Graham (May 2004). "Mind the Gap". Retrieved 2011-04-26.
  7. Niekerk, A. van; Govender, R.; Jacobs, R.; As, A. B. van (2017-03-17). "Schoolbus driver performance can be improved with driver training, safety incentivisation, and vehicle roadworthy modifications". South African Medical Journal. 107 (3): 188–191. ISSN 0256-9574.


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