This text poses a challenge to traditional economic theory, arguing that people do not act in expectation of monetary gain alone, nor do they work solely to get paid. It aims to show that higher monetary compensation crowds-out motivation, and offering higher pay makes people less committed to their work, and may reduce their performance. The first part of the book examines the crowding-out effect and the motivational spill-over effect. A large number of applications to constitutional questions, various policy issues and the organization of firms is explored in the second part. In the last part is a discussion of the substantial consequences for policy making and economic theory.
Industry Reviews
`What he [Bruno Frey] offers is both challenging and pervasive in its relevance. He is ambitious enough to aspire to make economics less presumptive and less general, but - as he himself observes - earlier efforts to integrate psychology into economics have been noted while precious little effect on economics as a whole. His book is provocative and interesting and likely to yield some further empirical efforts to measure putative crowding-out effects, but scepticism and inertia are likely to be difficult barriers to overcome.' -- L.A. Duhs, Economic Analysis and Policy `The book is a must for political business cycle theorists in that it includes. . . important articles in the PBC literature. . . . it will be a prominent feature in my bookcase.' -- Dean Garratt, Economic Affairs `The main thing is to congratulate Frey for highlighting an important and interesting problem which economists have yet to deal with in a fully satisfactory fashion.' -- David Collard, The Economic Journal `In this wonderful little book, Bruno S. Frey provides a convincing - indeed, to my mind a conclusive - case against a fundamental tenet of the model of homo economicus, namely, that "higher monetary reward (price) induces more of an activity". One of the great merits of Frey's book is his demonstration of how, especially (but not only) in public policy contexts, employing the too simple model has often (though by no means always) led to perverse results: payment has often decreased the supply of already-scarce behaviour.' -- Gerald F. Gaus, Agenda `Bruno Frey provides an important and sound contribution to the question as to the causes, the change and the economic impact of personal motivation. The book sums up many results of Bruno Frey's excellent research in a conclusive way, and its reading is to be highly recommended to each economist. Frey's book impressively demonstrates a broad range of applications of these analytically important crowding effects. Bruno Frey has made an important contribution to the literature on economic theory, a contribution that deserves great attention, which - I am sure - it will receive.' -- Gisela Kubon-Gilke, Journal of Institutional and Theoretical Economics `[Bruno Frey] suggests how the working economist or intelligent citizen can take into account what he calls "intrinsic motivation". Still more important, he shows how this can be done without surrendering to the communitarians who would subordinate the individual to the group to which he or she belongs. Mr Frey emphasises that his book is not a plea for old-style government intervention. . . Instead he argues that human beings should be trusted more. "Desist from trying to steer humans everywhere and always", he writes. At the very least, however, Mr Frey's crowding out theory offers some comfort to those who have misgivings about macho managerialism. From now on, they should be able to retain such misgivings without having to overthrow beliefs in markets or the profit motive.' -- Sir Samuel Brittan, The Financial Times `Bruno Frey provides a stimulating and wide-ranging discussion of personal motivation that opens out traditional economics to provide a more mature view of individuals as being sensitive to private and moral motives as well as market incentives. The basic analysis and the range of applications will be of great interest to anyone with an interest in political economy broadly defined.' -- Alan Hamlin, University of Southampton, UK
