Incentives and Rules: Constraints on Individual Autonomy

Posted by KevinJ

In adversarial institutions there are always “rules of the game.” In fact, these rules largely define the institution itself. If you play a game that looks sort of like baseball, but has four strikes and three balls, you are not playing baseball. In adversarial ethics we care about both how to design and evaluate the best rules; and also about what obligations “players” in that institution might have over and above those spelled out in the rules.

But surely there are many different kinds and categories of rules, and we could sharpen our normative theories by distinguishing some of them. Does it matter, for example, whether rules dictate what actors must do or must not do, on the one hand, or whether the rules are structured through the use of incentives to do or refrain from doing certain things, on the other? In a brand new book entitled Strings Attached: Untangling the Ethics of Incentives, Ruth Grant (professor of political science at Duke University) challenges a number of our standard assumptions about the use of incentives in public policy about markets and other domains.

It is commonly assumed, for example, that incentives leave the decision-maker with a free, or autonomous, choice between several options. Of course, even if all autonomous choices are voluntary, not all voluntary choices are autonomous. When given the choice between your wallet or your life, you voluntarily decide to hand over your wallet. But was the choice was not made autonomously.

The same argument could be made for properly created incentives; they place the player in a situation where only one choice is rational. The player voluntarily selects the rational choice, but may not be as autonomous as we would like to believe. Ruth argues that “Incentives ‘strictly speaking’ are a particular kind of offer: (1) An extrinsic benefit or a bonus that is neither the natural or automatic consequence of an action nor a deserved reward or compensation; (2) A discrete prompt expected to elicit a particular response; and (3) An offer intentionally designed to alter the status quo by motivating a person to choose differently than he or she would be likely to choose in its absence.” With each of these qualities, decisions are reached that are not “natural” to the individual.

The upshot: the use of incentives to get someone to do something they didn’t want to do may not be as innocent or uncoercive as we generally assume.

But how do incentives within institutions differ from other kinds of rules and regulations? They both adjust the balance of the costs and benefits of a particular choice and aim to alter an actor’s course of action. Incentives and other regulations may lead to the same end-result — but do incentives do this in a way that is less coercive or more voluntary? Ruth’s answer is: it depends! She looks at a wide variety of incentives used in public policy, and we have different “gut” reactions that are often confirmed by closer ethical analysis. Some we feel perfectly free to take or leave (say, an incentive to file tax returns on time) and some (say, a plea offer to a risk-averse and poor accused man who is in fact innocent) can feel coercive, exploitative, or like abuses of power or authority.

I can’t induce you to read Grant’s thought-provoking and highly readable new book. But I’m pretty sure you will never again assume that incentives are necessarily more freedom-enhancing alternatives to other forms of regulation and rules.


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