Key Parameters in Policy Design: The Case of Intrinsic Motivation

Abstract

An important consideration when designing social policy is the expected response of individuals to new taxes and expenditures. Response is predictable when individuals are assumed to optimise instrumentally. However, the extent to which instrumental behaviour can be deemed ‘representative’ has been questioned. Behavioural experiments reveal that individuals rely more heavily on low-cost signals and heuristics than on an optimising calculus. When costs and benefits are not easy to discern the consequences of action are difficult to estimate and perceptions of the intrinsic value of action assume greater relevance. Such considerations are particularly apposite when social policy affects altruism. In this paper the proposition is that policy signals impact on motivation systematically. Policy can have a greater (or lesser) impact than anticipated by instrumental response to the sum of its parts. Two examples prove illustrative. The first considers institutional reform and the supply of ‘merit wants’. The second focuses on recent proposals to nurture the voluntary charitable sector. In both cases, policy expectations based only on instrumental response prove misleading; the impact of policy signals on perceptions of the intrinsic value of action cannot be ignored.