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The moral economy: why good incentives are no substitute for good citizens

Sam Bowles at lectern
Courtesy of Christine Baker-Parrish
Mar 14 2018
Sara Button

Audience at event

When I was a child, maybe five or six, I committed a crime: I stole a pack of gum from the grocery store while my mother and I were standing in the check-out line. By the time we got to the car, the guilt had already gotten to me and I confessed; we went back into the store, I returned the gum, I learned my lesson. But my mother didn’t make me return the gum because what I had done was against the law. Rather, it was framed more as “this is not okay”; it wasn’t acceptable legally, sure, but what came first was the lesson that my behavior wasn’t acceptable socially or morally.

I thought of this lesson again and again as Dr. Samuel Bowles, research professor at the Santa Fe Institute and head of their Behavioral Sciences Program, delivered the 2018 Arrow Lecture in Ethics and Leadership that veered into territories of economics, philosophy, social science, and ethics. He argued that public policy should not be designed with the notion that people are amoral and self-interested, as it has been for a very long time; in fact, such an assumption might make those qualities more true in people’s behavior rather than less, and tied to that, incentives and subsidies are actually overused and ineffective to influence preferential behavior.

Sam Bowles at lectern

To develop this framework, Bowles brought the audience thousands of years back to Aristotle, who, in Nicomachaen Ethics, wrote, “Lawgivers make the citizen good by inculcating habits in them, and this is the aim of every lawgiver. If he does not succeed in doing that, his legislation is a failure.” A political leader must inspire and effect good behavior, otherwise all those qualities we rely on for a society to function peacefully—trust, justice, equity—are harder to come by and make society a little less peaceful.

But this attitude is not the way policy makers have gone since the era of Machiavelli. Between the 16th and 18th century, Bowles argued, the political shift that occurred relied on the idea that all men are wicked, as Machiavelli wrote, and that “hunger and poverty make them industrious and laws make them good.” Policy makers and economists have shared this belief, using laws to “make bad citizens behave as if they were good,” as Bowles said, rather than the Aristotelian model that encouraged good behavior for the sake of the good rather than the sake of the law. Bowles brought a number of examples to bear, and by the 20th century our and society leaned heavily enough on the transactional nature of self-interested capitalism that the need for compassion and cultural solidarity was no longer to have an exchange of goods that fueled an economy. It’s not personal; it’s business.

Audience member asking question

But what about when the market fails us? Solutions have often been to implement incentives or punishments to drive preferable behavior. But, as Bowles demonstrated, that doesn’t always quite work, either. Take, for example, a situation at a Haifa day care. To discourage parents from picking up their children late, the day care posted a sign saying that they would charge late parents an extra 10 shekels. Rather than signaling to parents that lateness was discourteous and an infringement on teachers’ time and children’s comfort, it signaled to parents that the behavior could be bought. Lateness doubled. In other words, when parents’ ethical concerns of acting justly towards the educators who took care of their children were taken into account, they behaved better than when it was purely transactional.

Hand shake

Other examples supported this idea. Bowles cited an instance in Bogotá, Colombia, where taxi cabs and others were driving recklessly, resulting in a lot of injury and harm. Instead of raising the financial penalty exponentially, leaders hired hundreds of clowns who ridiculed drivers in the streets when they sped through crosswalks too quickly or otherwise drove unsafely. In addition, citizens were encouraged to identify good drivers to be inducted into the Order of the Zebra (crosswalk), and the penalty was only slightly increased. The fatalities dropped dramatically because the moral obligation to drive safely was key in the solution, rather than relying on the law to do the work of inculcating good behavior.

Ultimately, Bowles argued, a punishment should be a moral lesson connected with the offense rather than a “Because I say so” sort of penalty. Our society is far too complex, our problems far too nuanced, to manage solutions solely by relying on a cost-benefit analysis of human behavior. If we create policy thinking that 100% of the population acts in self-interest 100% of the time, we may be deepening problems rather than alleviating them.


Sara Button

SARA BUTTON is a writer and editor. She lives in Menlo Park.