Climate change and inequality are our most pressing modern issues. Tackling these problems requires social cooperation among individual citizens. We have to go beyond fulfilling individual needs and working collectively as a society to contribute to a common good (e.g. reducing carbon emissions through sustainable consumption). But how can people be encouraged to put in more effort for a common good?
In this Rebuilding Macroeconomics project, we explore ways of harnessing reputation-building processes to increase the amount of effort people exert when collaborating with others to produce a common good. The idea is to see if we can encourage people to put in extra effort not through monetary incentives but by providing them with feedback as to how much effort each member of their group exerted and giving them an opportunity to discuss it with each other.
Traditional approaches to encourage greater effort exertion in organisational contexts is through financial rewards. Psychological and behavioural economic research has identified three disadvantages of this method: first, it imposes a financial burden (i.e. higher overall cost to organisations), secondly, it leads to a moral dilemma and an unfortunate self-selection of participants (only financially rewarding people for doing the right thing), and third, it is not reliable. Financial rewards have been shown to be as likely to improve performance as not providing financial inducements, and in some cases monetary incentives even lead to reduction in performance.
If not financial rewards, then what? Evidence from social psychology and behavioural economics suggest that rather than money we should consider the social forces driving human actions. This is particularly relevant when effort is concerned, as people tend to look to others as a way to regulate how much effort to put into doing something. Even the mere presence of others has been shown to affect how much effort one is willing to exert.
One of the reasons why people might increase the amount of effort they put in in the presence of others is to appear conscientious and hard-working and by doing so building up their reputation and social standing. In fact, reputation-building has been shown to be a powerful motivator in a variety of human actions in social contexts, which makes it a good strategy for encouraging greater effort exertion in collaborative contexts instead of financial inducements.
In this Rebuilding Macroeconomics project, we explore ways of harnessing the reputation-building processes to increase the amount of effort people exert when collaborating with others to produce a common good. The idea is to see if we can encourage people to put in extra effort by providing them with feedback as to how much effort each member of their group exerted and giving them an opportunity to discuss it with each other. We predict that this simple manipulation will make people more cooperative and increase the overall amount of effort contributed to the common good above and beyond just presenting financial inducements.
There are two important macroeconomic implications of this project. First, social cooperative behaviours (even at a micro level - as studied in the project) are dynamic; people in social networks learn and adapt in response to changes in the environment. In this project we will be able to investigate, at a micro level, the direction of change and the magnitude of change in social cooperative behaviours in response to feedback which encourages social comparisons. Characterising the dynamic processes involved in response to social feedback provides vital clues as to how non-monetary rewards can be used to motivate changes in actors in economic contexts.
Second, social comparison information is used at a meso and macro level to direct changes in behaviour, particularly with respect to social policies around national and international levels (e.g., cooperate sustainability indices). This project will be able to empirically assess the extent to which social comparison information is a sufficiently powerful tool to form the basis of social policies aimed at increasing collaboration when actual effort exertion is required. It will also provide important insights into how and when this information should be presented to maximise its’ impact.