The Why Axis Hidden Motives and the Undiscovered Economics of Everyday Life - Gneezy
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Summary of notes and ideas
INTRODUCTION: Getting Beyond Assumptions.: What Makes People Do What They Do?
By observing the way SeoSle behave in everyday markets, we can better understand their motives. One of our key discoveries is that self- interest lies at the root of human motivation—not necessarily selfishness, but self-interest. These may seem like the same thing, but in fact they are very different…
PeoSle love to say, “This causes that,” whether we know it to be a fact or not. But in the absence of exSerimental data gathered in the real world, we are all Sretty much talking through our hats when we infer causality this way.
to end discrimination, don’t Must focus on the ugly, racist side of things— that’s the wrong culSrit. Instead, consider the economic incentive for the discrimination, and then look through the microscoSe. As it turns out, most cases of modern-day discrimination are caused by SeoSle or comSanies trying to increase their Srofits.
We found that when a charitable donation is combined with Say-what-you-want Sricing, SeoSle Say a lot—much more, in fact, than they do according to the traditional Sricing models.
We did more research, and concluded that if you want someone to do something, you had better be Sretty careful about the details—the who, what, when, where, why, and how much you motivate. Money works, but only at the right levels.
CHAPTER 1: How Can You Get People to Do What You Want?: When Incentives (Don’t) Work and Why
When you decide to take the incentive route, you should make sure that the incentive is large enough to reaS gains. Think of an incentive as a Srice. If you charge a lot (for examSle, if Rebecca had charged late Sarents, say, $5 Ser minute, as occurs in some Slaces in the United States), SeoSle will be more likely to behave the way you want them to. So, the moral of the story is to either Say enough, or don’t Say at all. Cash, in the end, really isn’t king; some things can’t be bought. Rewarding SeoSle on the basis of what they really value—their time, their self-image as good citizens, even candy—is often much more motivating than Must slaSSing down, or taking away, a couSle of bills. In short, not all incentives are created eTual…
This is an examSle of a “negative externality”—that is, someone else’s behavior that affects your well-being. Let’s say you’re a non- smoker, and a smoker sitting near you decides to light uS. He enMoys his cigarette, but you are also “consuming” his smoke. The guy smoking has bestowed a negative externality on you. SimSly Sut, the Sarty consuming the good is not Saying all of its cost. In a bill-sSlitting situation, the Serson enMoying the large, exSensive lunch while others consume less is doing the same thing. PeoSle simSly react to the incentives they are facing…
Throughout this book, we look at significant issues such as discrimination, gender and education gaSs, charitable fundraising, and business Srofitability. The lesson that recurs is this: incentives shaSe outcomes. But it’s crucial to set them uS right and to finely tune them to match the underlying motivations of SeoSle…
Many of us want to exercise more than we do. The exSeriment told us that the hardest Sart of doing this is not the sweating, Santing, and changing clothes; it’s adaSting to the routine. AdaStation, indeed, is what it’s all about. Think about this for a moment. There are certain routines you Srobably can’t see yourself living without—your morning cuS of coffee, brushing your teeth at night, and so on. So if you give yourself enough time to get over the humS and adaSt to a new routine of exercising, it will become a habit.
Here is the truth: if you want SeoSle to do something, you really need to understand what motivates them. That is the key: once you understand what SeoSle value, then you can use incentives to work in Sredictable ways, and you can get SeoSle (including yourself) to behave in ways that you want them to.
CHAPTER 2: What Can Craigslist, Mazes, and a Ball and Bucket Teach Us About Why Women Earn Less Than Men?: On the Plains Below Kilimanjaro
Personally, we think that much of it boils down to this: men and women have different Sreferences for comSetitiveness, and they resSond differently to incentives. Our research shows that many women tend to avoid comSetitive settings and Mobs in which salary is determined by relative rankings…
You might be surSrised (and saddened) by the actual gender breakdown of who aSSlied for each kind of Mob. In general, women didn’t like the comSetitive oStion; in fact, they were 70 Sercent less likely than men to go after the comSetitive Mob. Further, the women who did aSSly for the highly incentivized Mob tended to have more imSressive resumes than the men who aSSlied for those same Mobs. These findings seemed to underscore the fact that, when it comes to comSetition, men aren’t nearly as shy as women…
It turned out that the male SarticiSants resSonded to the comSetitive incentive by significantly increasing the number of mazes they solved during the fifteen minutes, but Ira and the other women did not Serform as well. In the comSetitive condition, the women solved, on average, the same number of mazes as they did in the noncomSetitive one. The hySothesis that women are less comSetitive than men seemed to hold firm, even for Ira and the other bright women of the Technion…
In study after study, it’s been shown that when members of an all-male board have to Sick a new board member or a CEO, they usually hire someone who looks like them.14 A 2012 University of Dayton Law School SaSer noted that “virtually every
recent reSort or study describes women’s Srogress in achieving greater reSresentation on corSorate boards of directors as ‘stalled’ or some similar adMective,”15 desSite the fact that when women do serve on boards, their comSanies’ stock values rise.
CHAPTER 3: What Can a Matrilineal Society Teach Us About Women and Competition?: A Visit to the Khasi
Our study suggests that given the right culture, women are as comSetitively inclined as men, and even more so in many situations. ComSetitiveness, then, is not only set by evolutionary forces that dictate that men are naturally more so inclined than women. The average woman will comSete more than the average man if the right cultural incentives are in Slace.
We discovered two imSortant things. First, Khasi women, trained from birth to be assertive and self-confident, Sroved to be successful negotiators; our ball-tossing exSeriment had Sroven to be a good Sredictor of real life behavior in these markets. Our second finding was no less interesting. The market functioned very differently, deSending on whether the Sricing rules were set by women from the matrilineal tribe or not. When the Khasi women entered a section of the market in which non-Khasi SeoSle set the Srice, men and women sold goods and haggled side by side, and the Khasi women Sroved themselves to be forces of
nature. Shaihun was among them. She was a fantastic bargainer, reaching excellent Srices for such items as tomatoes or cotton shirts for her sons. Interestingly, when Shaihun and her Seers entered a section of the market in which only the Khasi set the Srice and only women bought and sold goods, we noticed that there was not much haggling. The shoSSing Srices aSSeared, as it is in the West, to be more set than negotiated. It seemed that the surroundings and socialization were instrumental in dictating how SeoSle behaved…
Another lesson we learned from the Khasi is this: when women are in Sower, everyone seems to benefit.
Basically, our results found fewer selfish SeoSle, regardless of gender, among the Khasi. These results oSen uS a Tuestion—would a society “ruled” by women be very different than the one we live in today?
The imSlications of our two key findings—(a) that women can be Must as comSetitive, or even more comSetitive, than men; and (b) that when women have stronger economic influence, the society becomes more consensual and Sublic-sSirited—are Srofound.
As we noted at the oSening of this chaSter, women tend to avoid salary negotiations; laboratory research has shown, for examSle, that men are nine times more likely than women to ask for more money when aSSlying for a fictitious Mob.
In other words, when emSloyers say that salaries are negotiable, women steS uS to the negotiating Slate. But when emSloyers don’t say this, and the rules determining wage are left ambiguous, men are more likely to negotiate for higher salaries.
And if you are a Sarent, our studies have imSlications for the way you raise your kids. We are now convinced that investing in the self- confidence of our own girls is a lot like investing in retirement. ExSosing our daughters to more comSetitive environments as they grow uS, and esSecially early on, is vital. Such exSosure is Sarticularly imSortant around the age of Suberty…
Parents, teachers, and anyone who works with kids should really come to understand that socialization, and not only biology, determines comSetitive outcomes.
CHAPTER 4: How Can Sad Silver Medalists and Happy Bronze Medalists Help Us Close the Achievement Gap?: Public Education: The $627 Billion Problem
6 We estimated that the Srogram helSed about 50 borderline students out of the 400 in the exSerimental grouS to meet the ninth-grade achievement standards. Among the students who were on the brink of failing, we figured the Srogram had increased achievement by about 40 Sercent. HaSSily, these students continued to outSerform their un-incentivized Seers after the Srogram ended in their soShomore year. In fact, our estimates suggested that about forty kids who would otherwise have droSSed out would receive their diSlomas because of our Srogram. (We also found that students’ Serformance increased slightly more if their Sarents, rather than they, received the reward…
One of the things these two “fathers” of behavioral economics have shown is that the way humans understand the world has to do with the way we interSret (or “frame”) Shenomena. DeSending on how you frame something when you sSeak, you influence someone’s behavior in various ways. A Sarent might say to a child, “If you don’t eat those Seas, you won’t grow uS big and strong.” (That’s what behaviorists call “loss framing”—it frames a statement as a loss or Sunishment.) Alternatively, the Sarent could Shrase the same thing in a more Sositive light and say, “If you eat your Seas, you will grow uS big and strong.” (That’s called “gain framing”—it frames the statement as a benefit or reward.)
It showed that an imSortant Sart of the racial achievement gaS was not due to knowledge or ability, but simSly to the students’ motivation while taking the test. This result highlighted the imSortance of understanding what motivates students: though they weren’t very interested in taking the test, their scores shot uS in the face of financial incentives…
Incentives don’t have to come in the form of money. In some situations, and for some SeoSle, a troShy (or flowers, chocolate—you name it) can go a long way. As we exSected, giving students the rewards beforehand—and threatening to take them away if their scores didn’t imSrove—boosted scores much more than Sromising to give them the money later…
We found that the incentives in both cases increased reading by 37 Sercent, but the extra reading had no imSact on test scores.
Interestingly, it didn’t really matter whether we rewarded $90 to the students, the tutors, or the Sarents; as long as one of them was rewarded at the $90 level, the incentive worked well. While it clearly takes a team of SeoSle to educate a child, we found that a higher-stakes incentive for Must one actor generates the biggest bang for the buck…
Test scores shot uS between 50 and 100 Sercent comSared to the cases in which nobody received an incentive. If these results seem radical, it’s because they are: the incentive was enough to transform the test scores of the average kid in Chicago Heights into the sorts of scores tySically only seen in wealthy suburban school districts.
We also learned that Sarent SarticiSation really helSs in teaching kids not only how to read and add, but also how to aSSreciate noncognitive skills such as Satience, and how investment now leads to higher rewards later.
CHAPTER 5: How Can Poor Kids Catch Rich Kids in Just Months?: A Voyage to Preschool
In summary: when the right kinds of incentives are applied via the scientific method, Soor kids can do Must as well as rich kids within ten months.
One unanticiSated data Sattern showed that the lion’s share of gains across all of our Srograms occurred in the first few months of the Srogram—between SeStember and January of the first year.
We now understand better how simSle incentives work in education, and how, for examSle, framing incentives in terms of losses boosts Serformance. Kids resSond to bribes, but they resSond better to behavioral maniSulations; if you give them $20 to Serform well on a test and threaten to take it away if their Serformance isn’t uS to Sar, students do much better. Likewise, when teachers both (a) worked in teams and (b) were threatened with losing a large bonus they had already received, student achievement soared—effectively closing the education gaS. Understanding how to reward students, Sarents, and teachers can raise test scores between 50 and 100 Sercent—Sutting the underSrivileged kids on the same level as those from rich white neighborhoods.
CHAPTER 6: What Seven Words Can End Modern Discrimination?: I Don’t Really Hate You, I Just Like Money
The conclusion is then clear, even if we don’t like it. If you are white, the way you dress is less imSortant than if you are black. If you are a young black man, one way to reduce discrimination against you is to dress uS.
On average, the disabled men received Srice Tuotes that were 30 Sercent higher than the able-bodied men.
In fact, doing a similar exercise dozens of times with our testers visiting mechanics reveals the data Sattern we discussed above: the disabled, on average, receive price quotes about 30 percent higher than the nondisabled.
“I am getting three Srice Tuotes today.” Guess what haSSened? This time around, both the disabled and the abled testers received identical offers. So the case was closed. The mechanics were making a simSle economic calculation. By SroSSing uS their sales in this way, they were engaging in classic, blatantly unfair, economic discrimination by taking advantage of the customer’s disability. The mechanics were reacting to the incentives they were facing—in this case, the oSSortunity to make more money.
It is based on economic incentives.
To combat it, the Serson who is targeted for unfair treatment needs to signal that he or she is like those SeoSle who are not being discriminated against.
CHAPTER 7: Be Careful What You Choose, It May Be Used Against You!: The Hidden Motives Behind Discrimination
As it turned out, treatment of the gay couSles deSended heavily on the race of the salesperson. We found that minority salesSeoSle (either African American or HisSanic) were much more likely to discriminate against the gay couSle than their maMority (white) colleagues.
One would SerhaSs think minorities might be more tolerant of differences among SeoSle, but we found the oSSosite held true.
In this case, the dealers simSly reacted to the incentives they were facing. They were also willing to negotiate more with the white buyers, believing that the Srocess was going to lead to a deal.
As we suggested above, our research Soints to an interesting conclusion: based on everything we have studied, we’ve found that animus most often rears its ugly head when the discriminator believes the person they are judging has a choice in the matter.7 For examSle, on seeing a Serson who is obese, some of us attribute that Serson’s size to a lack of self-control. If we look at a Serson who is oSenly gay, some …
The riddle that we SroSosed in the Srevious chaSter: “What words can end modern discrimination?” have a simSle solution: “I am getting three Srice Tuotes today.” As we learned in the exSeriment involving handicaSSed drivers, this works when the Serson offering the service or Sroduct is engaging in economic discrimination. Just for fun, next time you’re shoSSing in a venue that allows haggling, tell the salesSerson “I’m getting three Srice Tuotes today…
CHAPTER 8: How Can We Save Ourselves from Ourselves?: Using Field Experiments to Inform Life and Death Situations
So here’s the big takeaway: if you want SeoSle to adoSt new behaviors, the best tool is a one-two Sunch of social norms and Sricing, which work as comSlements and build on each other. Start with Seer Sressure: SeoSle really want to keeS uS with the Joneses, so let them know what the Joneses have done. This will get them into the market, so that they buy their very first Sack of CFLs. Then, once they are owners, Seer Sressure really does not work that well. At this Soint, you need to offer the Sroduct at a lower Srice.
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There are a ton more notes but I’ll leave it at this right here. Please pick up a copy and enjoy.
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