High-performance organizations and economies work on the basis
not only of material interests but also of Adam Smith's "moral
sentiments." Well-designed laws and public policies can harness
self-interest for the common good. However, incentives that
appeal to self-interest may fail when they undermine the moral
values that lead people to act altruistically or in other public-spirited
ways. Behavioral experiments reviewed here suggest that economic
incentives may be counterproductive when they signal that selfishness
is an appropriate response; constitute a learning environment
through which over time people come to adopt more self-interested
motivations; compromise the individual's sense of self-determination
and thereby degrade intrinsic motivations; or convey a message
of distrust, disrespect, and unfair intent. Many of these unintended
effects of incentives occur because people act not only to acquire
economic goods and services but also to constitute themselves
as dignified, autonomous, and moral individuals. Good organizational
and institutional design can channel the material interests
for the achievement of social goals while also enhancing the
contribution of the moral sentiments to the same ends.
