Building on Phil’s excellent post on motivation, I wanted to share this NPR segment I heard this week, which, ironically, references the same experiment in India about bonus compensation and it’s correlation (or lackk thereof) to performance. The second experiment described I thought was very interesting too, which points more to the feeling of purpose, which the video Phil posted referenced as well.

While the focus of this research tends to be on business organizational health, I think it’s important to point out, in a more general sense, that this is another case where classical economics fails.  People are not perfectly rational entities. This bears repeating every time that any research concludes this, because so much of far-right and center-right economic thought depend entirely on this assumption: People, in the aggregate, are always rational.

The entire field of behavioral economics is like a breath of fresh air to me, because it frustrates me so much that people can believe that psychology, which among other things, studies how people make decisions, plays no role in economics, which is essentially the study of how people decide to spend money.  They are naturally linked.

Tags: behavioral economics, economics, NPR

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