Do Government Incentives Make Us Bad Citizens?

McMahon_bodyJohn McMahon reviews Samuel Bowles's The Moral Economy: Why Good Incentives Are No Substitute for Good Citizens, in The Boston Review:

From sin taxes to the Affordable Care Act’s individual mandate, from tax rebates for buying an electric car to performance-based school funding, governments extensively deploy material incentives to regulate citizens’ behaviors. The idea is straightforward: economic costs and benefits shape people’s choices, so changing those costs and benefits can change their actions.

This approach is intuitively appealing in our age, as it uses an enlightened mix of encouragement and coercion to advance public goals. But it works only if people act rationally in their own self-interest and respond accordingly to alterations in cost-benefit calculations. This may not seem much of an “if”; the notion that we all maximize our own good has been the basis of a long strain of economic thinking stretching back at least to Adam Smith, who asserted, “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.” But is this really an accurate depiction of our behavior? And what is the significance of individual or collective political agency in a world of government-by-incentives?

Samuel Bowles’s new book The Moral Economy: Why Good Incentives Are No Substitute for Good Citizens provides a lucid and comprehensive answer to the first of these questions. Synthesizing findings from experimental and behavioral economics, psychology, and anthropology over the last two decades, Bowles convincingly argues that people do not act on the basis of amoral self-interest alone. Rather, we regularly proceed from “ethical and other-regarding motivations.” Furthermore, these “social preferences,” as Bowles call them, can be crowded out and eventually eroded by policies that rely exclusively on manipulating material self-interest. He then moves these lessons from social science research into the realm of both policymaking and political theory, contending that the proper role of government is to construct a “policy paradigm of synergy between incentives and constraints, on the one hand, and ethical and other-regarding motivations, on the other.”

Bowles doesn’t explore the second question, which is about political agency. This is a striking omission because he emphasizes the need for public policy and governance to cultivate good citizens. Yet there is no place in his recommendations for the active citizen practicing democracy through political participation, protest, and social movements. The book is haunted by the absence of active responses to government-instituted incentives and policies.

More here.