Motivation Crowding Theory

There’s a microeconomic theory, “Motivation Crowding,” that posits it’s possible to accidentally elbow-aside a person’s intrinsic motivations for doing things by offering them extrinsic motivations for the same.

For example, you might offer someone $50 a month to go to the gym at least three times a week, and there’s a chance this monetary motivation would nudge that person into a regular workout habit.

But the concern is that by offering them money to exercise, their intrinsic (internal) motivations for working out—getting healthy, feeling good, looking fit, etc—might be diminished or go away entirely.

This concept was originally posited back in the 1970s, when a British social policy researcher named Richard Titmuss found that offering money for socially positive behaviors, like donating blood, could result in a diminishment of those positive social behaviors, possibly because of that change to the rewards associated with them.

People often give blood because it makes them feel good to engage in what they perceive to be prosocial behaviors, helping their fellow human beings.

If money becomes the primary nudge instead, however, that can change the internal math we do, resulting in fewer blood donations because we either decide our blood is worth more than is being offered, or because money isn’t always offered by all blood banks (or not enough of it is offered). Thus, folks who have been trained to associate donating blood with getting paid a specific sum of money will hold back, not wanting to feel taken advantage of, even if they would have previously donated such blood for free.

The term “crowding out” was coined, within this context, in the 1990s by a Swiss economist named Bruno Frey who incorporated concepts from psychology and sociology into his work.

He (and other folks working in this space) found that larger monetary incentives, in particular, could “crowd out” non-monetary incentives so that when those money-incentives were removed, people would become less motivated to engage in behaviors they might have otherwise happily engaged in (for internally motivated reasons) for free.

Folks who were preemptively offered money also tended to be less inclined to go above and beyond (in terms of effort and creativity) when assigned tasks, compared to those who engaged in said tasks for their own internal reasons, and those who received unexpected rewards (as opposed to those that were promised as a sort of payment for their work) didn’t typically demonstrate the same decrease in motivation.

There are several theories as to why intrinsic motivations seem to be so predictably nudged aside by external, monetary rewards, including what’s usually called the “Overjustification Effect,” which posits that we subconsciously keep tabs on our behaviors and the rewards that seem to stoke and reinforce them.

When a strong constraint (like money) is promised if we engage in a certain behavior, our brains come to associate that behavior with that constraint, and this can then reorient our “let’s engage in this behavior” process toward money or similar rewards, and away from whatever pleasure we derived from it, previously.

Other theories suggest that we maybe experience diminished motivation because we attain some level of social praise when we engage in unrewarded (extrinsic) behaviors, so adding external rewards maybe waters-down our enjoyment of those behaviors because we’re no longer praised as much.

Still other theories contend that motivation crowding isn’t really a thing, and what we’re actually witnessing is a sort of signaling effort between a person who’s become aware that their actions have value to others, and the folks who are in charge of divvying out rewards for those valued actions—though recent meta-analyses have generally come down in favor of this being a real, measurable behavior.

There are all sorts of implications for this theory, both at the personal and societal scale, and most of them focus on how to incentivize positive, prosocial, healthy behaviors without accidentally pulling the rug out from under existing, intrinsic motivations that already encourage folks to do these things without being further nudged (though perhaps at a lower level than is desired).

There doesn’t seem to be a perfect, one-size-fits-all approach to applying such nudges, but in general it seems like adding unexpected, surprise bonuses rather than guaranteed, expected payouts tends to support what motivations are already there without replacing them, and that amplifying intangible benefits—like celebrating people for their generosity or healthfulness, rather than paying them to do generous things or work out—might lead to more ideal long-term outcomes.