Honours versus Money: The Economics of Awards, by Bruno S. Frey and Jana Gallus

This book collects the results of a body of research on the motivating role of prizes and awards. It has been conducted primarily over the past two decades by the authors and others who are interested in exploring human motivation but seek to go beyond the standard assumptions of materialistic self-interest and cold-hearted rationality assumed by the economic models that came in for criticism in the wake of the 2007 financial crisis.

Much has happened since then to warrant a very good reception for this book, notably the award of a Nobel prize this year to a behavioural economist working at a historically mainstream institution (Richard Thaler at the University of Chicago). The ensuing public interest in this psychological approach to economics makes the case nicely for Bruno Frey and Jana Gallus’ assertion that humans’ desire to be recognised and appreciated by others is a fundamental aspect of motivation, so incentives such as the Nobel prize can be both efficient and socially desirable. The book includes an exhaustive, and occasionally slightly exhausting, list of types of awards (in business, arts, sports, academia, the voluntary sector and public and religious life) and describes how they can usefully function to motivate both performance and good behaviour.

The authors explain how both field and laboratory evidence, notably but not exclusively their own work, has highlighted the importance of intrinsic motivation and status as alternative and, in many cases, better motivators than monetary incentives. (Research shows the latter often to be counterproductive because they crowd out intrinsic motivation and encourage unethical behaviour.) Award recipients contribute more to public goods as well. Overall, the authors argue, the social implications of making more widespread use of awards could be huge. They could help to mitigate earnings inequality and reduce executive pay inflation, strengthen the work ethic and discourage conspicuous consumption as a signal of achievement. This is particularly true in the case of awards to acknowledge and further incentivise charitable behaviour by wealthy recipients, as the example of Bill Gates illustrates.

What happens after someone receives an award is the subject of much of the discussion. Both controlled studies of actual recipients of prestigious academic awards and experimental evidence indicate that efforts continue and that the benefits to recipients go beyond a competitive advantage through the signalling effect of the award and extend to higher well‑being.

So awards would seem to be an all-round winner in the incentives toolkit. Frey and Gallus, of course, know that there are caveats: awards can increase envy among non-recipients and, in cases where they are erroneously bestowed, cause serious reputational damage. Furthermore, proliferation can empty them of meaning. We learn that there are many trade-offs to be considered and more to understand about the optimal design of awards and why they are used in some organisations and not in others. Further data need to be collected on the hidden costs (for example, the effects on non-recipients).

Yet one cannot help noticing the lack of a more explicit cultural and institutional analysis in this book, which remains (no doubt because of the limited nature of the evidence available) very focused on a Western story and the kinds of reward mechanisms typically associated with successful men. Taking account of these limitations could certainly improve the research agenda.

Marina Della Giusta is associate professor of economics at the University of Reading and works in the areas of behavioural and labour economics, with particular focus on gender, stigma and social norms.

Honours versus Money: The Economics of Awards
By Bruno S. Frey and Jana Gallus
Oxford University Press, 144pp, £25.00
ISBN 9780198798507
Published 24 August 2017