Monday, October 13, 2014

Tirolecon: Self-image is funny

It can make your day frowny or sunny, says newly minted Nobel laureate Jean Tirole (along with Roland Benabou) in Incentives and Prosocial Behavior:
We develop a theory of prosocial behavior that combines heterogeneity in individual altruism and greed with concerns for social reputation or self-respect. Rewards or punishments (whether material or image-related) create doubt about the true motive for which good deeds are performed and this "overjustification effect" can induce a partial or even net crowding out of prosocial behavior by extrinsic incentives.
Good thing to know if you're an executive for a PBS affiliate trying to put on the most effective Begathon you can. However, the Nobel Committee didn't mention it. Instead they focused on Tirole's on-the-other-handed work on monopolists and regulation.
Regulation is difficult

 Which activities should be conducted as public services and which should be left to private firms is a question that is always relevant. Many governments have opened up public monopolies to private stakeholders. This has applied to industries such as railways, highways, water, post and telecommunications--but also to the provision of schooling and healthcare. The experiences resulting from these privatizations have been mixed and it has often been more difficult than anticipated to get private firms to behave in the desired way.

Words to live by.

Also, Tyler Cowen does yeoman work on this years winner.

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