Insightology

In Mark Twain's classic novel Tom Sawyer is white washing a fence because his aunt told him to do it. In other words, it's work. But Tom soon convinces his friends that whitewashing the fence is a privilege and even gets them to pay him for a chance to try their hand at it. Twain makes the larger point that whether something is work or not is based on whether one gets paid for it. In this case work becomes a privilege when the worker has to pay to take part, as opposed to being paid for it. Based on this principle, two researchers have developed the idea of two markets:  social and monetary. When you help a friend move with no mention of money it is a social market. When you get paid to mow someone's lawn it is a monetary market. Where do you expend more effort and does anything change the level of effort?

Three experiments were conducted by researchers from two universities to test the ideas. While the details varied, in every monetary market case, effort improved with monetary compensation. That is, when more money is explicitly offered people try harder. Interestingly, when non-monetary compensation (candy) is offered the effort level does not vary. That is, when candy is offered whether it is cheap or more expensive, people try as hard because it is not seen as monetary compensation and hence considered to be a social market. How do we know? In another condition, people where compensated with candy but were explicitly told the monetary value of the candy. Guess what happened? They behaved exactly as people who were given money did - effort improved with higher compensation! In all cases, when no mention of any payment was made (i.e. a purely social market), the level of effort was equivalent to that seen in the condition with the highest level of monetary payment. So it would appear that to get maximum effort we would want a purely social market (such as volunteering for a charity) or at least one where the rewards are not monetary. Failing that, make sure the person is well compensated if you want a high level of effort.

We see examples of the social/monetary markets every day, but also the potential for crossover. Take the relatively common example of employers and employees. Clearly a monetary market, right? Now, what happens when the employer asks the employee to volunteer on certain committees? It transitions into a social market if there is no monetary payment (that's why it's called volunteering). Can the employer maintain the social market condition (therefore ensuring high levels of effort) and still reward the employee? Yes, but not with monetary incentives. When money enters the picture, this research shows that a different market is operating and hence effort will be affected.  

So what do you do when you are moving? The authors suggest asking your friends for help and offering them dinner. They also suggest not telling them the cost of the dinner.

This research was conducted by James Heyman at the University of St. Thomas and Dan Ariely at MIT and appears in a 2004 issue of Psychological Science. Ariely is also the author of the book Predictably Irrational which describes how people behave irrationally in a predictable manner.