Table of Contents

The Economics of Motivation and Organization

The Economics of Motivation and Organization

An Introduction

Peter-J. Jost

In this unique book, Peter-J. Jost provides a comprehensive economic-psychological approach for successfully managing employees. Based on the analysis of the employee’s individual work behavior, he illustrates that instead of treating employees as input elements of production, and managing and controlling their work, organizations need to motivate their employees to act in the interest of the firm and in accordance with its goals.

Chapter 2: Economic-Psychological Behavior

Peter-J. Jost

Subjects: business and management, strategic management, economics and finance, economic psychology


The uncertainties about economics are rooted in our need for a better understanding of the economics of uncertainty; our lack of economic knowledge is, in good part, our difficulty in modelling the ignorance of the economic agent. (Arrow, 1974b) The aim of any behavioral science is to explain why an individual performs a certain action or to predict which action the individual is going to perform. This aim is congruent with ours: The employees of a firm are the ones responsible for realizing the aims of the organization through their actions. We therefore first need to understand why the individual employee displays a given behavior in certain reactions or how he adapts to organizational changes, before we may address the question how to adequately guide his behavior. In this chapter, the first step will be to present a basic model of the employeeís individual work behavior. This model is based on the discussion in the previous chapter and integrates the central personal factors which we specified as behaviorally relevant into the model. The basic model which we develop will then form the basis for our analyses of individual work behavior in Chapters 3 and 4. With regard to its content, our model therefore bridges the analysis of psychological determinants of individual behavior in the first chapter and the study of economic decision behavior of employees in the following chapters. Since the employee makes independent decisions regarding the time spent at work, his efforts and also the quality of his work, his behavior is necessarily economic in the context of his work. That means that he can choose from a large number of possibilities of how to assign his human capital resources to different activities. Nevertheless, his resources are limited, so that he has to choose between these different alternatives. Analogously to our definition of the economic aim in the first chapter, we will refer to economic work behavior, because the employee pursues an alternative using means which are scarce and which he may have employed for other activities, too.

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