Integrating Economic and Organization Theory
Edited by Anna Grandori
Motivation explains people’s behaviour. It is therefore important to understand what induces individuals to work in what way. Standard economics (which has been adopted in many business schools) uses a one-dimensional concept of motivation. It essentially assumes that people are perfectly rational and are solely motivated in a selfish way. Based on the insights of psychological economics, this chapter argues, firstly, that people differ in their preferences with respect to pro-social orientations; secondly, that preferences are plastic and systematically susceptible to the design of institutions, working conditions and the quality of human interactions; thirdly, that individuals partly lack self-control in following their preferences; and fourthly, that preferences often are not known to the individuals and are wrongly interpreted. Applying the insights of psychological economics, we derive measures for motivation governance. Motivation governance consists of formal and informal organization designs aimed at influencing incentives in value-creating directions. The chapter proceeds as follows. Firstly, motivation governance in standard economics is compared to the insights gained from psychological economics. The subsequent sections deal with heterogeneous preferences, in particular pro-social preferences, and plastic preferences. The chapter then engages in two little explored areas, bounded self-control and mistaken preferences, as discussed in happiness research.
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