Using Carrots and Sticks

CARROTS AND STICKS by Ian Ayres

by Ian Ayres, author of Carrots and Sticks: Unlock the Power of Incentives to Get Things Done (Bantam, 2010)

Rob Harrison is one of the most beloved teachers at Yale Law School. He has improved the writing and emotional outlook of generations of our students.  He is the kind of guy who unabashedly ends his emails “Love, Rob.” He is staggeringly kind. So it came as a bit of a shock when Rob told me that he had used unforgiving commitment contracts to help students overcome writer’s block. For more than a decade, students have given him checks of up to $10,000, signed and made out to charity, and authorized Rob to mail the checks if they failed to turn in a paper to the course professor by a specified date.

To date, his check-holding commitments have never failed. Rob has never had to mail one of these commitment checks. This is a spectacular result—particularly because Rob only offers the contracts to students who are hard-core procrastinators, kids who have already demonstrated a deep psychological inability of putting pen to paper (or nowadays, finger to keyboard).

I wrote Carrots and Sticks in part to understand why Rob has been so successful. The idea of incentives and commitments has been around forever. But the simplistic economic idea that you’ll get more of something if you dangle a larger carrot or less of something else if you brandish a larger stick misses a lot of what motivates people. For example, what’s really interesting about Rob’s intervention is the charities that the students chose to potentially fund. For the first five years that Rob provided his check service, the procrastinators made the checks payable to charities that they liked. But about five years ago, a student suggested that making the checks out to charities they didn’t like would be an even more effective incentive.

The idea of anti-charities has become a popular option on a commitment company that I founded, www.stickK.com, where people have put more than $3,000,000 at risk to stick to all kinds of commitments—including getting their school papers in on time. Users who put money at risk can decide who will get any money that is forfeited on their contract. Our 43rd president is a uniter in retirement. Currently the George W. Bush Presidential library is our most popular anti-charity.

Carrots and Sticks tells the stories behind dozens of randomized trials testing the wellsprings of human motivations. It exposes students to cutting edge studies in behavioral economics and psychology. The book shows that the new learning in motivation has a lot to say about how best to tailor commitments to make them more effective and virtually free. Students will learn why Zappos offers new employees $2,000 to quit, and how a New Zealand ad exec successfully sold his smoking habit. But this book is not an extended advertisement for stickK or for the value of commitment
contracts. It also explores not only how to pick the right commitment tool, but also when it’s best to keep the tool in the box.

Ian Ayres is an economist and lawyer who is the William K. Townsend Professor at Yale Law School and a professor at Yale’s School of Management. He is a columnist for Forbes magazine and a regular contributor to the New York Times Freakanomics blog. He served for seven years as the editor of the Journal of Law, Economics, and Organization, and in 2006 was elected to the American Academy of Arts and Sciences. He has previously written ten books, including Super Crunchers, which was a New York Times business bestseller and named one the Best Economics and Business Books of the Year by The Economist. He lives in New Haven, Connecticut.

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2 Comments

Filed under Author Essays

2 responses to “Using Carrots and Sticks

  1. Scott Benson

    Ayres new book appears to be interesting. Something I could adopt for my class as we talk about incentives. Please send an examination copy if I make the cut.
    Thanks

  2. I’ve been looking at the literature on incentives as part of a general interest in performance management systems. Incentives have both pro – and op-ponets. In some case, they seem to work too well, as the examplse from both Enron and, in the early 1990’s, Sears can attest. This volume by Ayres looks to offer a path thru the clutter and might be able to provide a fuller view of the pros and cons of incentives.

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