Tuesday, April 07, 2009

Bonus money as harmful

Big bonuses are counterproductive. What?

Ryssdal: So we just get stressed. When we see all that money on the line, we just get stressed, and our performance goes down.

ARIELY: That's right. And this is not the worst of it. We did one more thing in the beginning of the experiment in India. We tried to get people very stressed, the most stressed we could with this amount of money we had. So for some people we gave them the money upfront, and we said, "Look, this is your money. If you don't perform well, we'll take the money back from you." Now with one subject he was shaking the whole time, he couldn't do anything, he was so stressed. Then we went with another guy, who was not as shaky. But he, when he didn't make the money, he ran away with all our money in the end, we couldn't catch him he was so fast.

Confirmation that confiscatory taxation does not work.

Also: the government will catch up with the runner, eventually.

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