Home » Economics » Doing what we are paid to do.

Doing what we are paid to do.

It is an old truism that people do what they are paid to do. If we want people to behave in certain ways we either need to direct their behavior or we need to incentivize them. Parents know this and from a very early age they begin by instructing their children how they should behave at the table, how they should behave in public, and how they should keep their rooms tidy. Most families move over at some point to providing rewards to their children for appropriate behavior whether that just be a hug and a smile or whether it is pocket money  or an unexpected gift.

The behavior of grownups in business is no different. Companies typically have training sessions, both formal and informal, for new employees. From there on annual evaluations and the rewards that follow provide signals for behavior that is considered meritorious. The alternative to incentives for good behavior is direction or control. The manager must sit there at every moment guiding the behavior of the employee.

What is true inside a business is equally true for the behavior that society expects of businesses as a whole. If there are things that society wants from a business, the society must be willing either to regulate that business to ensure that it does what is required of it or it must provide economic incentives for the business to do what we want it to do. If society is unwilling to pay for what it wants and unwilling or unable to impose the necessary regulations to force what it wants, then it should not be surprised when it gets what it pays for.

These general truisms apply to a host of issues that we currently see going on in our society. I plan to tease out the implications of the truism that people do what they are paid for in a series of posts.

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