Money Can Inspire Effort More Easily than Insight

For generations, people have used money to elicit the behavior they want. Your boss may dangle a raise to get you to try harder and focus more. Parents have long linked chores to allowances.

But while money is often a useful incentive, there are some tasks for which it doesn’t necessarily work as well, according to research by New York University PhD student Pamela Osborn Popp, University of New South Wales’s Ben Newell, Chicago Booth’s Daniel Bartels, and NYU’s Todd Gureckis.

The findings may be of interest to employers considering performance bonuses to workers, as well as to educators and policy makers considering using financial incentives to promote school attendance or better test scores. Money can move the needle more effectively for things that require effort and perseverance than it can for things that involve discovery, creative inspiration, or similar cognitive processes.

Bartels illustrates why the power of an incentive depends on the assignment. “If I told you that I dropped a needle in the grass somewhere on the University of Chicago campus and offered you $100,000 to find it by the end of the day, you might work hard, but you probably won’t find it, because that’s a lot of ground to cover in limited time with no hints about which outdoor spaces are most promising to search,” he says. “Whereas if I offered you a substantial amount of money to practice some rote task, like to run through a set of flash cards over and over again to learn vocabulary terms, I suspect you’d work hard and perform better.”

The researchers conducted a series of six experiments in which subjects could earn financial bonuses for figuring out fairly complex patterns.

The first five experiments were designed around a classic learning task that starts with a phase in which subjects use trial and error to learn how to categorize a set of stimuli into two groups. For example, participants are shown a set of cards with variations of triangles and squares. Some of the shapes are big, some small, some black, and some white. The participants then have to figure out what category the cards are supposed to be divided into, whether shape, size, or color.

In all the experiments, the participants were meant to learn the category through feedback in the learning phase. For example, participants didn’t initially know that triangles belonged in Category A and squares in Category B. But if they tried to put a square in Category A, they were told, “Incorrect. The correct answer was B.” This learning phase was followed by a test.

The researchers varied the experiments over different dimensions, such as how many trials participants got in the learning phase, how much money they could earn as a bonus for getting answers right, and how much giving correct answers increased their probability of winning the bonus, which wasn’t guaranteed for everyone who did well.

“If we’re paying people up to a $10 bonus for getting the answers correct, it seems like they would be pretty motivated to learn the patterns,” says Osborn Popp.

However, across all five experiments that asked participants to learn a categorization rule, the researchers find financial incentives didn’t help people perform any better. By contrast, in the final experiment, in which participants were explicitly told the categorization rule and simply asked to apply it, the prospect of earning money did improve their performance: they completed the task more accurately, and faster, when offered an incentive. Money also encouraged some participants to double-check their work.

All in all, the researchers write, “the results suggest that when a task requires sustained and careful effort, rather than learning and insight, incentives can motivate better performance.”

“There are cases in which you literally can’t follow the money,” Osborn Popp says. “Your brain can only do so much.”