Material compensation in exchange for strictly monitored performance, particularly for complex and unstructured tasks, can undermine “intrinsic motivations” in sustainable development programmes, shows a study of the Mid-Himalayan Watershed Project by Professor Ashwini Chhatre, a visiting faculty at the Indian School of Business (ISB) and Arnab Dutta, Research Associate at ISB.
As the monsoon is gathering force to engulf India, various parts of the country are still reeling from the aftermath of the second deadliest heat wave in its history, with death tolls reaching approximate figures of 2500. The number of recorded heat related deaths, in the states of Telangana, Andhra Pradesh and Orissa alone, crossed 2000. Some parts of Andhra Pradesh, recorded maximum temperatures of 48° (118°F). Amid the discussions of an El Nino impact on the monsoon, many environmentalists have continued to cite this deadly heat wave as another glaring example of global warming. The heat waves in Russia and Europe in 2010 and 2003 respectively killed over 50000 people. Many such instances, smaller in scale, are increasingly being recorded every year. While the jury is still out on whether global warming is here, notwithstanding substantial data to the effect, nevertheless, both environmentalists and sceptics agree on the fact that deforestation and green-house gas emissions (the two most important reasons behind global warming) have been increasing exponentially over the last few decades, and increased awareness has not changed things drastically either. In the last 50 years alone, half of the rainforests have been wiped off the surface of the Earth. Increasing population, rising incomes and living standards have increased the demand for forest products. Add to this the ‘clearing of forest space’ for economic projects aimed at constructing infrastructure and industries, in developing countries like China and India. If not controlled, this dwindling forest cover and degrading ecosystems of the Earth can have devastating consequences for our future generations. Therefore, sustainable development is imperative for our survival.
Policy Making and Sustainable Development
Sustainability, as part of any form of development has been a much widely discussed topic. Its role in policy making is critical to restoring the Earth’s environment. But the more important question is, “How do we implement sustainability in a development project or scheme?” A simple answer would be, “to develop economic projects while also restricting the pollution and deforestation associated with such projects”. In reality, however, the dynamism associated with political systems and social institutions makes things inherently more complicated for such simple solutions to be implemented. And hence emerges the role of many economic theories involving externalities.
Both environmentalists and sceptics agree on the fact that deforestation and green-house gas emissions (the two most important reasons behind global warming) have been increasing exponentially over the last few decades, and increased awareness has not changed things drastically either.
Externalities are non-monetary costs incurred or the benefits enjoyed by a person, who is not part of a particular economic activity. For example, a chemical factory polluting a river and creating hazardous consequences for some villagers downstream, can be considered a negative externality or a cost incurred by the villagers. Neither are the villagers directly involved in any production in the factory, nor are they buying the goods produced by the factory. Many fruitful methods of sustainable development have been proposed and implemented quite successfully, under the umbrella of externalities. In most of these projects, the schemes are driven by standard economic theories, much of which relies on highly utopian assumptions. One such assumption, very important in this context, is rationality. The notion of rationality in economics entails perfect available information with ‘everyone’, and a unique decision for every economic agent based on the given set of circumstances. In other words, everybody knows what is good for them and they are able to optimise based on the information they have about the prevailing conditions (the information they have is perfect and complete).
It is not impossible that economic theories involving externalities can solve some of the problems pertaining to sustainable development, but such cases would be very few. Besides, these simplifying theories rarely account for the complex dynamic interactions between the social and political institutions surrounding these projects. Therefore, it is highly likely that policy makers would hit upon an impasse, if they blindly follow standard economic theories, while framing policies.
Motivational Crowding and Misgivings about the Impact of Sustainable Development Programmes
Development programmes rooted in traditional economic reasoning often use incentives as a key mechanism for implementing policy objectives. These incentives are mostly provided in the form of monetary or other materialistic benefits. For example, a programme might give away direct benefits by providing manure and fertiliser to farmers in exchange for implementation of environment conserving farming methods, while indirect benefits could be in the form of public utilities like roads and canals or general public awareness. The motivations for complying with such external incentive based transactions are generically known as extrinsic motivations. The presumption is that, if these external economic incentives are provided in exchange for environmental conservation, the people involved would start associating environmental conservation with these economic benefits, hence developing extrinsic motivations (opposite to inculcating a sense responsibility towards the environment). And if manipulated in the correct direction, these motivations would outrun the duration of programme itself and would continue to last longer, thereby fulfilling the goals of environmental conservation while also implementing economic development in the long run.
However, these programmes often ignore pre-existing intrinsic motivations in individuals. As opposed to extrinsic motivations, intrinsic motivations are those which are inherently present in an individual. For example, a person might be interested in conserving the environment not because he or she is expecting some economic benefits, but just because the person ‘cares’ about what is happening to the Earth. Such motivations are inherently inexplicable and are subject to individuals’ mindset, education, general knowledge, etc. Policies and programmes, aimed at generating extrinsic motivations through economic incentives, would have to interact with the inherent intrinsic motivations appropriately to produce the desired results. In a situation where intrinsic motivations are negative, extrinsic motivations would have to overcome the effect of intrinsic motivations. On the contrary if intrinsic motivations are already positive, extrinsic motivations would have to reinforce these intrinsic motivations. The million dollar question is, whether or not the extrinsic motivations interact with the already existing intrinsic motivations to bolster the desired goals of development.
Unfortunately, there is every possible chance that extrinsic motivations undermine the already present positive intrinsic motivations. For example, a farmer might be conserving grassland by preventing his cattle from overgrazing, because of his inexplicable love for nature. But when a policy programme, provides direct benefits in the form of cattle food in exchange for conserving the grassland, the farmer continues conserving the grassland but not because of his love for nature. Instead, now he cares more about the amount of cattle food that he gets. Once the supply of cattle feed stops, the farmer might not feel for nature as before and may start over-feeding his cattle by allowing excessive grazing. This displacement of intrinsic motivations, behind certain actions, with externally fuelled extrinsic motivations is known as motivational crowding. The presence of motivational crowding can seriously undermine the impact of a sustainable development programme. It is important to remember at the outset of any programme implementation – that motivational crowding is a possibility; one that might undermine the objectives of the policy.
Mid-Himalayan Watershed Project: The Survey and Methodology
In view of this daunting presence of motivational crowding, empirical investigations are of paramount importance. An empirical investigation surrounding the Mid-Himalayan Watershed Project was conducted between 2006 and 2011. It was a joint venture undertaken by the Government of Himachal Pradesh and the World Bank. The objective was to “reverse the process of degradation of the natural resource base and improve the productive potential of natural resources and incomes of the rural households in the project area”.
The north Indian state is predominantly composed of small villages with an agrarian population. A large part of the land area consists of forests on hilly terrains in the foothills of the Himalayas. Depleting forests therefore, directly affects the livelihood of the people living in these regions. The project consisted of various activities, most of which were aimed at creating extrinsic motivations in the participants, to protect natural resources. Broadly speaking there were private benefits, awareness programmes and communal aid.
More than 800 panchayats were selected from eight districts to participate in the project. Each panchayat consisted of 2-7 villages, with the population in these villages varying between 2000 and 5000. To cut down the costs, four panchayats were chosen randomly from the ones participating in the project and another four very similar panchayats were selected but from non-participating ones for a survey, before and after the watershed project. The surveyed people from panchayats participating in the project were known as ‘treatment’ groups, while the people from the non-participating panchayats were called ‘control’ groups. A person from each household in these panchayats were chosen for a survey. The respondents contained almost an equal number of men and women. The objective of this survey was to assess whether there was any difference in the attitudes of the people towards conservation of forests before and after the project was implemented.
The first piece of evidence comes from the absolute change in the response to our question on the reasons behind forest conservation, between 2006 and 2011, that is, before and after the project was implemented. As we have already mentioned, intrinsic motivations can be either reinforced or crowded out by extrinsic motivations; or else the project may have no impact at all.
Policies and programmes, aimed at generating extrinsic motivations through economic incentives, would have to interact with the inherent intrinsic motivations appropriately to produce the desired results. In a situation where intrinsic motivations are negative, extrinsic motivations would have to overcome the effect of intrinsic motivations. On the contrary if intrinsic motivations are already positive, extrinsic motivations would have to reinforce these intrinsic motivations.
In response to the survey question, if the respondent reported environmental reasons, behind forest conservation, before the project but economic reasons after the treatment, there is crowding out of intrinsic motivation because of the project intervention. If on the other hand the respondent sited economic reasons, for resource conservation, before and environmental reasons later, there is a reinforcement of positive intrinsic motivations. The third scenario entails ‘no change’ in the motivations of the respondent. The information pertaining to these possibilities, as obtained from the survey on the treatment and control groups in 2006 and 2011 are depicted in Figure 1.
The vertical bars give us the percentage of people who belong to the corresponding category of change. This figure gives us a very clear image of the project impact. In the treatment group, or the group that was involved in the project, only 24 percent of the people said they had changed their reasons behind forest conservation from economic to environmental ones. Compared to this, 30 percent of the people, not involved in the project, changed their views from economic reasons to environmental reasons behind forest conservation. While 46 percent involved in the project reported the same reason in 2006 and 2011, 45 percent from the control group said the same thing. However, while only 25 percent of the people in non-project areas changed their motivations behind resource conservation to economic ones, a whopping 30 percent from the project areas said that they now preferred to conserve forests only in exchange for some economic benefit. So the moment the project is withdrawn along with all of its private benefits, these 30 percent would immediately lose all interests at conserving any resources. The problematic thing is that these people would not have done so, if the project were not there in the first place. This final figure is rather disconcerting, because the extrinsic benefits experienced by the people on account of the project has literally over-turned to produce completely opposite results. It seems as if the project intervention did more harm than good, when this was not at all intended by the policy makers.
This displacement of intrinsic motivations, behind certain actions, with externally fuelled extrinsic motivations is known as motivational crowding. The presence of motivational crowding can seriously undermine the impact of a sustainable development programme.
On comparing the treatment and control groups through various econometric tools like average treatment effect, we observe a 10 – 12 percent decrease in intrinsic motivations to conserve the forest resources, which were in turn displaced with an economic motivation to do so. The fact that there is a displacement of an intrinsic environmental motif with an extrinsic economic one is in itself not a problem. But its implications are rather grim. The authorities implementing the policies would have to carry on providing the economic incentives in order to induce the extrinsic motivations, which has now replaced the intrinsic ones.
When we investigate the scenario in further detail, we get some more interesting results. The impact of the project varies across the three broad categories of activities: private benefits, communal benefits and informational benefits. Figure 2 gives the proportion of people, among the 550 odd project participants, involved in the three categories of project activities.
The differing nature of the project activities induces different effects on the intrinsic motivations of the individuals participating. In order to account for this difference, we make a comparison of the individuals directly involved in the project against those who were not involved. To see how this stands in the overall perspective. The individuals involved in the project are also compared within the treated sample and the overall sample including both treated and non-treated individuals. Figure 3 depicts the results obtained from this sample wise comparison.
When project participants are compared with non-participants, the effect of the project seems to produce a pro-environmental attitude only through engagement in community based activities. Both private benefits and informational benefits induce an economic reasoning thereby crowding out intrinsic motivations for forest conservation. When project participants are compared within the sample, that is, when we are dealing with just the treated individuals, the directions of the effects remains intact, albeit, with a degree of magnification. Motivational crowding is therefore, conditional on the type and combination of activities an individual is engaged in. A precise combination of involvement can induce the desired change in attitude.
The need for sustainable development is a fact acknowledged by every policy maker regardless of their political or institutional stance. But the methods, employed in implementing programmes aimed at sustainable development often do not produce the desired results while standard economic theories fail in predicting the correct outcomes. This is because of the highly improbable assumptions underlying most of these economic theories, which govern much of the policy making. Under such circumstances, a scientific approach with data driven evidence generated by econometric tools could prove to be more effective.
If behavioural traits are taken into account while framing policies there would no longer be wastage of resources. Instead a judicious combination of programme activities could actually provide the desired results with minimum incurred costs.
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