Jean Tirole and Intrinsic and Extrinsic Motiviation

Although not central to his work, one of my favorite papers of today’s Nobel prize winner, Jean Tirole, is Extrinsic and Intrinsic Motivation (written with Roland Benabou). In this paper, Tirole and Benabou try to resolve the economist’s intuition that incentives motivate with the idea from psychology that incentive schemes can sometimes demotivate. The psychologists argue that extrinsic motivation can reduce intrinsic motivation (but they are not at all clear on why this should be the case). Tirole and Benabou try to produce a similar finding by arguing that in addition to providing motivation an incentive scheme gives the agent, the one being incentivized, some information and the information may undermine the motivation.

For example, if I tell my son.  “If you get an A in math, I will give you $1000.”  What does my son conclude?

  • My father must think math is very important for my future to offer me $1000.  My father is smart.  I will work hard.

This is the message that I hope to send. But my son knows that I know something about math and also that I know something about him and he may use this knowledge to make a very different inference.

  • If my father thinks I need $1000 to get an A, math must be very hard or I must lack talent.  I will work for an A this year but next year I should probably not sign up for advanced math classes.

Or perhaps he infers

  • If my father is offering me $1000 to do the right thing , he must not trust my judgment.

Or perhaps

  • My father is trying to use his money to control me.  I rebel!

Thus reward has two effects a pure incentive effect (holding information constant) and an inference effect. Notice that the inference effect depends on the context. Thus, without knowing the context–how the father gets along with the son and their history of interaction–we can’t know what the effect of the “incentive” will be. Thus I have argued that “an incentive is not an objective fact but a subjective interpretation.”

I’m not convinced that Tirole and Benabou have the right answer on intrinsic and extrinsic motivation but thus and other papers indicate Tirole’s broadness of thought and his characteristic approach to issues.

By the way, working out the equilibrium in these games is not at all easy because the principal knows the agent will infer information about the characteristic from the reward structure and the agent knows the principal knows that the agent will infer information about the characteristic from the reward structure and so on – thus we have a Moriarty problem and must look for conditions such that there can be an equilibrium in which everything is common knowledge. But heh, if these problem were easy you wouldn’t get a Nobel prize for solving them!

See Tyler’s post and my other posts below for much more on Tirole.


5. Most of that $1000 can be easily had, by bribing my teacher with $200.
6. That $1000 can be had in case my grades are on the margin between an A and a B, because I can appeal to my instructor's sense of fair play. He wouldn't want me to miss a payout just because of a lousy point or two.

the only reason, I think, that it took so long for the subtler insights of game theory to be discovered, is that a large number of thinkers could not restrain themselves from smart-aleck answers like these at the lower stages

They are not smart-aleck (I grant they may appear that way). Those are genuine options, just ones we prefer not to examine. It turns a 2-person game into a 3-person game: father, son, instructor.

Game theory has little to do with reality.

6. Let me work a little sloppier on Physics this semester. Maybe then I'll get offered another $1000 for an A in Physics.

+1! I.e. now that I know my father is an idiot, how can I exploit this fact?

Speaks volumes about government incentives.

7. Cheating.

Or "if I'm getting paid for it, it must be worth a lot of money, so I would be a sucker to do it for free in the future."

Too easy.
The ideal situation is ongoing and pervasive information.
Early in semester, inquire about motivation, expectations, and goals.
Middle - re-affirm expectations, inquire about motivation and goals.
Near end - inquire about pre-exam/project confidence and student evaluation of effort-to-achievement so far….

I think the best relationship between (let's call them) work dispatcher and work producer - is analogous to 'concerned coach' and 'willing athlete'. The athlete trusts that the coach will push into mildly uncomfortable (and thus productive and high-learning zone) effort in healthy, occasional, and recoverable amounts. The athlete will accept the mild discomfort and communicate the level, knowing that the 'push out of the comfort zone' is needed to advance the athlete's performance (worker's preparation for promotion and define a new comfort line). The coach will monitor the productivity and ensure a balance between productive work and emotionally healthy athlete. The coach will monitor for pushback from the athlete that may come from reduced initial health or over-stress. Everyone wins - best possible productivity and 'responsive boss' plus a challenged and 'listened to' worker. The competition here is internal - not across the office, etc. A computer program could probably do the equivalent of the coach's job in a regular work environment. Of course there has to be a minimum skill and experience match with the work.

"But heh, if these problem were easy you wouldn’t get a Nobel prize for solving them!"

Did he really "solve" the problem or merely identify it (or even compound it)?

So apply this line of thought to offering $1,000 for a kidney.

Prof. Tabarrok certainly has, in the broad sense. As he notes himself in one of his many contributions concerning this subject, just visit

Pretty much. As a teenager, the #1 most effective way to ensure that I wouldn't watch a given movie or read a given book was for my mom to recommend it to me or, worse yet, buy me copy with a note saying "I think you'd really enjoy this!"

Haven't read, among other things, "The Name of the Rose" because of this.

Well, allow me to recommend the film version starring Sean Connery and Christian Slater.

The film version might be a good gateway to inducing someone to read the book, but is a poor substitute for the book. I highly recommend the book to someone who likes any of the following: Sherlock Holmes stories; Aristotelian philosophy; libraries; or medieval history.

It is, by far, the best book I wish I'd never read.

When will you learn, ' Mother knows best'

Everything is not common knowledge.

So economists rediscover the theological problem of the law - the user can't control the received use. It could be a curb - don't do that, it's dangerous. It could be a mirror - if I can't get this easy thing how can I get the tougher, I'm lost. It could be a rule - virtue is its own reward.

Here is one explanation of effects. Suppose a rational student chooses study effort maximizing expected payoff based on the opportunity costs of studying. If the selected level is not likely to result in an A and outcomes are positively correlated with effort, then an incentive to increase math effort will come at the cost of reducing effort in the other things that the student is truly good at, ie the low opportunity cost pursuits. To the extent that this moves the student toward life goals that use the newly acquired math skills, the student will be disadvantaged relative to his mathematically inclined peers. The nudge might be ultimately self-defeating.

The world would not be much better off if Ben Affleck were better at math, but we would all be better off if he spent more time in acting school.

Humans on the left side of the bell curve aren't particularly rational. Just look at the high school dropout rate to see that. Or look at credit cards.

If youre to far on the left side of the bell curve, high school is a waste of your time.


Don't be so hard on yourself. You on the left of the bell curve are just as human as we are.

I always LOL when I start reading an MR post and it gets really spergy and clever-silly and then I think "oh wait is this an Alex post?" and I scroll up and it's an Alex post

I'm genuinely curious. What makes this post "spergy"?

I think that motivation is important for someone to succeed. It is also important to know the person you are trying to motivate if you are using reward, because then you know how he or she will react to the reward and motivation. My opinion to rewards for motivation for me, is that I would definitely see it as a way to work harder and succeed.

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