First off, for those of you who come here for Hearthstone content don’t worry, I will be doing that along with the kinda just influential thought provoking posts I also wanted to make on this blog. That being said, there will be a fairly good mix from each subject so I may go on short streaks where I am more motivated to talk about things I am passionate about rather than Hearthstone (Which to be fair I am also passionate about but it is less scholarly I guess).

Anyway, there are a lot of ways that psychology plays a part in economics but today I am going to be focusing on the motivational part of economics, the “why” behind peoples’ actions. Now for this post many of the things I will be talking about will come from a mix of my opinions, things I have learned as an economics Major in college, and a very interesting video I found which will be right below.

To summarize, it talks about how for tasks that are more complex than simple motor skills and basic memorization, higher monetary rewards for doing things leads to WORSE performance. There are a few reasons as to why this could be the case which I will get into in a moment, but the point is, the lower monetary rewards developed higher performance in many tasks because:

Intrinsic rewards are highly valued by people, even more than extrinsic at some point. This basically means people value feeling good about their work more than being paid once the work becomes more meaningful and when money reaches a certain point (it has been proven that once annual income reaches about 70 to 80 thousand in the US, extra income provides less and less extra happiness, also known as diminishing rate of return) More Money actually causes people to do work faster rather than better. This is a key point because it is something I actually know to be true from personal experience. When offered a monetary reward I personally try to get the task done with as quickly as possible in order to get to the reward sooner rather than focus on the work itself. I have discussed this with friends and although I didn’t report the data as if it were a study, I did discover that many other people try to get the most reward for as little work as possible. Added Stress. If you put a monetary value on the project, those who value their work and don’t try to rush through it become stressed which can actually be harmful to their work. For example, its like in school when children stress about grades (which is the “monetary” reward in school in the form of percentage points). Although they the more serious students study harder and focus more, sometimes their grades may not reflect their knowledge due to test anxiety caused by the stress, or the fear of not doing well causing them to stay up an extra hour or 2 studying which actually becomes harmful when it cuts into the time they are supposed to sleep.

This brought up my own personal realization noticing that I fall victim to all 3 of these steps (and although my monetary reward is in the form of grades it is still relevant). For example, in college I tell myself that an B+ or better is a good enough grade and getting anything higher than that provides me a lot less happiness than reaching the initial threshold of a B+. I try to cut corners when studying in order to get good grades on a test rather than learn the material for real and fully focus on my work which gets me the reward but leads to overall less benefit from the work I put in. I also stress out a LOT when faced with a test I actually don’t think I will reach my B+ threshold on and it causes me to stress and stay up late studying, which causes me to be tired on the day of the test and face anxiety during the test myself (which is why I used that as an example for point 3).

The point of this post is to basically show you that money isn’t everything, it is much better to feel good about your work (as long as you make enough to sustain yourself because these rules don’t apply to those below the poverty line or in the lowest percentiles). So often I see people make decisions based on money, with even my father initially going down the path of an engineer because it paid well even though he had no interest which eventually drained him causing him to change career paths. If people start focusing more on their work and go after internal, or intrinsic, motivations rather than external, or extrinsic, motivations by going against society’s emphasis on money, then the worldwide output and quality of products will increase theoretically.

I hope you all enjoyed and found this or the video thought provoking.