Friday, April 25, 2008

Compliments are as Good as Cash

According to Dr. Norihiro Sadato of the Japanese National Institute for Physiological Sciences in Okazaki, Japan: Paying people a compliment appears to activate the same reward center in the brain as paying them cash.

It's no secret that I'm a big fan of economics but I think many people mistake my enthusiasm as a belief that I only think about money. Personally I think it's a common error that people think that considering economic choices is "selling out". You often this idea in microfinance or any form of 'social activism'. The reality is that economics is an attempt to understand how people are influenced by incentives. No one has ever said that incentives must be in the form of money alone.

Money and markets are the needs, wants and desires of society quantified. Prices are the intersection where scarcity / abundance and need meet - which in turn help society to most efficiently allocate resources. The elegance and simplicity amidst complexity is very zen imho. While cash incentives obviously have their place, when it comes to reinforcing values, I personally feel that they can do more harm than good - for the simple reason that cash is only one way to motivate. Sometimes all it takes is recognition.

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