January 14, 2008

Money does not buy all happiness, Cowen Highlight #1

To me the highlight of the first five chapters from Discover Your Inner Economist was the repeated message that not all motivations and incentives are monetarily driven, that not all scarcities are material, and that each person’s motivations are different. That may seem like three separate points, but I really think it is important to recognize all of them and how they are connected. Tyler Cowen did a great job of pointing out something that often gets overlooked in economics.

I found this so important in all aspects of my life from being a student to an employee and even a mother to my one year old daughter. I'll start with people's motivations. When I was a kid I was SO excited when my parents gave me a chore list with a weekly allowance. I would always do my chores with little hesitation, but as I got older the story changed. The older I got the more opportunities I had to make money, better money, elsewhere. So now my chores were more of an option since I didn't necessarily need the money. I would baby-sit, mow our neighbors lawns, I was an entrepreneur from the start. I even had a tip jar at the piano were I would practice my weekly lessons. As Cowen also mentioned making money elsewhere gave me bragging rights, a sense of maturity and independence. Who need chores? Now having read this I see the easy mistake parents make and at my house when my daughter gets older, chores will have different incentives like positive recognition and a feeling of need and want within our family. I know it's easier said than done, but again as Cowen mentions, I'll experiment with what drives Anna (my daughter) to help out. This brings in the point that not all incentives work the same for each person or in each situation. Like I said before, there was a time when the money was enough to get me to do my chores, but as money became more available I had internal motivations that changed my actions. Money very well may be enough for a lot of children to do their chores, for me it was not (my parents will attest to that). When I was younger, whether my parents realized it or not, encouragement, support and showing that they were proud of me was the best reward I could have. This also works for my one year old, who is currently learning sign language. I tried bribing her with food and treats, but in the end she has learned best from mommy’s attention and encouragement when she gets it right. Within the month she has learned at least 4 new signs and at least a half a dozen new words. It’s amazing how learning what incentive a person, no matter how young, will respond to helps in producing the desired goal. I am going to think harder about what motivates my husband from now on.

The last point that ties in with this concept of “non-financial based economics” is that for something to be scarce it does not have to be material. Cowen mentions the enjoyment of culture. I think for me, the most scarce and probably valuable think in my life is time. Time to spend with my family, by myself, reading (other that for school), taking a bath or even sitting down and enjoying a meal (all you parents out there know exactly what I am talking about!). For my daughter it would be playing with Mom and Dad. For my husband it would be sitting down and watching a football game. Cowen points out that these things can lead to monetary transactions, such as buying the book you want to read, or taking that vacation you’ve always dreamed of. The point that is so important that the author makes is that economics is more than money. Scarcity does not equal materials, incentives are not always money and they’re all different for each person.


Russell Harward said...

Jessica, Your post reminded me of my child hood. My parents used to pay me to do chores around the house. a quater to make my bed, 50 cents to do the dishes, and a dollar or two to mow the lawn. Like what you mentioned, as I got a job and money became more available I felt less inclined to do the chores around the house I used to do.
Even now I look back and am glad I was getting paid to help out around the house so I could buy various things. But I do feel like if my parents made me do the dishes and other chores just for the incentive of feeling like I am contributing to the family I would have been less reluctant to do those chores after I started making money elsewhere.

Larry Eubanks said...

My wife and I have followed the approach we learned from a Love & Logic workshop on parenting.

We give our son an allowance every week. Just like with us, he gets some spending money because he is part of the family. He is not given an allowance for doing chores. He is expected to do a few chores, and as he gets older he will be expected to do more chores. Just part of being family.

Now, I will offer to pay him to do some or all of one of my chores. And, if I have to do one of his chores, he will have to pay me at the same rate I pay him for one of my chores.

In light of Cowen, does anyone want to analyze our approach?

Jessica Wade said...

I found this concept interesting also because I have been listening to the Love and Logic on toddlers on CD. It was recommended to me but since I was not sure if it was worth my scarce time and money, I went to the library and got the cds to download to my computer. Anyway, if any of you out there have kids I would recommend Love and Logic, it is a great new approach to parenting and offers some great talking points and suggestions on handling difficult situations using different reward and incentive programs.