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Home » Economy & Development » If-Then rewards cause a search for loopholes – how psychology explains China

If-Then rewards cause a search for loopholes – how psychology explains China

I recently finished a book called “Drive: The Surprising Truth About What Motivates Us” that focuses on intrinsic motivation, how it can be bolstered or buffeted by workplace policies, and how it effects our overall happiness (I enjoyed the book, even if it was a little short). Like most things these days, there were several parts that reminded me of China (we’ll be looking at a second aspect in a later post).

If-Then rewards cause a search for loopholes

China’s government since reform and opening up has functioned more as a corporation than as a country. Within each level of government there is fierce competition for promotions that come with clear perks and benefits (and some that aren’t made quite so public).

As Daniel Pink points out in his well researched book, rewards (like promotions or bonuses) often create a desperate search for loopholes instead of actually accomplishing the goal as it was intended. Perhaps the best example of this run amok, is how much GDP growth factors into gov’t performance reviews. Even though on its face, it would seem that this kind of metric would benefit a wide range of people, from construction workers to farmers, instead gov’t officials search for ways to manipulate the statistics to reach their goals.

Similar things can be seen in China’s environmental pursuits. Like the fact that Beijing is increasing its number of “blue sky days” (which just reflect air of a certain quality, not the ability to see blue sky), even though days of extremely bad air quality are increasing. The problem is that the system allows local officials to shut down factories for a few days to meet the goal before continuing as usual; real progress is not being made.

As Pink points out, this ends up causing people to focus on only the short-term rewards instead of the long-term benefits. The results of this kind of if-then reward have been well documented; gov’t officials, who are only in a place for a fixed period of time, often ignore the long-term debt caused by their get rich quick schemes or pollution belching industries.

The same reward system also effects China’s students. Since the reward (getting into college) is such a major focus of education, a shift occurs in the students’ learning. No longer is the goal to actually obtain mastery of a subject, but becomes entirely focused on passing tests.

As several studies have shown, students motivated by grades alone instead of mastery, are capable of achieving high scores, but are less capable when the time comes to apply that knowledge to a new situation.

It means that not only do tests not create an accurate picture of who is worthy of college, but that in many cases high stakes tests create the problem in the first place.

As Pink suggests in the book, the way to curb the loophole seeking tendencies that go with large rewards is to broaden the requirements for the reward. In gov’t if long-term growth and environmental protection were a large part of the metric in deciding who is promoted, it would limit the short-sighted games. If colleges looked more at students as a complete individual, instead of as the sum of a single test, they would be better able to spot those full of potential, instead of simply finding those best at memorization.

(next we’ll look at why intrinsically motivated people are key to China’s future)


  1. Sinostand says:

    I think it’s pretty clear that government officials have perverse incentives. Too many of their constituents petition and they don’t get promoted; so the solution? Intercept and beat the hell out of them before they can make it to Beijing.

    You can make some common sense adjustments – like eliminating GDP growth as the chief requirement for promotion – but giving a GOOD incentive structure is damn near impossible as long as they’re human beings. You can make them accountable to the people for their jobs with democracy and a free press, which will help many problems, but look at democracies. Those leaders just have incentive to pander, polarize, and promise whatever has the most short-term popularity with the most people.

    I’m looking forward to the day we achieve singularity so we can let the sexless, emotionless, goal-less, promotion-less computers run the show. I’m even willing to risk terminator for that.

  2. Vam says:

    I’d like to know about the connections between different types of organisational culture and the different types of incentive they push. I strongly suspect a link between a corrupt culture and large financial rewards.

  3. Well said Tom.
    The phenomenon of short term benefit at the expense of long term improvement is not a recent nor area-specific issue but deserves attention nonetheless.
    This is the key to improved governance, not just in China but the US, EU, and everywhere.

  4. Vam says:

    Witness japan. The only country to suffer nuclear attacks and what does their government do? Set up a bunch of nuclear timebombs around the place. New zealand. Clean and green, and farmers pump the rivers full of cow shit. Canada. Lots of land. Huge land area. And developers put shit right on top of stuff claimed by inuits. The usa. Superadvanced. 50+ year old nuclear power industry. They still havent figured out what to do with nuclear waste. Africa. People have been fucking since fucking existed. They still dont know how to do it safely. The list goes on. . .

  5. Lao Why? says:

    Yo Vam
    Try to keep the expletives to a minimum.

    @ Tom
    The Freakonomics guys (Levitt and Dubner) are all about the perverse outcomes of badly designed incentives. Certainly relevant to about every aspect of human activity (including potty training for Levitt’s two year old daughter). They have a pretty active website.

    I have been China long enough (about the same as Tom) to know that situations that appear to not make sense always do make sense. It is just we foreigners are not viewing things from the correct perspective. Everything is logical…it just might not be your logic. Therefore I find that this incentives approach is an especially good way to view the foggy situations that any foreigner on the mainland encounters. As opposed to the infamous “follow the money” as a tagline to understand the situation, it might be better said to “follow the incentives” since not all incentives lead directly to money.

    • Lorin Yochim says:

      I think @Vam has problems other than expletives. Lock up your daughters, Vam, the black people are coming, and their libidos are out of control!

      For sure there is something to be said for following the incentives a la Levitt and Dubner. And @Lao Why? is correct to point out that foreigners often have a limited view of what is going on. Drive reminds us that it’s not all about what we can get out of doing something, whether that something be prestige or money. Still, both of these approaches suffer from the operationalist/behaviourist tradition from which they spring. They forget that people are not automatons at the mercy of external forces or internal drives. If this were the case, we’d have an awful lot of trouble figuring out why two Chinese village leaders in the same or similar circumstances behave in different ways. One might do everything he can to ladder climb or strip state assets for his own benefit. Another might do quite the opposite and do everything he can to build good schools for all residents. To be sure, society/culture and biology are important constraints on human action, and certainly most people “act with the flow.” But what people do is exactly that: “action” and not “behaviour.” People have the ability to reflect upon the circumstances that constrain them and do something other than take the easiest or preferred path.

  6. C. says:

    This is definitely part of the issue, but I’m not sure it’s all of it. You see similar If-Then notions in Indonesia, but the corruption Western businesses have to contend with isn’t quite the same. IIRC, 15%+ of products have to be rejected from China, while only 6% have to be rejected from Indonesia and other developing nations.

    I think a lot of it has to do with China’s notion of face and its conception of intelligence. While Korea and Japan’s idea applies to strangers, China’s doesn’t. Moreover, I’ve noticed that China’s view of intelligence is like Russia in the sense that cheating people is viewed as a form of brilliance. Neither applies in Indonesia, Brazil, and other countries with lower QA/QC issues.

  7. Chopstik says:

    Oh, man, I’m already behind on my book reading and now you’ve just added a new one to the list… Thanks a lot, Tom! 😉

  8. me says:

    “Even though on its face, it would seem that this kind of metric would benefit a wide range of people, from construction workers to farmers, instead gov’t officials search for ways to manipulate the statistics to reach their goals.”

    …figures never lie, but liars always figure.

  9. Lao Why? says:

    Two other gems
    1.Lies, damn lies and statistics
    2. If the facts don’t support the conclusions the facts must be changed.

    @ Lorin,
    Thanks for the post. It makes me think of the Weberian argument against Marx’s dialectical materialism; Weber used, ironically, China as his primary example as a vehicle to explain why economies don’t necessarily develop as Marx would suggest. To wit, ideas, culture and conscience can counteract the inexorable forces driving economic systems.

    I haven’t read the book (it’s now on my list) but I would also note that behavior is also influenced by not just rewards but also punishment (disincentives). I think any discussin of China cadre behavior would warrantd an examination of discipline or lack there of. So much of rent seeking activities exist because cadres perceive the threat of actual meted out punishment as being remote. Strict laws may be on the books but are rarely enforced and for those that are comfortable that they have a friend in a high place that will shield them from prosecution, well then, belly up to the trough. The emperor’s grain awaits!

    • Lorin Yochim says:

      You’re right to remind me of Weber, but one of the risks of Weber in the wrong hands would be the suggestion that Chinese society somehow has an cultural affinity with either corruption or authoritarian capitalism. At any rate, Weber reminds us to think at the level of cultural system. What I was getting at in my post was more about individual volition, i.e., the power of individuals to resist both material incentives and cultural…tendencies.

      On cadres, I’m not sure about the accuracy of your assessment, but it occurs to me that there are surely heavy incentives against the appearance of corruption, aren’t there? After all, cadres aren’t forbidden from being entrepreneurs these days. It seem that fear of punishment isn’t, in theory, the thing that keeps them in line these days.

  10. Lao Why? says:

    Of course there are incentives to guard against the appearance of corruption just as a thief is incented to supress the appearance of a crime. Not sure I get the meaning.

    “It seems that fear of punishment isn’t, in theory, the thing that keeps them in line.” I think you are looking at the obverse of my point.
    My question is why are discipline measures not keeping the violators in line? I think the measures are pretty stiff. Either the guilty officials are stupid and don’t know the law (unlikely), or they are prepared for the consequences which could be in some cases death (unlikely) or they think they won’t be caught or they believe the law will not be enforced.

    Here’s an amusing article of a Sichuan official who blames his bribe taking giving face to the briber…

    • Lorin Yochim says:

      In my rush to push “post,” my point wasn’t very clear, it’s true. I meant to draw attention to Party disciplinary agencies/mechanisms as opposed to the law. As far as I know, the former takes precedence. In terms of appearance of corruption, I think the story you link to is a good example. If corruption is as widespread as suggested in the post and comments, then we need an explanation for why corruption is ever exposed. That isn’t addressed in this piece. My tentative assertion is that it is related to “face” in a different way, that is, to saving the face of the Party. My final point about fear of punishment keeping them in line, is, I think, an obvious point. If the riding the gravy train is the goal, then avoiding the appearance of corruption (living an extravagant lifestyle, for example) becomes very important. Just pointing to a distinction between negative and positive motivation.

  11. […] week I briefly showed how if-then rewards are more likely to cause a search for loopholes than actual results. Today I want to explore a second idea from Pink’s book “Drive: The Surprising Truth […]

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