Intrinsic and Extrinsic Motivation

Abstract

The question of human motivation is central to understand the effects of legal rules on people’s behavior. One of the main tenets of law and economics is that incentive systems need to be designed in order to minimize the difference between private and social interests. Legal rules, taxes, subventions and other external interventions are regarded as necessary to motivate the internalization of externalities. Empirical evidence however suggests that motivation to engage in pro-social behavior may pre- exist to external incentives. People often avoid cheating, polluting or littering and they act pro-socially without considering consequences of deviation to do so. The traditional idea of “laws as price-incentives” has a difficult time explaining these phenomena. This is why in the last two decades one of the most promising research agenda consisted in distinguishing between “extrinsic” and “intrinsic” motivations. The former are linked to actions driven by external incentives, in contrast to the latter driven by personal and internal forces. Keywords: