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Table of contents

1.Research Question & Summary

2.Arguments & discussion questions

3.Preliminary Conclusion

4.Project fit & Future Work

The question is:What are examples or situations where price effects increase the intrinsic motivation of market participants to act in an ethically sound way? ( response to the research question)

Oftentimes, an increase in the price effect lowers intrinsic motivation of market participants to act in an ethically sound way. This is because as the price increases, intrinsic motivation tends to decrease, and vice-versa. However, there may be times when the inverse relationship becomes a direct one with regards to price effect and morals. The situation where such a case could exist would have one force be stronger than the other in the equation. If ethics is to prevail, then the price effect should be weaker than the intrinsic motivation, which is achieved by offering a weak incentive. In this way, the external factor alone (a.k.a the incentive) is not sufficient to influence the behavior of the market participant. Instead, the market participant’s desire to act in an ethical manner affects the strength of their intrinsic motivation, which leads to ethical outcomes. One example in Chapter 2 talks about offering children a monetary incentive when they preformed well in school. The only version of the incentive program that yielded sustainable results was when the students were paid $2 for every book they read. The students would have to do a test to prove that they read the book. Being paid $2 for reading a book and then taking the time to write a test on what you read is arguably not a very good economic trade off. The student will have to spend hours reading the book and some more time to prepare and take the test. The incentive is a weak factor and cannot be the main influencer of a student’s behavior in this case. Therefore, the student felt that there was some economic value as the school was willing to pay them in hopes of boosting their school performance, but the monetary value was more symbolic than incentivizing. The student would have already needed to feel that preforming well in school was valuable to them. If the student believes that striving for better academic performance is important, their intrinsic motivation to make the effort to read more books is higher than the monetary incentive offered and therefore a stronger influencer of their behavior. Thus, the students are reading more for the right reasons and their actions can be considered ethical and sustainable in the long run. Since the students are intrinsically motivated, they will find that the higher scores in reading comprehension and rich vocabularies they acquire much more valuable than the mere $2 incentive they were offered for their labour. Ultimately, the ability for an incentive to increase ethical behavior via an increase in intrinsic motivation depends on how well designed the incentive is to begin with. The target market participants must be carefully considered and the way in which they perceive the non-market good must also be evaluated carefully. Once the market value of the non-market good is determined based on the perceptions of the market participants, a monetary incentive at a level below the market value must be selected. In this case, the market participants will perceive the price effect to be weak and will rely on their intrinsic motivation to act in an ethical manner to be the main influencer of their behavior. The small and calculated increase in the price effect now has a direct relation with the increase in intrinsic motivation to act in an ethical manner. Although such a method requires a great deal of research and effort, it is the only situation where the price effect can increase the intrinsic motivation to act in an ethical manner and sustain such behaviors in the long run.

Question & Summary

•The question is: What are examples or situations where price effects increase the intrinsic motivation of market participants to act in an ethically sound way?

•The source consulted was Chapter 2 Incentives by Michael J. Sandel, from what money can’t buy.

•One possible answer is the situation where the monetary incentive is a weaker influence than the person’s perceived market value of the non-market good, which means their intrinsic motivation to act in an ethical manner has a stronger influence on their behavior.

Arguments & discussion questions

1.) Extrinsic reasons for intrinsic behaviour-  Cash incentives are being highly employed by doctors, insurance companies, and companies to motivate people to be healthy.  This includes examples such as taking medications, loosing weight, and quitting smoking. However, should money be the source of motivation required to induce people to take their medications, quit smoking, or loose weight to avoid the future cost implications of such practices. Financial incentives serving as the intrinsic motivation for people to adapt healthier lifestyles and habits can be objected on two grounds. The first being an objection on the grounds of fairness, which suggest that overweight people should be able to slim down on their own as using taxpayer funds to pay them is unfairly rewarding slothful behaviour. Or in other words, it is using cash incentives as a reward for indulgence rather than a form of treatment. This subsequently absolves one from any responsibility for their health. The second objection being grounded on the notion of bribery. Sandel argues that good heath isn’t merely achieved by using money to encourage health conscious behaviours but rather has to do with developing the right attitudes and caring for our bodies with a sense of self-respect. Therefore inducing individuals to do the right thing for the wrong reasons. As a consequence, studies have shown that bribe forms a habit and when the bribe disappears, one often reverts to their bad habits.

2.) Reforming attitudes without cash incentives- The consequences created by cash incentives to promote ethical behaviour can be seen as twofold. One could possibly pursue on to practice an ethical lifestyle intrinsically or cease to act ethically when they’re no longer paid. In the example of paying kids for good grades, it was concluded that cash payments yielded mixed results. But the most surprising being the advanced placement incentive programs in low-income Texas schools. Implementing the program did not only offer cash to students and teachers, but also transformed the cultures of schools and the attitudes of students towards academic achievement. In contrary to the standard “price effect”, which would predict more pay equals better performance, economist found that money had an expressive effect which resulted in academic achievement being regarded as “cool”. Studies found that despite the differences in pay amongst schools, the performance wasn’t any different. Hence, demonstrating how the price effect can cultivate a positive attitude towards certain goods which wouldn’t have been possible without the cash incentive.

3.) The cost benefit of an action- It could be argued that human behaviour can be explained by assuming that people decide what to do by weighing the cost and benefits of the options presented before them and choosing the one which would provide the best utility. The following argument would look at whether given a cash incentive changes how one makes a rational decision. The example used for this draws from Sandel’s example of chid-care centres. By imposing a fine for late pickups, it could be assumed that parents would act more responsibly to avoid penalties. In contrary, however the childcare centres found that the number of late pick ups drastically increased. This is due to the reason that parents began treating the fines more as fees that they’re willing to pay for. In practice, this eradicates the guilt felt prior to the establishment of the fine. Hence, when cash incentives are used to promote ethical behaviour in this scenario it proves to be unsuccessful as participants began acting in contrast to its intent. By treating a fine as fee leads to the moral significance being dismissed, and the question remains whether price effects increase the intrinsic motivation of market participants to act in an ethically sound way.

Q & A

•Given that a monetary incentive and intrinsic incentive are at play in these given examples, do you believe that one could possibly be prioritized over the other in the long run?

•Is ethical behaviour cultivated merely with the aid of a financial incentive or is it trait thats inherent within all sentient beings?

Preliminary Conclusion

The ability for an incentive to increase ethical behavior via an increase in intrinsic motivation depends on how well designed the incentive is to begin with. The target market participants must be carefully considered and the way in which they perceive the non-market good must also be evaluated carefully. Once the market value of the non-market good is determined based on the perceptions of the market participants, a monetary incentive at a level below the market value must be selected. In this case, the market participants will perceive the price effect to be weak and will rely on their intrinsic motivation to act in an ethical manner to be the main influencer of their behavior. The small and calculated increase in the price effect now has a direct relationship with the increase in intrinsic motivation to act in an ethical manner.

Project fit & Future Work

The project fits with the theme of the class because the course is on ethics and economics and the project aims to find the possibility of a situation where the direct relationship between the price effect and ethical behavior.

We plan to work on improving the quality and quantity of resources for our final paper and also, we wanted to do more research on the history of economists and their perspective on ethics, history of Price Effect more examples of Monetary Incentives lastly we want to get a better idea of the correlation between money and incentive.

Wikipage Article

Title: The Price Effect and Intrinsically Motivated Ethical Behavior

Table of Contents:

Subtitles

Theoretical Overview

Sustainable Products Industry

Fair Trade Industry

Conclusion

Research Question: What are examples or situations where price effects increase the intrinsic motivation of market participants to act in an ethically sound way?

Theoretical Overview

Oftentimes, an increase in the price effect lowers intrinsic motivation of market participants to act in an ethically sound way. This is because as the price increases, intrinsic motivation tends to decrease and vice-versa [1]. However, there may be times when the inverse relationship becomes a direct one with regards to price effect and morals. In this way, the external factor alone, or the incentive, is not enough to influence the behavior of the market participant. Instead, the market participant’s desire to act in an ethical manner affects the strength of their intrinsic motivation, which leads to ethical outcomes.

Sustainable Products Industry

The sustainable products industry is an excellent real-world example of the low impact of the price effect on intrinsically motivated ethical behavior. Consumers know that sustainable products will cost them more, and they are willing to pay the price anyways. According the price effect, cheaper products should have a greater demand, especially with those with less income [3]. However, the price effect is not as strong as the social impact that has convinced millennials to uphold the significance of protecting the environment, which overrides the price effect. According to a survey done by CleanTech Canada, approximately 3 in 4 Canadians consider the ethical consequences associated with purchasing a product when making a decision to buy [1]. The social implication of the sustainability movement is so strong that 62% of Canadians are willing to pay more for sustainably packaged products [1]. Despite increased prices- consumers are still willing to pay more for sustainable products. Sustainable Products have become very common in the fast food marketplace lately, moral incentive causes corporations to change their ethics. The care for the environment is drawn from our morals. Starbucks is a prime example for this type of change, many consumers were angry about the environmental damage fast food places caused. Starbucks from the start of the company was aware and has made a huge change in 2020 to stop the usage of plastic straws. That encouraged many other corporations such as McDonalds and Tim Hortons to make changes as well. If a company is targeting the millennial market, Sustainable Products would be a great fit because of the social and environmental accountabilities it comes with. Millennials are heavily influenced by their technology when making a purchase because product information is easily found online. Also, the stores that millennials tend to shop at have more sustainable product options already.

Fair Trade Industry

The fair trade industry is also another excellent real-world example of the low impact of the price effect on intrinsically motivated ethical behavior. Consumers are aware that the prices of fair trade products are much higher in comparison to regular products. Despite this, consumers are continuing to purchase fair trade products at a rapid pace [4]. Fair Trade products cost more because they ensure that farmers and laborers get paid fair wages under good working conditions, which drives the price upwards. The volume of fair trade coffee being purchased is continuing to grow, even though prices have been relatively stable, sometimes even increasing [4]. However, the social movement of eradicating child labor and unsafe working conditions has influences people to internalize the need to purchase ethical products over cheap unethical alternatives. Fair trade doesn’t only support the producers, there are other benefits such as economic, environmental and social. This helps out both the producers and consumers. The economic benefits are Fairtrade is more accessible towards agricultural services such as organic training and premium markets. This helps farmers to have more products and sell more. Secondly, the environmental benefit from the Fairtrade Standards covers a lot of crucial areas for environmental protection. Such as “energy and greenhouse gas emission reduction, soil and water quality, pest management” [6] and etc. The environmentally friendly practice has helped control pests and diseases. This environmental focus has positive effects on the producer’s health. Lastly, social benefits give producers power for their own future such as education better housing, schools, medical facilities.

Conclusion:

In this case, the market participants have perceived the price effect to be weak and relied on their intrinsic motivation to act in an ethical manner to be the main influencer of their behavior. The small increase in the price effect now has a direct relationship with the increase in intrinsic motivation to act in an ethical manner [5]. The situation ensures that ethical principles such as sustainable and ethical consumer choices are internally motivated and are not heavily influenced by the price effect.

References:

[1] Clean Tech Canada. “Majority of Canadians Willing to Pay More for Sustainably Packaged Products.” Canadian Manufacturing, November 6, 2019. https://www.canadianmanufacturing.com/manufacturing/majority-of-canadians-willing-to-pay-more-for-sustainably-packaged-products-241863/.

[2] Collin's Dictionary of Economics. “Price Effect.” The Free Dictionary. Collin's Dictionary of Economics, 2005.https://financialdictionary.thefreedictionary.com/_/viewer.aspx?path=hcEco&name=fig405.jpg&url=https://financial-dictionary.thefreedictionary.com/price+effect.

[3] Elk, Kathleen. “Millennial Households Are Earning More Money Than Ever Before-Here's Why It May Not Be Enough.” CNBC. CNBC, January 15, 2019. https://www.cnbc.com/2019/01/11/millennials-households-earn-more-money-than-ever-heres-the-problem.html.

[4] Fair Trade USA. “5 Common Myths About Fair Trade Coffee.” Fair Trade Certified. Fair Trade Certified, September 16, 2019. https://www.fairtradecertified.org/news/fair-trade-coffee-myths.

[5] “What Is Price Effect? - Definition: Meaning: Example.” My Accounting Course. My Accounting Course, 2020. https://www.myaccountingcourse.com/accounting-dictionary/price-effect.

[6] The difference that Fairtrade makes. (n.d.). https://www.fairtrade.org.uk/What-is-Fairtrade/The-impact-of-our-work/The-difference-that-Fairtrade-makes

[7] Wiener-Bronner, D. (2019, February 27). Forget plastic straws. Starbucks has a cup problem. https://www.cnn.com/interactive/2019/02/business/starbucks-cup-problem/index.html

[8] Nace, T. (2018, July 10). Starbucks To Ditch Plastic Straws -- Will It Actually Help The Environment? https://www.forbes.com/sites/trevornace/2018/07/10/starbucks-to-ditch-plastic-straws-worldwide-for-adult-sippy-cups/#731f2ecdc9eb — Preceding unsigned comment added by Course4044-T (talk • contribs) 14:19, 31 March 2020 (UTC)