Lecture 2 slides Flashcards
What is the link between money happiness?
- Money can buy happiness up until 80-90k . The lower a person’s annual income falls below the benchmark, the unhappier they feel. No matter how much more they make above this benchmark, they don’t report feeling any happier.
- global judgements of life satisfaction or happiness have not changed much over the last 4 decades, despite larger increases in income
- increases in income have a transitory effect on life satisfaction rather than a permanent one
- very weak relationship btw happiness and income
What is the focussing illusion?
When people consider the impact of any single factor on their well-being (not only income), they are prone to exaggerate its importance. For example, when participants were asked first how many dates they had last month and then abt happiness, the correlation between them was much higher than if the dates question was asked afterwards
What was predicted about bad moods for those with a lower income and married women?
They predicted that single women spend more time in a bad mood and those with lower household income. The actual results suggested that less time was spent in a bad mood than estimated
What did the cornell work site blood pressure study find?
involved ecological momentary assessments to record feelings every 25 minutes. The findings were that: there was no correlation between personal income and happiness, while family income is positively correlated with anger/hostility and fear (higher income-> more fear + anger)
What are the possible explanations for these findings?
- relative income becomes more important than absolute income→ more important that you are earning more than those around you rather than the actual amount
- hedonic adaptation→ you become used to your luxury, so you want it less
- time allocation → believe that there is more free time to engage in hobbies but not the case
- focusing illusion
What is the general link between money and social behaviour?
Money: helps people to achieve their goals without the help of others, leads to self-sufficient orientation which is independent behaviour. So they are less likely to ask for help, less help and less social (more distance and wanting to be/work alone)
What did the experiments find?
- it took longer to ask for help from the experimenter in a difficult task when they are primed with money or play money compared to the control→ more self-sufficient
- same task but opportunity to ask for help from a fellow student on an unsolvable task. Those living in poverty/wealth requested help more.
- those in the money condition: were less helpful during a task, were less helpful to a stranger and donated less money
- participants were primed with either fish, neutral stimuli or money. They had more distance between people in the money conditions and were more likely to choose solitary activities and greater proportion of participants worked alone
What is the relationship btw financial incentives, satisfaction + performance?
- pay is positively related to satisfaction with salary + job satisfaction
- employees with a higher salary are slightly more satisfied within organizations, but people with a higher salary are hardly more satisfied between organizations
- pay is associated with quantity rather than quality
Agency theory
bonuses can lead to people acting in their own interests rather than in the interests of others
What are the positives of paying for performance?
Incentive effect: the impact of pay-for-performance through its impact on current employees’ motivational states
Sorting effect: the impact of pay-for-performance through its impact on the composition of the workforce
What are the negative effects of pay for performance?
- does not always motivate
- undermines intrinsic motivation
- no improvement in performance quality (SDT)
- risk-taking/ short-term goals (incentive intensity)
- focus on self-interest (agency theory)
- problematic in teams
- cultural differences
How should incentives be allocated?
Based on: equity, equality and needs
What is the relationship btw individualism and GDP?
Strong positive correlations as the wealthier across contexts, the greater the individualism
How do financial incentives differ across cultures?
- financial incentives are very western due to highly individualistic values
- CEO compensation reflect power structures which follow individualistic values
- less emphasis on individualistic performance in the east (but not completely 0). There is more emphasis on group harmony + interpersonal relationships -> team-based performance rewarded more
How should incentives be used?
incentives should reflect a difference in economic conditions and incentives are only valued if the work is meaningful regardless of cultures
