ABSTRACT
Chapter 5 explains why social incentives and social preferences matter in behavioral public economics. A factor that might increase the performance of prosocial activities (e.g., volunteering, civic duty, charitable donations, or other social contributions) concerns people’s incentives. People exhibit prosocial behavior when they do not always make choices only based on economic incentives. Extrinsic rewards to encourage prosocial behavior can sometimes backfire and decrease the desired behavior by crowding out intrinsic motivation to act altruistically. In the case of blood donations, introducing payments led to a decrease in giving. Economic incentives can manipulate people into being more selfish. Social incentives will give prominence to the role of nonpecuniary drivers of prosocial behavior. Ethical and moral aspects cannot be ignored even in a market economy.
