Alfie Kohn has written a provocative opinion piece for the NY Times in which he argues that standard "pay for performance" incentives do not matter and often create a backlash effect.   Economists should take note because his piece is an implicit jab at 98% of the ideas embodied in economics research.  If "incentives do not matter", then this has many implications for the progressive agenda.  The minimum wage can be raised without employers substituting away from labor.  Taxes on the rich can be raised without them fleeing to a low tax haven or reducing their Silicon Valley effort to devise the next "big thing" (think of Musk or the Zuck). 

Mr. Kohn does make a series of interesting points.  I certainly believe that there are cases when paying people for a specific task does not yield a large response. He also points out based on some field experiments that a short term experiment (such as paying a person for a task for a few months and then stopping the payments) does not have a long term effect.

There are two separate questions here; First, when do incentives matter?  Second, why do incentives matter?   In our Econ 101 classes, we teach our students that in a world featuring considerable diversity of talents and our own "conception of the good life", there will always be a set of individuals who are  "at the margin".  This set of people will change their behavior if they receive a nudge.  This nudge might be a $ incentive or it might a social incentive such as community celebration or shaming. 

For example, if we need more young men to sign up for the Army --- how do we achieve this? Do we increase the pay for serving in the military? Or do we increase the prestige of serving? Do we increase the "on the job training" that such men receive? Or do we increase the later life health and retirement benefits from serving?  The military has strong incentives (since it faces a budget constraint) to pilot different strategies to identify the most cost effective ways of recruiting prospective troops.

A deeper question is why are some people "at the margin"?  In the aftermath of James Heckman's Nobel Prize win in the year 2000, more and more economists work on the economics of heterogeneity.  Why do we have different goals and aspirations?  Does the same person have the same goals as she ages?  How do life experiences and one's own choices interact with each other to shift "who you are and what you want"?   A given individual knows what motivates her to choose where to live or whether to quit her job, the economist seeks to learn this person's willingness to  substitute one choice for another.   Mr. Kohn's piece suggests that economists are looking to the wrong motivating factors when we crassly focus on $.  In truth, $ matters more than ever because in this Internet economy there are a huge number of ways to use $.  You can buy private goods or donate it to a cause you are passionate about.