MIT researchers tested how money affects performance on different tasks. Higher pay boosted results on purely mechanical work, but actually hurt performance on tasks requiring any thinking. The effect was consistent across nine different cognitive challenges.
They gave these MIT students a bunch of games, games that involved creativity and motor skills and concentration. And they offered them, for performance, 3 levels of rewards: small reward, medium reward, large reward. Do really well, you get the large reward, on down. What happened? As long as the task involved only mechanical skill, bonuses worked as they would be expected. The higher the pay, the better the performance. But once the task called for even rudimentary cognitive skill— In 8 of the 9 tasks we examined across 3 experiments, Better incentives led to worse performance. Is this some kind of touchy-feely socialist conspiracy going on here? No, these are economists from MIT, from Carnegie Mellon, from the University of Chicago. And do you know who sponsored this research? The Federal Reserve Bank of the United States.
