- 03 Jun 2014
- Working Paper Summaries
Eliciting Taxpayer Preferences Increases Tax Compliance
Most citizens dislike paying taxes. In the United States, for example, tax noncompliance is estimated to amount to some $385 billion annually. Many other governments also suffer from a "tax gap" in their national accounts. A meaningful portion of tax aversion can be understood and addressed by considering psychological characteristics of the tax process. To explore this possibility the authors design and carry out a set of experiments that allow taxpayers to express advisory preferences regarding the use of their tax dollars. They then assess the effects of this taxpayer agency treatment on tax compliance as well as satisfaction with tax payment and attitudes towards taxation. Findings show that providing taxpayers with such "taxpayer agency"—giving them a sense of influence over tax spending—significantly increases tax compliance. The authors also observe that agency operates, in part, by bringing together payment and benefit. In addition, agency creates no decrease in tax satisfaction or change in fear of audit, and it may reduce general antitax sentiment among taxpayers. Overall, giving taxpayers a voice may act as a two-way nudge, changing tax payment from a passive experience to a channel of communication between taxpayers and government. Key concepts include: Tax noncompliance is a big problem. Research has shown that standard drivers of compliance (such as enforcement rates) do not fully explain individual tax behavior. A lack of agency or sense of influence over tax spending may lower tax compliance. Individuals are happier to give when they know what they're giving for, and less likely to do so when the outcome of their payment is ill-defined. Tax aversion is due in part to the separation of tax payments and the public goods obtained in return. This disconnect places distance between payment and benefit, and therefore decreases taxpayers' perceptions of the tax-funded benefits they receive. Closed for comment; 0 Comments.
- 13 Jan 2014
- Research & Ideas
How Government Can Restore the Faith of Citizens
Would we appreciate government more if we could see what it was doing to help citizens? Research by Michael Norton and Ryan Buell. Open for comment; 0 Comments.
- 29 Nov 2013
- Working Paper Summaries
Surfacing the Submerged State with Operational Transparency in Government Services
As Americans’ trust in government nears historic lows, frustration with government performance approaches record highs. We propose that Americans’ views of government can be reshaped by increasing government’s operational transparency—that is, the extent to which citizens can see the often-hidden work that government performs. Closed for comment; 0 Comments.
- 21 Aug 2013
- Research & Ideas
To Buy Happiness, Spend Money on Other People
In a new video, Michael Norton shows that spending money on others yields more happiness than spending it on yourself. Closed for comment; 0 Comments.
- 19 Aug 2013
- Research & Ideas
Studying How Income Inequality Shapes Behavior
Professor David A. Moss is studying how growing income disparity affects our decision-making on everything from risk-taking to voting. Closed for comment; 0 Comments.
- 05 Aug 2013
- Research & Ideas
To Buy Happiness, Purchase an Experience
Michael Norton explains why spending money on new experiences yields more happiness than spending it on new products. Closed for comment; 0 Comments.
- 04 Jun 2013
- Working Paper Summaries
Prosocial Bonuses Increase Employee Satisfaction and Team Performance
Designing effective incentive schemes is a central challenge for a wide range of organizations, from multinational corporations to academic departments. In pursuit of identifying the most effective strategies, organizations have devised an impressive variety of such bonuses, from fixed salaries to pay-per-performance, from commissions to end-of-year bonuses. In this paper, the authors suggest that the wide variety in such schemes masks a shared assumption: That the best way to motivate employees is to reward them with money that they then spend on themselves. The authors—Lalin Anik, Lara B. Aknin, Michael I. Norton, Elizabeth W. Dunn, and Jordi Quoidbach—propose an alternative means of incentivizing employees—what they term "prosocial bonuses"—in which organizations provide employees with bonuses used to engage in positive actions towards charities and coworkers, from donating money to remote countries to taking a coworker to lunch. The authors examine the impact of these prosocial bonuses on employee satisfaction and team performance, by reporting results from field experiments in settings ranging from bank employees in Australia to pharmaceutical sales representatives in Belgium to dodgeball teams in Canada. Overall, results suggest that a minor adjustment to employee bonuses—shifting the focus from the self to others—can produce measurable benefits for employees and organizations. Key concepts include: When organizations give employees the opportunity to spend money on others—whether their coworkers or those in need—both the employees and the company can benefit, with increased happiness and job satisfaction and even improved team performance. Prosocial bonuses can benefit both individuals and teams, on both psychological and "bottom line" indicators, in both the short and long-term. Prosocial bonuses could backfire if companies introduce them as a replacement for more standard bonuses, rather than as an additional incentive. Closed for comment; 0 Comments.
- 03 Jun 2013
- Research & Ideas
The Power of Rituals in Life, Death, and Business
Experimental research by Michael I. Norton, Francesca Gino, and colleagues proves multiple benefits of using rituals. Not only do they have the power to alleviate grief, but they also serve to enhance the experience of consuming food—even something as mundane as a carrot. Closed for comment; 0 Comments.
- 30 May 2013
- Working Paper Summaries
Non-Standard Matches and Charitable Giving
In this article, Michael Sanders, Sarah Smith, and Michael I. Norton review evidence suggesting that matching schemes—an increasingly common strategy used by nonprofits and firms to increase giving in which organizations match employee donations to charity—may not always prove effective. The authors offer several novel matching schemes designed to improve the effectiveness of matching, some focused on individual donors in isolation and some focused on donors embedded in organizations. The authors' hope is to spur further research assessing the efficacy of these schemes, reducing the tendency for matching schemes to crowd out donations and making them more likely to increase charitable behavior. Key concepts include: A standard match operates in a simple way: For every $1 a person donates from their net consumption (i.e., for each $1 sacrificed from their ability to buy other things), their chosen cause receives more. The form that standard matches take, however, can vary. Matches may not be an optimally cost-effective way to increase giving. Charities benefit from the value of the match payments, but the match payments do not have a large positive effect on individuals' donations. There are novel alternatives to the standard match, such as non-linear matching, social (and team) matching schemes, and lottery matching. For each new type of non-standard match, the authors use existing theory and data to offer support for its potential effectiveness. Closed for comment; 0 Comments.
- 15 May 2013
- Research & Ideas
From McRibs to Maseratis: The Power of Scarcity Marketing
In the new book Happy Money: the Science of Smarter Spending, behavioral economists Elizabeth Dunn and Michael Norton describe how money can buy happiness—but only if we spend it the right way. Closed for comment; 0 Comments.
- 26 Mar 2013
- Working Paper Summaries
How Elastic Are Preferences for Redistribution? Evidence from Randomized Survey Experiments
The United States has witnessed a large increase in income concentration over the past several decades. While standard theory predicts that support for redistribution should increase with income inequality, there has been little evidence of greater demand for redistribution despite historic increases in income concentration. A possible explanation is that people are unaware of the increase in inequality, and greater information would substantially move redistributive preferences. The authors examine the determinants of redistributive preferences through randomized online survey experiments with Amazon Mechanical Turk, a rapidly growing new laboratory to carry out social experiments. The results show that information changes people's beliefs about the current level of inequality and leads them to become more favorable to redistributive policies like the estate tax. Key concepts include: Respondents update their views about income inequality when presented with information about the current distribution of income. Liberals and conservatives differ greatly in their perception of inequality, but receiving information about inequality closes roughly forty percent of this "opinion gap." Receiving information about current levels of income inequality causes liberals and conservatives to become more supportive of redistributive policies such as the estate tax. At the same time, emphasizing the severity of current income inequality appears to undercut respondents' willingness to trust the government to fix societal problems. The existence of the problem appears to serve as evidence of the government's limited capacity to improve outcomes more generally. Randomized surveys are a powerful and convenient tool for studying the effects of information treatments on attitudes and behaviors. mTurk is powerful because it can reach large samples of U.S. residents (in the thousands) at fairly low cost ($1-$2 per respondent). It is convenient because, using widely available software, online surveys are now very easy to design. In contrast to field experiments, which are costly to set-up and replicate, online survey experiments lend themselves naturally to conducting series of experiments where results from an initial experiment lead to new experiments to cast light on potential mechanisms. Closed for comment; 0 Comments.
- 13 Feb 2013
- Research & Ideas
5 Weight Loss Tips From Behavioral Economists
Behavioral economists study what motivates people to buy, save, donate, and any other number of actions that build society. The following studies reveal proven methods of encouraging healthy eating and exercise. Open for comment; 0 Comments.
- 09 Jan 2013
- Sharpening Your Skills
Sharpening Your Skills: Understanding Customers
In these previous articles, professors discuss a range of topics about customers: why they are not always right; understanding their motivations; providing them dramatically enhanced services; and making things right when you don't meet their expectations. Open for comment; 0 Comments.
- 21 Aug 2012
- Working Paper Summaries
Children Develop a Veil of Fairness
Is children's fair behavior motivated by a desire to be fair —or merely the desire to appear fair? The results of several experiments suggest that as children grow older they become increasingly concerned with appearing fair to others, which may explain some of their increased tendency to behave fairly. Since even young children can radically shift their behavior from fair to unfair based on whether authority figures are aware of their behavior, it might be naive to believe that shrewd adults will be fair without similar oversight. By understanding the limitations of fairness, policymakers can discover how to leverage fairness to increase socially desirable behavior in some circumstances, while limiting its occasional wastefulness. Key concepts include: The experiments documented in this paper investigate children's motivation to appear fair to third parties, an important step forward in understanding how children develop self-presentational concerns. Children modify their behavior in order to improve their reputations with third parties. Children's fair behavior throughout middle childhood is at least partly motivated by wanting to appear fair to others. The research provides empirical support for the notion that people are especially likely to be unfair when there is a lack of knowledgeable oversight and when they can gain materially. Closed for comment; 0 Comments.
- 13 Feb 2012
- Research & Ideas
The Case Against Racial Colorblindness
Research by Harvard Business School's Michael I. Norton and colleagues shows that attempting to overcome prejudice by ignoring race is an ineffective strategy that—in many cases—only serves to perpetuate bias. Closed for comment; 0 Comments.
- 05 Dec 2011
- Research & Ideas
It’s Alive! Business Scholars Turn to Experimental Research
Business researchers are turning increasingly to experiments in the lab and field to unlock the secrets of what motivates CEOs, consumers, and policymakers. Key concepts include: Interest in experimental research may have been ignited by prominent behavioral economist Danny Kahneman, who won the Nobel Prize in Economics in 2002, and by journalist Malcolm Gladwell, author of The Tipping Point and Blink. Researchers use field and lab experiments to better understand the logic of real-world decisions, which sometimes fly in the face of established economic theory. Experimental research can be considered a leg on a three-legged stool that also includes field data and theory. While agreeing to be part of a field experiment can be time-consuming for a company, the results can be invaluable—and more cost-effective than paying a market research firm or a consultant. Closed for comment; 0 Comments.
- 13 Apr 2011
- Working Paper Summaries
The ‘IKEA Effect’: When Labor Leads to Love
Companies increasingly involve customers in the design and assembly of products, from Converse allowing customers to design their own shoes to IKEA asking customers to assemble their own furniture. In this paper researchers Michael I. Norton (Harvard Business School), Daniel Mochon (University of California at San Diego), and Dan Ariely (Duke) use the "IKEA Effect" to explain the increase in valuation we place on products we build ourselves. The researchers discuss the implications of the IKEA Effect for marketing managers and organizations more generally. Key concepts include: Successful assembly of products—no matter how amateurish—leads consumers to value them over and above the value that arises from merely purchasing a product. Labor increases valuation of completed products not just for consumers who profess an interest in "do-it-yourself" projects, but even for those who express a preference for buying preassembled products. Successful completion is an essential component for the link between labor and liking to emerge; participants who were not permitted to finish their creations did not show an increase in willingness-to-pay. The marketing challenge lies in convincing consumers to engage in the kinds of labor that will lead them to value products more highly, especially given their general aversion to such pursuits. The overvaluation that occurs as a result of the IKEA Effect has implications for organizations as a contributor to two key organizational pitfalls: sunk cost effects and the "not invented here" syndrome. Closed for comment; 0 Comments.
- 21 Mar 2011
- Research & Ideas
Are We Thinking Too Little, or Too Much?
In the course of making a decision, managers often err in one of two directions—either overanalyzing a situation or forgoing all the relevant information and simply going with their gut. HBS marketing professor Michael I. Norton discusses the potential pitfalls of thinking too much or thinking too little. Closed for comment; 0 Comments.
- 22 Feb 2011
- Research & Ideas
The Most Important Management Trends of the (Still Young) Twenty-First Century
HBS Dean Nitin Nohria and faculty look backward and forward at the most important business trends of the young twenty-first century. Closed for comment; 0 Comments.
Handshaking Promotes Cooperative Dealmaking
A simple handshake can have large consequences for a negotiation. In this paper the authors suggest that handshakes before negotiations—or the lack thereof—serve as subtle but critical indicators of negotiators' social motives. In particular, handshakes signal willingness to act cooperatively during negotiations. The authors propose and show through experiments that handshakes increase cooperative behaviors at the bargaining table and, as a result, influence outcomes in both integrative and distributive negotiations. Integrative negotiations are those in which parties' interests are neither completely opposed nor completely compatible, allowing negotiators to mutually benefit by making efficient trades. In contrast, distributive or "zero-sum" negotiations—in which the parties' interests are completely opposed—are characterized by a different set of strategies such as appearing firm and even lying about one's interests. Overall, these results contribute to research and scholarship on social motives. The work also has practical implications for the importance of building rapport in negotiation and conflicts more generally. Key concepts include: Simply shaking hands before negotiations can increase cooperation at the bargaining table. The social ritual of shaking hands can have positive effects even in antagonistic settings such as negotiations between parties in conflict. A simple everyday ritual such as a handshake can create positive outcomes not just for individuals, but for parties in conflict. Closed for comment; 0 Comments.