Sunday, August 17, 2008

Busting Nepotism

Tim Harford offers an entertaining analysis of how to create incentives to get the right organization in place to do something as simple as pick fruit. He emphasizes rightly that "Incentives matter". But the story also shows that information matters!

They proposed a “tournament” scheme in which workers were allowed to sort themselves into teams. Initially, friends tended to group themselves together, but as the economists began to publish league tables, and then hand out prizes to the most productive teams, that changed. Again, workers prioritised money over social ties, abandoning groups of friends to ally themselves with the most productive co-workers who would accept them. In practice that meant that the fastest workers clustered together, and again, productivity soared – by yet another 20 per cent.


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