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Markets are different institutions than organizations are; firstly in that they theoretically have reversible positions, i.e. a buyer can become a seller, and secondly in that a market is based around competition (Ménard 1995). It is clearly a more self-organizing, organic form of institution; but how to define it remains difficult. A modern interpretation of Polanyi’s study of economy and institutions define the economy as ‘the interaction between man and his social environment’ and point out that not all mechanisms of exchange are markets, especially when lacking coherency, but that markets are indeed institutional constructions (Maucourant and Plociniczak 2013). As will be seen in later chapters, the exchange of recyclables in Taiwan indeed seems to be coherent and self-organizing, with many parties being both buyers and sellers.
2.2 Incentives
Incentive theory originates from behavioral and cognitive economics, and focuses on external factors influencing behavior. Many different forms of incentives have over the years been identified and studied extensively, across different fields, ranging in their definition from including non-material incentives, (Tang and Tang 2014; Frey and Jegen 2001; Wilson 1973) to exclusively material (mostly financial) incentives, such as Lyer et al. (2007) The more broad interpretation of the term is taken in this thesis.
Tang and Tang (2014) focus on how context affects incentives, to understand the concept of collaborative governance, and take incentives as a rather broad concept, in line with Wilson (1973). They apply it within a setting of land conservation to understand the dynamics between different approaches to governance and different incentives. As such, they make an important step toward a framework towards, as they put it, understanding Alexis de Tocqueville’s (1945) motto “self-interest rightly understood”, something that is quite crucial for proper governance.
Tang and Tang (2014) see three different approaches to governance; the first and most obvious being the regulatory one, which in case of land ownership involves using traditional government controls to prohibit certain uses of land or expropriate with compensation. This approach is mentioned to usually not be on friendly footing or sometimes possibly unethical, however, and often has legal, political and financial
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obstacles. The second one relies on the market and placement of incentives, and carries the descriptive title “the voluntary approach”. Whereas this often is a more friendly approach, the final control rests with the sellers, and one landowner can block plans while the rest is willing to comply. A third identified approach accesses toolkits from either of these two where fitting, and is thus titled “the collaborative approach”.
Whereas the term material incentives is most often measurable in monetary terms, non-material incentives entail more difficult-to-measure motivators, subsequently split up by Wilson (1973) in purpose-drivers, such as ideology, pride, competence, self-determination, and solidary-drivers, such as relatedness, status and identity. (Tang and Tang 2014) Purpose-drivers are related to a feeling of satisfaction resulting from working towards a certain purpose, whereas solidary drivers relate to social benefits that can be either collective or individual. (Wilson 1973)
Often, more than one incentive is in place, and rather than simply acting in a sum, they interact. (Tang and Tang 2014) Interaction effects between the abovementioned incentives can be synergetic, crowding out, hierarchical exclusion or preemptive.
Synergetic refers to effective reinforcement of incentives, thus aligning individuals towards a common goal. Crowding out is an effect in which, whereas incentives may be mutually reinforcing at first, one takes a dominant role and washes out the effects of the others. Hierarchical exclusion refers to placement of incentives in a hierarchy, where actors are not concerned by the less fundamental incentives until the more fundamental ones are satisfied first. Preemptive effects refer to early incentives ingraining themselves, and affecting actors’ stance towards any future incentives.
Analyses of incentive dynamics as such attempts to capture the context of incentives, the subsequent interpretation of these incentives and finally the resulting effectiveness in terms of behavior. As a result, it provides an effective tool for local policy analyses, but also for larger level, more structural analyses as done in this thesis. We will here attempt to capture the incentive dynamics that affect the Tzu Chi Foundation, and resulting impacts on national recycling success. As a means of analysis, incentive dynamics requires qualitative research to interpret the surrounding and interpretation of an incentive.
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However, whereas the differences, advantages and disadvantages are not always fully agreed upon in the socio-psychological and management fields, studies show general differences between decision-making and incentive effects for example when working in groups or as individuals (e.g. Michaelsen et al. 1989; Kameda et al. 1990; Garbers and Konradt 2013). The brief analysis of institutional theory earlier made clear that considering organizations in this context would require an abstraction; however, it is quite expectable that for many analyses involving incentive theory such an abstraction will only be helpful towards building a full understanding of the situation if applied carefully and with attention to individual members’ incentives.
In the context of an NGO operating in the recycling sector, non-material incentives are important sorts of incentive to explore further; volunteers working for an NGO have, as opposed to private sector individuals, no direct financial incentives. Frey and Jegen (2002) explore the dynamics between external interventions and intrinsic incentives, combining economic and psychological perspectives in what they call “Motivation Crowding Theory”. They study the earlier-mentioned crowding out effects and it’s opposite, crowding in effects, in particular, and point out how the former may undermine traditional understandings of the laws of economics. “Crowding-in” overlaps with what Tang and Tang (2014) term synergy, the former of which refers to material incentives strengthen non-material incentives.
Whereas crowding-in is an effect that is in line with general assumptions rational actors maximizing their outcome, crowding-out further describes how an external incentive may undermine an actor’s self-determination or self-confidence and as such reduce output or performance. On a market-level, the level of study for economists, this means that supply is reduced to below its original levels. Crowding effects thus play at a cross-section between psychology and economy. A change in motivation along a polar line running from intrinsic to extrinsic can be explained by either a) a change in preferences or b) a change in the perceived nature of the task, the task-environment or self-perception. As such, self-motivation is reduced by outside intervention (i.e. either rewards or punishments) and output or success is reduced; however, external interventions may also strengthen intrinsic motivation, which results in the crowding-in effects.
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After outlining this theory, the authors continue to point out empirical evidence in the form of other studies, placing these in context of the theory. An example which is specifically important when discussing an NGO is a study by Freeman (1999). Freeman uncovered evidence that payment for volunteering work significantly reduces output, even so much that the amount of time individuals want to work more when rewarded does not make up for it. This would suggest that Tzu Chi members are likely to work more than when they would be extrinsically rewarded for their work.
Crowding theory, in a market where an NGO is active as the Taiwanese recycling sector is, may be a very strong explanatory theory. With their article “Motivation Crowding Theory” Frey and Jegen (2002) do not only outline in detail the mechanics of the theory, but also do they provide a very convincing set of evidence to prove these mechanics.
Moreover, it is an example of how a psychological theory, playing at the individual level, can quite easily be transferred to a market-wide environment involving a large set of individuals.
General incentives or motivations for volunteering behavior are analyzed and compared from literature by Bussell and Forbes (2001). They make the assertion that much of volunteering work is done out of altruism. However, as studied by Mueller (Bussell and Forbes 2001), individuals also do volunteering for egoistic motives such as selective incentives (i.e. social status or contact), having families in the subject group of volunteering, and improvement of ‘human capital’ (knowledge and experience). The second reason is perhaps less relevant to recycling work; the first and the last may be more relevant to Tzu Chi’s volunteers.
They gather from the literature too that volunteering often is a means of expressing values. (Omoto and Snyder 1993; Bussell and Forbes 2001). As such, religious association creates a greater likelihood to volunteer, as it often allows people to express religious values. (Wymer 1997; Bussell and Forbes 2001) This value-expressive function is as such directly related to the ideological incentive. With the nature of Tzu Chi and its strong Buddhist value system, it is clear upfront that this plays a big role for many of the Taiwanese members to get involved in voluntary recycling work.
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