Note to self: Where morale is high – for instance in a workplace or a community – at least some regulations – for instance dome designed to make sure people don’t cheat or free ride are unnecessary as very few people do this and when they do they are detected and sanctioned. Introducing regulation to outlaw free riding or cheating will sometimes offend people doing the right thing and, in offending them, undermine their own morale and preparedness to ‘do the right thing’. Regulation can thus crowd out very good behaviour. Yet the bad behaviour that might follow may well call forth public support for the regulation. Once things have broken down like this – regulation may indeed be better than the alternative of no regulation.
As we know from lots of experiments – or just from thinking about a situation in which you thought the dinner party a friend invited you to that you offered them a tip – extrinsic and intrinsic motivation have an uneasy and not very well understood relationship to one another.
This is all rather crudely put – I apologise – this is genuinely a note to myself so I can look this stuff up later. But in the meantime, the point of this post is to point to similar conclusions of an NBER cross-country study Regulation and Distrust. The issues here are sufficiently subtle that I’m not too sure a cross country study is the best way to consider the issues, but given the value accorded to such things in the profession, and given that the results turn up in cross country studies, I guess that’s pretty interesting and also perhaps persuasive.
In a cross-section of countries, government regulation is strongly negatively correlated with social capital. We document this correlation, and present a model explaining it. In the model, distrust creates public demand for regulation, while regulation in turn discourages social capital accumulation, leading to multiple equilibria. A key implication of the model is that individuals in low trust countries want more government intervention even though the government is corrupt. We test this and other implications of the model using country- and individual-level data on social capital and beliefs about governmentâs role, as well as on changes in beliefs and in trust during the transition from socialism.
Anyway, I’ve not yet read the paper, and won’t till I do some work on regulation again