The debate around the weight of intrinsic motivation within overall incentives has been crystallized in the debate led by Le Grand about whether public service workers are ―knaves or knights‖ (Le Grand 2003). Le Grand argues that post-war public administration theory in the UK (and in Europe more generally) saw public servants as public-spirited altruists, a misleading interpretation of reality which was recognized in, although not adequately redressed by, the 1980s introduction of various New Public Management reforms.

On the opposing side of the argument, (Pink 2009) has developed the critique of monetary and other extrinsic incentives into a broader theory, hypothesizing that they are both counterproductive, as they frequently undermine intrinsic incentives, and unnecessary, as intrinsic incentives can be harnessed and used to maximize individual productivity. His theory suggests that tasks can be constructed to: (i) maximize an individual‘s sense of _autonomy_ (drawing inter alia on the ―self determination theory‖ expounded in the overview paper by (Ryan and Deci 2000) and the cross-country attitude survey undertaken by (Chirkov, Ryan, et al. 2003)); (ii) _mastery_ (continuous incremental learning and improvements rather than distant targets citing inter alia (Sauermann and Cohen 2008) who use data on over 11,000 industrial scientists and engineers to show that intrinsic motives, particularly the desire for intellectual challenge, appear to benefit innovation more than extrinsic motives such as pay); and (iii) _purpose_ (drawing inter alia on (Niemiec, Ryan, et al. 2009) who show from a follow up study of 246 students who graduated from two US colleges that those who met intrinsic aspirations for personal growth, close relationships, community involvement, and physical health had better scores for psychological satisfaction and health than those who pursued attainment of the extrinsic aspirations for money, fame, and image.

Another psychological argument, known as the ―Yerkes-Dodson law‖, highlights the phenomenon of ―choking under pressure‖ (Ariely, Gneezy, et al. 2009). If individual salary is subject to high-stakes pressure, individuals experience increased arousal and shift from automatic to controlled behavior, a narrowing of attention and a pre-occupation with the reward, all lessening the chances of success. The argument is that performance has an ―inverse U‖ relationship with the level of the incentive payment, with performance improving at low and moderate levels of incentive payments as compared to no payments, but then being worse at very high levels of payment compared to moderate, low, or even no payments.

Lastly, behavioral economists have identified the possibility of satisficing instead of maximizing behavior. Employees might exert effort until a certain minimum level of reward is reached and then substitute additional labor supply for increased leisure or idle time. A study of New York cab drivers identified the prevalence of satisficing behavior and questions the effectiveness of performance pay schemes, if the satisficing threshold is hit quickly (Camerer, Babcock, et al. 1997).

The proponents of ―self-determination theory‖ clearly have a strong and intuitively attractive point to make, but it is not evident that the case for intrinsic incentives overwhelms consideration of extrinsic incentives. Three areas of uncertainty hang over conclusions in this area. First, autonomy, mastery and purpose are more feasible in some tasks than in others. Second, intrinsic motivation can take two forms — being motivated by the inherent nature of the job or being motivated to earn the respect of one‘s peers — and group-based performance schemes, to the extent that they encourage teamwork, could increase intrinsic motivation. Finally, the theory is largely addressing the moral hazard problem inherent in principal-agent relationships, suggesting that staff can sense that they are being treated instrumentally through the use of extrinsic incentives and so will be motivated to cheat. There are different implications for the self-selection/sorting argument if the general population can be divided between predominantly intrinsically and extrinsically motivated people, since under those circumstances an explicit system of performance pay will attract extrinsically motivated applicants to the civil service.

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