Incentives, Socialization, and Civic Preferences

preferences are updated under the influence of natural selection or some other decentralized process, or using models of cultural evolution in which parents inculcate values in their offspring. But preference change is sometimes an objective of deliberate policy, whether by religious orders, political parties, firms, or states. To study this process of deliberate preference manipulation, we consider a far-sighted social planner seeking to use material incentives to induce citizens to adopt what we term “civic preferences” that will motivate them to contribute unconditionally to a public good. A subsidy to contributors, for example, will encourage parents to raise their children to have civic preferences if, as is standard in cultural evolution models, the preference updating process favors higher payoff types. However, there is a second indirect and possibly offsetting effect that occurs if those with civic preferences are socially esteemed and contributing is a noisy signal of one’s preferences. By inducing some self-interested types to contribute to the public good, the subsidy will diminish the social esteem value of really having civic preferences and this will lead parents to place a lesser weight on inculcating civic preferences in their offspring than they would in the absence of incentives. We characterize optimal incentives that would be selected by the planner who is cognizant of this cultural crowding-out process, and identify conditions under which greater use of incentives will be called for than would be the case of the absence of this adverse indirect effect on cultural transmission (rather than the opposite as would be expected).