How to control the world, the basics

I just finished Tyler Cowen's new book Discover your inner economist, and want to recommend Chapter two, "How to control the world, the basics" as one of the best expositions of how and why incentives work. It is a nuanced, funny, and engaging read on why your kids dont respond to monetary incentives (its not cool to work for your parents) and why parking tickets seem to deter violators from Norway or Sweden, but not from Kuwait, Egypt, or Chad (culture of corruption). On the other hand, people from Norway and Sweden have extraordinarily high rates of job absenteeism.

Tyler, who also runs the most popoular economics blog, comes up with four principles for using incentive pay:

1. Offer monetary rewards when performance at a task is highly responsive to extra effort.
   
2. Offer monetary rewards when intrinsic motivation is weak.
   
3. Pay monetary rewards when receiving money for a task produces social approval.
4. High rewards tend to make individuals "choke."
   

In other words use money as a reward "when effort matters, there is little intrinsic desire to do the job, and money boosts the recipient's social status." But beware stress.