From Darwin to Eternity

Evolutionary moral psychology.

The Simplest Way to Fix Banking: End Bonuses

EU countries are currently considering placing strict limitations on the size of banker bonuses. Is this a good idea? If you value the survival of (Western?) civilization, then the answer in yes. Read More

Really?

Why would these bankers accept losing their huge bonuses if they can just move to a new bank that pays them the same bonuses? They can take their book of business with them.

The EU has no authority to regulate banker's bonuses unless the bank is European but there are many non-EU regulated banks in Europe. The bankers can then still live in their same home and remain in the EU. Only the business will then shift from EU domiciled banks to foreign banks as will a lot of tax revenue.

Why worry about bonuses?

You said: "But if we can eliminate the incentives that motivate so much of this behavior in the first place, why wouldn’t we? That would certainly be a more efficient and preemptive solution."

Agreed, but eliminating bonuses for EU banks just shifts the business to foreign banks within the EU who will still pay bonuses. Your solution does not address the problem that you propose that it will resolve.

We can "eliminate the incentives that motivate so much of this behavior in the first place", so why not do this? Why worry about bonuses instead?

Another reason punishments don't work

Love this article, but there is another reason why eliminating the reward instead of punishing the behavior you don't want is the better strategy. We know from operant conditioning that to extinguish a behavior eliminating the reward is more effective. Punishment is actually counterproductive and tends to strengthen the behavior you are trying to extinguish.

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Michael Price, Ph.D., is a lecturer at the psychology department at Brunel University, West London. He is also the co-director at the Centre for Culture and Evolutionary Psychology.

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