Correlation & Causality: Why Money Won’t Drive an Economist, Exactly

In 1992, the beautiful notion that a bunch of disparate countries could get together and form an Economic Union came to pass: the Maastricht Treaty. Like a giddy young couple (well, this would be technically a plural marriage, but anyways…), the countries went to the altar, ’til death do they part.

Because, as is widely touted now, there was no exit clause.

This on its own is enough to give me pause: how, in this litigious, finance-driven society, can ANYONE go to the altar and not have a pre-nup? (No, I didn’t last time — there was nothing to ‘nup, to quote Kirstie Alley — but I will next time).  I get that it’s extremely unattractive to go into a marriage acknowledging the prospect of divorce, but the odds are not in your favor for success. (Nor are they in your favor for combined economies — see “Austria-Hungarian Empire”.)

Lack of forethought aside, someone has come up with a way to arrive at the solution: Simon Wolfson has created a $400k ($250 pounds sterling, 300 Euro) prize to the first person (likely Economist) to come up with a successful, practical way to exit the Euro. (He has a nifty title in addition to the money: Baron Wolfson of Aspley Guise). It’s the second largest economics prize in the world, behind the Nobel.

And here’s where things get interesting: if you read Drive by Dan Pink (or check out the RSA Animate if you’re averse to reading too much), you’ll know that heuristic tasks/jobs cannot, beyond a sustainable living salary, be rewarded via income.  That is to say, if you take someone and you give them an algorithmic task — follow process “A”, exactly — then you can monetarily incentivize them. If their task requires innovation, or creative thinking, though, a monetary incentive will backfire: their solution will be less creative and delivered under greater duress (and likely late).

So why offer a large monetary reward for what is absolutely certain to be an incredibly heuristic task? Clearly they will not be incentivized by the cash.

Best answer? Because they are incentivized by recognition — and this prize is, as stated, second only to the Nobel (one could argue you may win BOTH if you figure out how to do it elegantly). The money itself buys the recognition from people who would otherwise not ordinarily care *who* solved the problem. Think about it: if, some six months from now, someone in a government building figured out how to make this process work, you won’t care — if there’s no prize. The very existence of the prize, by virtue of its sum, is what drives the recognition, and in turn drives the Economist, or Economists, that figure this out.

Here’s hoping it works.

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