Ellingsen, T. & Johannesson, M. (2007). Paying respect. Journal of Economic Perspectives, 21 (4), 135-149.

Why do people work? Economic theory generally, and the principal-agent model specifically, emphasize the role of material incentives. But many academics, for example, work diligently year after year for a nearly fixed real salary, continuing to work hard as they approach retirement, although financial incentives are usually absent. The authors argue that while economists have been right to focus on incentives, they have been wrong to focus so exclusively on material incentives. While workers appreciate monetary rewards, they also get utility from what (they believe that) others think about them. A body of evidence is laid out that, taken as a whole, makes a strong case that respect matters in the

workplace, above and beyond material rewards. The authors discuss evidence that workers respond to attention, symbolic rewards, and trust and even that material incentives in some cases lead to less effort. Finally, it is argued that many of these observations can be captured in a standard principal-agent model, once the principals and the agents are assumed to care about respect or esteem as well as money.