Neuroeconomics and Public Management

Revising the Fundamentals: Insights of Neuroeconomics for Economic Foundations of Performance-Related Pay in Public Management
Utz Helmuth
Transformations in Business & Economics - Vol. 8, No 1(16), 2009

ABSTRACT. This paper concentrates on recent findings in the upcoming field of neuroeconomics where researchers use new neuroscientific methods to analyze economic behavior. It focuses on the question what public management research can learn from neuroeconomics to improve performance-related pay systems. Among those findings covered are intertemporal choices, fairness concerns and altruistic punishment. The results concerning social behavior are contrasting the neoclassical theory-based recommendations of public choice theory as competition among bureaucracies and performance-related salary. This paper proposes to integrate these findings in the public management theory and to revise established performance-related pay schemes and contracts. Furthermore, it discusses possible problems which could arise with this new approach.