An economic analysis of the Motivation Crowding-out Theory

This paper is concerned with an economic analysis of Frey’s Motivation Crowding-Out Theory, which states that monetary rewards crowd-out intrinsic motivation. Crowding-out effects, conditions as well as implications for economics will be examined in detail by analyzing the highly controversial psychological and economic, mainly human resource, literature. Throughout the paper, the question whether crowding-out effects are of relevance to classical economic theory will be looked at from different point of views. Finally, a conclusion suggests that at this state of information an integration of the concept of crowding-out is not recommendable.