In this chapter I create a straw man with real bones and then produce a bonfire that disfigures him but does not wholly destroy him. The straw man is created in the first section by spelling out the full economic implications of hidden costs and intrinsic motivation; he is a horrid figure. Even in his charred condition he may be considered to be the modern version of the “spectre” that Marx thought he saw haunting Europe. The bonfire is represented by an item-by-item undermining of the force of the theory of hidden costs. We start by examining the difference between pay as information, which does not incur hidden costs, and pay interpreted as control, which does. We then look at some quite powerful self-rewards, other than desire for self-determination, that motivate work without either extrinsic rewards or hidden costs: for example, desire for excellence and desire to deal fairly. Unlike the situations where the intrinsic motivation is the desire for self-determination, when persons with these motives receive their pay, their work motives are not undermined. This section on self-rewards is followed by an examination of the role of choice in voluntarily work, an inquiry regarding just how much the desire for intrinsic rewards informs work motivation, and an exploration of other situations where pay is welcomed without producing a sense of being controlled.

The market costs of hidden costs

Some astonishing market implications follow from the idea that money rewards reduce enterprise in the free enterprise economy.