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Psychic income?

Human Values Stock Exchange: Investing in shares in a value market of (Part #6)

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One useful conventional lead is offered by understandings from the business world of "psychic income" -- the subjective value of nonmonetary satisfaction gained from an activity, possibly an "implicit revenue" associated with an economic transaction. This is income in a non-monetary form, gratifying psychological and emotional needs. In the business world, power, prestige, recognition, and fame are all considered to be forms of psychic income. From a marketing perspective, it relates to the intangible benefits above and beyond the utilitarian value derived from a conventional purchase -- including the improvement in a consumer's self image as a result of purchasing certain highly desirable products.

Psychic income" refers to what motivates people other than money, such as respect, recognition, challenge, love of the work itself, opportunity for autonomy, location in a particular community, name of the prestigious institution for a resume, technologies that make work less drudgery, flexible hours, etc. therefore, the full income is the combination of wages and psychic income of the working conditions.

Colin F. Camerer and Ulrike Malmendier (Behavioral Organizational Economics, 2004) analyze how behavioral economics can be applied to organizations, and how it can be enriched by thinking about the economic questions associated with economic organization. For the authors, behavioral economics modifies the standard economic model to account for psychophysical properties of preference and judgment, which create limits on rational calculation, willpower and greed. Their modified economics theory aims at providing parsimonious and psychologically sound explanations for empirical findings that the standard model has a tough time explaining. They stress, for example, that "psychic income matters", and may be tied to psychological factors like perceived appreciation:

The basic risk-incentive model divides the worker's world into efforts they dislike, and rewards they like. It is convenient to talk about wages as rewards because they are easily measured, and don't satiate. But people are motivated by many other types of non-pecuniary 'psychic income' as well.... Psychologists' synonym for psychic income is 'intrinsic motivation' -- the satisfaction a worker gets from work for its own sake. An interesting phenomenon documented in psychology is the possibility that extrinsic incentives like money can 'crowd out' or extinguish intrinsic motivation.

Christopher J Coyne and Peter T Leeson (How do Rulers Choose? Dual domains of discretion in political decision making) offer an extensive discussion, with evidence, of the role of psychic income in political decision-making (points also echoed in another paper by Benjamin Powell and Christopher J Coyne, Do Pessimistic Assumptions About Human Behavior Justify Government? Global Prosperity Initiative, Working Paper 19). They argue:

The nature of psychic income is such that the outside observer is unable to assign, a priori, specific characteristics that constitute psychic income for the ruler. The psychic component of income is solely in the mind of the actor and hence cannot be measured. Some rulers may place value on being altruistic and truly attempt to serve the interests of their constituents... Others may value their reputation and legacy and act in manner to promote and accomplish these goals. It is most likely due the difficulty in quantifying psychic income that the notion has largely been excluded from analyses of the actions of rulers. Despite difficulties in quantification, we see a plethora of examples of actions taken by rulers that cannot be explained by the standard rent-seeking models.

Milan Zafirovski (Human Rational Behavior and Economic Rationality, Electronic Journal of Sociology, 2003) argues that the rational behavior of human agents is far from being invariably utility- and profit-optimizing, and thus cannot be automatically reduced to economic rationality. His main argument is that behavior can be rational not only on economic grounds but also on non-economic ones. Hence human behavior can be non-rational in economic and yet rational in extra-economic terms, i.e. economically irrational and non-economically rational. He points out:

One can argue... that while measuring psychic-income concepts like happiness is not as clear as the measurement of purely economic utility, they also can be measured. Arguably, though happiness or psychic income is relative and cannot be as precisely quantified as money income, it might be to a degree and in the same way concepts like social prestige can be numerically measured. Researchers in sociology and social psychology have been measuring prestige for some time thus making this concept at least an ordinal-level variable, though it is a subjective measure based on group judgments.... For psychic income simply does not add up to money income -- and often vice versa -- and to that extent to utility in any sensible sense.... As egoist's utility or money income seems of a qualitative different kind to that of the altruist or psychic income, it is highly questionable to subsume under the same category, i.e., utility optimization, even satisficing, what are essentially different types of behavior, such as egoism and altruism, status and wealth, political power and profit, and the like. In addition, these types of income are quantitatively incomparable and incommensurable...

Zafirovski is however careful in pointing out the fallacy of treating psychic income (especially in the light of its acknowledged importance in behaviour) merely as an extension of economic thinking:

...for psychological, ideal and other cultural phenomena are simply not what economists term income, profit, capital, and the like. In this sense, the term psychic income appears as an oxymoron reflecting the above fallacy, or at best an easy analogy and mere metaphor; this mutatis mutandis applies to similar pseudo-economic terms, including political profit, income, capital, exchange, or markets, etc.

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