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(This paper was written in 1986 for publication in the academic jornals but was not accepted for publication -- rather unsurprisingly)


J.J. Ray

University of New South Wales, Australia


Attention is drawn to current work in psychology on "social loafing" and "token economies". Both represent rediscoveries of free- market principles but both offer new possibilities for researching the detailed application of those principles.

As all studies of the subject show, psychologists and sociologists tend to have Left-wing views, with sociologists being the more Leftist. It should therefore be no surprise that the ideas of Adam Smith and his successors appear never to be mentioned in psychological theory. On the face of it, this is an important omission. Economics is one branch of the study of human behavior and many economic theories rely on quite explicit predictions about how people will behave in different choice situations. Concepts such as "utility" are also frankly psychological. One should be able to expect, therefore, that eventually the usefulness of economists' theories of human behavior should make some impact on psychologists -- even if there is some initial resistance. Surely "the truth will out" eventually.

Just this has happened, but not in the form one might have imagined. Instead of taking economic theories and endeavouring to find wider psychological applications for them, psychologists have instead simply "reinvented" capitalistic ideas without appearing even to know that they have done so. There are two major examples of this: "social loafing" theory and "token reinforcement economies".

In "social loafing'' theory (e.g. Harkins & Petty, 1982; Harkins & Jackson, 1985) what psychologists have rediscovered is that people who are working on tasks while part of a group work less hard at it than when they are working on the task as individuals. The fact that a task is a group responsibility seems to make any individual in that group feel less responsible for the success or failure of the group so each individual puts in less effort. Thus a worker in a State-owned factory puts in less effort than a private entrepreneur. Since the need for individual incentive is at the very heart of capitalistic economic theory, this confirmation, under laboratory conditions, that individual incentives are in fact superior must be of some interest. Most interesting of all, however, is the fact that few if any psychologists have come out as supporters of capitalism as a result of their "discovery" in this direction. They certainly do not acknowledge any intellectual debt to Adam Smith and his successors.

The second "discovery" has, if anything, even more profound implications. Psychologists have found that one of the most effective ways to induce pro-social behaviour in the mentally ill and the mentally retarded is to pay them for the desired behavior. In psychiatric hospitals, schemes are set up using plastic tokens that are issued in return for approved behaviors and which can be redeemed at the hospital canteen for things that the patients want -- sweets etc.

Dramatic improvements in behaviour have been noticed where this is done. Even quite long-term and sustained behavioral improvement has been observed. Pro-social behavior learnt under such "monetary'' incentives tends to be continued in other settings outside the original token economy (Hurley & Sovner, 1985; Hogan & Johnson, 1985; Banzett, Liberman, Moore & Marshall, 1984). Again the capitalistic idea of the need for individual incentive is vindicated. Capitalism and the money economy are effective in producing desirable results even among the mentally ill and the retarded! Even most market-oriented economists would scarcely have felt confident in predicting such scope and power for market mechanisms.

Perhaps a feature of particular interest to market theorists, however, is that psychologists have tried a wide variety of token economies in an attempt to get at he optimal token economy for inducing pro-social behavior. Both "pure" and various "mixed" market economies have been tried. What the final verdict will be (on the sort of economy found to be most desirable) is as yet too early to say but the enterprise of psychologists in this direction might well put many economists to shame. Economists have traditionally maintained that the only laboratory in which their theories can be tested is the laboratory of history. Psychologists are however in general very experimentally oriented and it did not occur to them that what they were doing was something that was widely said to be impossible. They therefore went out and did it. In that respect we can perhaps be thankful that psychologists have been so little aware of their intellectual debt to economics. If one is really interested in the truth of market theories, therefore, it would seem that one should be keeping in touch with the "token economy" research at present being reported in the psychology journals.


Banzett, L.K., Liberman, R.P., Moore, J. W. & Marshall, B.D. (1984) Long-term follow-up of the effects of behavior therapy. Hospital & Community Psychiatry. 35, 277-279.

Harkins, S. G, Jackson, J.M. (1985) The role of evaluation in social loafing. Personality and Social Psychology Bulletin

Harkins, S. G., & Petty, R. E., (1982) Effects of task difficulty and task uniqueness on social loafing. J. Personality & Social Psychology 43, 1214 -1229.

Hogan, W.A. & Johnson, D.P. (1985) Elimination of response costs in a token economy program and improvement in behavior of emotionally disturbed youth. Behavior Therapy 16, 87-98.

Hurley, A. D, & Sovner, R. (1985) Behavior modification: III The token economy. Psychiatric aspects of Mental Retardation Reviews 4, 1-4.

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