Can rewarding effort really be efficient?
Differences in the value of people’s contributions are due to differences in talent, training, job placement, luck, and effort. If we include an effort component of training in our definition of effort, the only discretionary factor influencing performance is effort, and therefore the only factor we should reward to enhance performance is effort. By definition, neither talent nor luck can be induced by reward.
Rewarding the occupant of a job for the contribution inherent in the job itself does not enhance performance. And provided that training is undertaken at public rather than private expense, no reward is required to induce people to seek training. Not only is rewarding effort consistent with efficiency, but rewarding the combined effects of talent, training incurred at public not private expense, job placement, luck, and effort, is not.
Also, notice that it is one’s work mates that are charged with the task of measuring effort and there is no incentive for one’s work mates to reward “clumsy” or “bungling” effort rather than proficiency. One’s fellow workers have every incentive to reward “effort to improve the success of efforts” since this would rebound to their advantage as well because all workers are collectively responsible for ensuring that the workplace fulfills its commitments they proposed during the planning process.