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Vaniver comments on The efficiency of prizes - Less Wrong
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There is also the issue of extrinsic incentives vs intrinsic motivation, however.
Relevant keywords (google scholar): extrinsic motivation intrinsic motivation creativity
I am skeptical about the applicability of those sorts of psych experiments to general life. Sure, it takes someone two minutes instead of one to solve a puzzle when they're stressed out by it. But the sort of problems these prizes are used for are typically problems that take much more than two minutes to think about. If prizes buy you the attention of people, then they can be very worthwhile.