How the Economics of Rewards Relates to Open Source

As I just noticed, this is post #10000000_2, #80_16, or #200_8! (The underscore separates the number (on the left) from the base system (on the right).)
I got the idea for this post from a video embedded in an article on the website The Linuxologist. It deals with how incentives affect people's performance - specifically the incentive of a higher reward for better performance. Follow the jump to read the rest.

The speaker in the video cites studies done by economists at MIT on students in Cambridge, MA. Generally, for strictly mechanical tasks, the quality of the performance was (as intuited) directly proportional to the size of the reward. However, for tasks requiring just basic cognitive functions, the quality of the performance was inversely proportional to the size of the reward - that is, higher rewards led to poorer performance. This means that for tasks even requiring basic creative or logical thinking, rewards (in this case, money) were not the motivating factors that would lead to better performance.
Of course, the researchers, skeptical of this result, thought maybe the rewards themselves were the problem in that the monetary value wasn't enough to motivate the students to work harder. They then went to a place where money is hard to come by: namely, the town of Madurai, IN-TN (the state of Tamil Nadu in India), where the reward amounts were worth much more to the study participants (compared to the students in the Cambridge, MA study). They modified the rewards slightly to reflect salaries earned over certain periods of time (as opposed to strict, concrete amounts). The results were exactly the same as in Cambridge, MA.
The speaker goes on to say that these sorts of results have been replicated in studies the world over, so this split nature of rewards as an incentive has been observed many times. That said, people need to be paid enough to make a living, but after a certain point (with creative tasks), money can become a disincentive to perform better.
The motivating factors then (once money is not the primary motivator (i.e. once one's ability to make a living is covered)) are purpose, autonomy, and mastery.
Autonomy is the reason why people are much more willing to tackle problems on their own that have never been brought up before due to management being too overbearing.
Mastery is the reason why open-source projects are made - people want to display their skills at coding and want everyone to benefit from the fruits of their mastery. Thus, mastery as a motivating factor really refers to the combination of the possibility of gaining mastery over the material, the possibility of tackling challenging problems, and the possibility of making contributions to the field. This is why people pursue hobbies like music, coding, and writing aside from their day jobs.
The speaker then talks about purpose, and how when the motivator of profits overtakes the motivator of purpose, ethics become secondary, and products of poor quality emerge. In companies making high-quality, sophisticated products, a higher purpose (and not the prospect of more money) is what makes the employees, managers, and higher-up executives get up in the morning and come to work.
Together, autonomy, mastery, and purpose (and not money, after a point) are what make people satisfied with working on creative tasks. It is only when doing repetitive, mechanical tasks when the traditional intuitions on rewards as incentives work.
This, of course, is just a summary of the video content. Following this is my take on it.
They say that open source projects are a result of this, but I would like to analyze that some more.
First of all, few open source developers do so as their paid job. They mostly do so during spare time and with contributions from volunteers and such. Hence, money is definitely not a motivating factor.
Do they have autonomy? Of course they do. While the development team may set general goals, the specifics can be set by individual developers, who can also pursue other things like other bug fixes. It's sort of like how the government for a time moved away from giving money to states for very specific programs to giving money to states to fulfill general goals and then giving the states the autonomy to decide how that money should be spent.
Do they have mastery? They should. If they don't get enough downloads (all other things constant), that is a reflection of poor coding ability, so they won't pursue the project. It's a market economy in its essence here. This is why developers at Red Hat pursue projects there so much, while amateur developers making software for themselves usually don't choose to distribute the software to such a wide audience (knowing their limitations in coding).
Do they have a purpose? That's the whole point. The essence of open source software is to be able to acquire, modify, and distribute code freely. These developers do what they do to make existing programs better (or better suit their own needs) or create new programs to fill in voids.
Hence, open source developers often get great satisfaction from pursuing their highly-skilled work.
On the other hand, Microsoft is a bloated company that makes software that (on the whole) doesn't work. The speaker in the video said that when the profit motive becomes more important than the purpose motive, bad products/service (and poor ethics) emerge. How is this the case with Microsoft?
Do the developers have autonomy? Not usually. The higher-ups (who may or may not have experience with actual programming) are the ones calling the shots, and until very recently, Microsoft's decisions with regard to features often bore no resemblance to the features customers wanted. In any case, the developers are being told exactly what to do with no freedom to pursue related activities (that could most likely make existing software much better).
Do the developers have mastery? They had better, otherwise they probably wouldn't be hired by Microsoft (for all of my beefs against that company, I will say that it takes a lot of skill and experience to be hired by Microsoft).
Do the developers have a purpose? No. At least, not one that overrides the profit motive. Hence, Microsoft is content to be rolling in cash and putting out mediocre products that it knows the public will have to accept.
Moving away from software, I'd like to share my own experience with this. I was an unpaid research intern last summer.
Did I have autonomy? Yes, though not at first (because my mentor needed to lay out expectations). I was free to explore related topics and present them to my mentor, simply because my mentor's goals weren't exactly set in stone.
Did I have mastery? As much as a high-schooler could have mastery over basic physics and math concepts. I did read the important parts (that my mentor suggested that I read) from my mentor's textbooks for a better background, and this really helped with my investigations later on.
Did I have a purpose? Well, if I didn't, then considering that I wasn't being paid, I wouldn't be working there, so clearly I did. I wanted to not only improve my physics and math knowledge and skills but apply them to issues that have real relevance in the real world (white roofing and melting glaciers).
If I was in it for the money, I would be flipping burgers at $fastfoodchain. This is what I tell my friends who ask why I didn't take a job that paid me at least something. That said, I wasn't being paid enough to make money a non-issue - I would have still like to have been paid minimum wage (at least). However, I am very pleased with the job I did and the material I learned while there, and the lack of pay doesn't affect my impression of the experience.
As I think about this more, it makes so much more sense. This also explains how the independent musicians I wrote about in earlier posts are happy with their livelihoods despite not having multimillion dollar contracts with major record labels - they know they are good, they like the autonomy of being indie artists, and their purpose (more than money) is to make good music, so to make the money they need to make a good living, they distribute the music for free while selling actually scarce goods (like T-shirts).