For a mom or a dad, every day is filled with threats and cajoling. We whisper, shout, sigh. If you finish your homework, you can watch TV for half an hour. Please, this is the third time I ask you to stop bouncing that ball off the wall. One more and I will take it away for the rest of the week! STOP! Gone forever!
Like most moms and dads, I was properly schooled on the benefits of providing positive incentives. That rewarding is better than punishing. That praising is better than criticizing; that a trophy is always in order for just showing up at the tournament; that bribes work; that the promise of a new skateboard at the end of the semester will improve her grades.
Economists know better. A new paper by Stephen Levitt and others show that our grandparents might have been right after all.
A long line of research on behavioral economics has established the importance of factors that are typically absent from the standard economic framework: reference dependent preferences, hyperbolic preferences, and the value placed on non-financial rewards. To date, these insights have had little impact on the way the educational system operates. Through a series of field experiments involving thousands of primary and secondary school students, we demonstrate the power of behavioral economics to influence educational performance. Several insights emerge. First, we find that incentives framed as losses have more robust effects than comparable incentives framed as gains. Second, we find that non-financial incentives are considerably more cost-effective than financial incentives for younger students, but were not effective with older students. Finally, and perhaps most importantly, consistent with hyperbolic discounting, all motivating power of the incentives vanishes when rewards are handed out with a delay. Since the rewards to educational investment virtually always come with a delay, our results suggest that the current set of incentives may lead to underinvestment. For policymakers, our findings imply that in the absence of immediate incentives, many students put forth low effort on standardized tests, which may create biases in measures of student ability, teacher value added, school quality, and achievement gaps.
And next time you threaten your kids that Santa will bring only coal, remember that they have hyperbolic discounting.
Move over Dr. Spock.