C.R.E.A.M.

by / August 6, 2012

CASH for grades

Although direct financial incentives are prevalent in nearly all walks of life, they are rarely used in our education system. With educational underachievement being such a problem in many communities the question is worth asking: Can we literally bribe students to get better grades?

As a general principle we expect incentives to work only if people have the time to adjust their behaviour. If you went up to a 100m sprinter right before a race and offered them $100,000 to beat their personal best time you wouldn’t expect it to have much effect; the pressure on the sprinter to give it their all during the race is already intense enough to maximise effort. But you might have more success if you made that offer 2 months before the race.

Surprisingly standardised test scores don’t work like that. A 2011 study found that announcing small payoffs for high test scores right before a standardised test had a modest positive impact on results. This suggests that students don’t maximise their effort while sitting in a test without financial incentive, an interesting finding given that there is little opportunity cost to trying your hardest once you get in the room.

Indeed ‘long term’ incentives might even be less effective, young people are more likely to seek short term gratification (or in economics have high ‘discount rates’). If there is a long delay between the test and the payment of a monetary bonus, it will have almost no effect.

Studies have also shown that the incentive can be magnified when it is framed as a loss rather than a gain. Take two scenarios: In scenario 1 I promise you $200 if you get an A+ in your next test. In scenario 2 I give you $200, but say you will have to repay the money in full unless you get an A+. In theory there is no difference between the two, but the framing in scenario 2 gets nearly double the effect on student performance. This is indicative of the common ‘loss aversion’ bias that many people are prone to. It’s not unique to kids either; similar results have been shown in studies which measured the effect of performance pay for teachers.

What about young children? Incentives work for them too, but in slightly different ways. Cash rewards were found to be far more effective when targeted at educational ‘inputs’ (i.e. doing homework, reading books, class attendance) than ‘outputs’ such as grades. This is understandable; young children haven’t had the time to master the art of test taking, so it’s more fruitful to nanny them along the way to educational success. Young children also respond well to non-financial incentives such as trophies and awards, which act as status symbols and boost self-image.

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