Incentives Matter

Individuals’ actions are driven almost entirely by the reward, either immediate or long term, that is received from his or her action. Many studies in many different fields demonstrate this seemingly simple maxim. Sociologists and psychologists study its effect on human behavior; economists study its effect on markets and resource use. That incentives matter is nearly unquestionable. From an economic perspective, removing incentives decreases efficiency of business and society and discourages hard work. Again, many examples abound in the Soviet economies of the twentieth century and the state-run economies today. Incentives matter.

Recently while reading Charles Wheelan’s (@CharlesWheelan) book, Naked Economics: Undressing the Dismal Science, Wheelan reinforced the importance of incentives in a very important way for me as a teacher:

“Meanwhile, American public education operates a lot more like North Korea than Silicon Valley… The pay of teachers is not liked in any way to performance; teachers’ unions have consistently opposed any kind of merit pay. Instead, salaries in nearly every public school district in the country are determined by a rigid formula based on experience and years of schooling, factors that researchers have shown to be generally unrelated to performance in the classroom. This uniform pay scale creates a set of incentives that economists refer to as adverse selection. Since the most talented teachers are also likely to be good at other professions, they have a strong incentive to leave education for jobs in which pay is more closely linked to productivity. For the least talented, the incentives are just the opposite… Any system that pays all teachers the same provides a strong incentive for the most talented among them to look for work elsewhere.”

Wheelan has written about teacher pay and incentives in more detail in his 2000 article for The Economist.

Problem #1– Teacher pay rewards all teachers in similar ways, not at all related to how well teachers do their job. What metrics, other than test scores, could be used to measure and incentivize good teaching?

Another particular incentives-related problem also bothers me. Students receive a fully-subsidized public education K-12, but a free education alone is not enough to bring students to school. States compel students to attend, or else families are fined. Clearly student incentives are not working well either, or else students would attend willingly every day.

Problem #2- What incentivizes a student to come to school consistently and try his or her best? The long-term incentives are great, related to better college and career opportunities, but what keeps students performing their best every day?

A lack of teacher incentives (as producers) means a lower quality product is produced for the market. No choice among services means student (as consumers) must consume a lower quality product with no short-term incentives. Both issues, among many others, produce less than perfect options all while society generally agrees with the importance of public education and spends millions every year to fund this system.

What incentives could reasonably improve the system, from either a producer or consumer experience? I pose this question to my high school IB Economics students. Their thoughts, in relative anonymity, will be posted as part of this blog. I would love to read your comments below, too. I am certain they will provide an engaging start conversation for my students to follow.

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26 thoughts on “Incentives Matter

  1. Donald & Hillary January 26, 2016 / 10:05 am

    Write your opinions in the comment section to this post, answering either Q1 or Q2. Make sure you DO NOT write your full name– either initials or just your first name. Email address is not required either.

  2. Anonymous January 28, 2016 / 10:17 am

    Dylan: An incentive to add in the education system is to pay teachers based on their worth and how well they do their jobs.

    • Anonymous January 28, 2016 / 10:24 am

      Sweden and India: Using bell curve grades creates an incentive for students to compete against each other to achieve higher grades. Furthermore, preferred class scheduling for students with higher grades for the upcoming year is another method to create incentives for students.

      • Justin Staub January 28, 2016 / 10:44 am

        I like the preferred scheduling slots for student– maybe not just courses but when the courses occur. Wouldn’t it be cool if you got to pick your schedule too!

  3. Jeb! and Ted January 28, 2016 / 10:19 am

    One metric that could be used on determining teacher pay is student feedback. Student satisfaction and learning experience is ultimately the most important thing a teacher can do correctly.

    • Justin Staub January 28, 2016 / 10:45 am

      Student feedback is certainly a BIG component that is very much missing from teacher evaluations. In my opinion, it should not be the only metric, but one of many.

  4. jonreid1999 January 28, 2016 / 10:19 am

    Jon Reid: An incentive for good teaching would be an evaluation of the teacher periodically throughout the year. The teacher can be scored from 1-10 on a scale of set critique, and based on their evaluation score they will get a bonus and a potential increase in salary.

    • Anonymous January 28, 2016 / 10:24 am

      Victor: The only problem with this would be potential bias from those instituting the exams and the teachers which can result in damaged relationships within the workplace.

  5. Anonymous January 28, 2016 / 10:21 am

    Administrators could sit in on some classes and review teacher’s performance based on their teaching style. If administrators adjusted teacher’s pay based on their performance review, teacher’s would be incentivized to teach better compared to the administrator’s standard.

  6. Dr. and Mrs. Ben Carson January 28, 2016 / 10:22 am

    Q1: Undercover operatives disguised as students sit-in on classes by the teacher, grading their performance over time with objective measurements. Their performance in comparison to other teachers at the school and across the state/country will then be used to set their pay. This would be repeated every 1 or 2 years so teachers don’t stop trying when their tenure increases.

  7. James and Ryan January 28, 2016 / 10:23 am

    Don’t make it illegal not to go to school, and then pay teachers based off of standardized test scores. This way, it makes it fair to teachers as they will only be teaching kids who want to learn, so their teaching skills won’t be skewed by kids who do not pay attention or don’t care about the class. Their ability to get students to learn will be demonstrated by the test scores without outliers, so it would be a fair way of judging a teacher’s ability and thus deciding teacher’s pay.

    • Justin Staub January 28, 2016 / 10:47 am

      I really wish school weren’t compulsory. Teachers would be required to do a better job if students were allowed to miss school.

  8. JaKarr and Ish January 28, 2016 / 10:24 am

    A way to evaluate teachers to properly incentivize them is to base their incentive off the success of their students in their future due to previous teaching.

  9. Hack Jollis January 28, 2016 / 10:25 am

    Response to Problem # 2

    To incentivize students to come to school consistently and to perform at an optimal level the schools should provide goods that are desirable for free.

  10. Carly Fiorina January 28, 2016 / 10:26 am

    Teachers could be given incentive by being offered more public money (so, compensation) for materials that they want or need in the classroom, in order to encourage more innovative and enthusiastic teaching.

    • Justin Staub January 28, 2016 / 10:48 am

      Maybe a new HP laptop—? I like this idea. Not bonuses per se, but additional money for classroom expenses. Good thought.

  11. Anonymous January 28, 2016 / 10:26 am

    Travis: The government could make school not mandatory. This would result in less overall attendance (and lots of other things that are hard to predict) but would mean that the students who do go to school actually want to be there. Since all the students in school would want to be there then classrooms would be less disruptive and easier to teach in.

  12. Anonymous January 28, 2016 / 10:28 am

    The government could make school not mandatory. This would result in less overall attendance (and lots of other things that are hard to predict) but would mean that the students who do go to school actually want to be there. Since all the students in school would want to be there then classrooms would be less disruptive and easier to teach in.

  13. Serry Jeinfield January 28, 2016 / 10:28 am

    Perhaps devise a system that records total student attendances and once a cumulative amount has been reached, a structured event that is actually entertaining (potentially chosen by the students) is hosted during or after school hours. Such a route may encourage more consistent attendance records as students often see school as simply another social function instead of a place of learning. Meanwhile students could then be incentivized to actually try harder in school if a system is put in place in which higher scoring students are given additional benefits, such as choosing classes before less motivated students, or gaining the freedom to leave classes and work in different parts of the building throughout the day.

  14. Anonymous January 28, 2016 / 10:30 am

    Maanasa: Competition between students incentivizes them to come to school and perform better. Everyone has the same long term goal, to get a great overall grade and attend a great college which will give them a financially successful future, but students that strive to get the best scores among their peers have a greater incentive. To measure the ability of a teacher, students could take surveys at the end of the year to rate the ability of their teachers, along with examinations in class from other authorities.

    • Justin Staub January 28, 2016 / 10:49 am

      I wonder how often would be too often to evaluate a teacher. What if rating scales were offered frequently (weekly or by new lesson taught…)?

  15. Kevin and Maria January 28, 2016 / 10:32 am

    Teachers should be evaluated frequently and then be paid according to their evaluations. Also, students should not be forced to go to school, so that only motivated students will attend. Hopefully, students who are not going to school will see the success of their counterparts, motivating them to go to school.

  16. Anonymous January 28, 2016 / 10:33 am

    One option that would incentivize teachers to improve would be to make them more easily fired or laid off. Due to unionization, poorly performing teachers cannot be fired without a serious, or even criminal, infraction. If teachers knew that they would be dismissed if they did not do their jobs well, then they would be more motivated to improve their teaching. Metrics to measure teacher performance would be based on student reviews, standardized testing, and their superiors’ perception of their work. Unions would not have to be dismantled as long as they agreed to these terms.
    If this method was successful, then teaching would improve and students would enjoy school more, making them more incentivized to attend and dedicate themselves to school.
    – Gov. Bobby Jindal, and 5x NBA Champion Dennis Rodman

    • Justin Staub January 28, 2016 / 10:50 am

      We will examine the effect of unions on the productivity of labor in Macroeconomics. Good insight!

  17. Anonymous January 28, 2016 / 10:34 am

    Victor: A way to encourage students to try harder in school could be to increase the value of a high school education within the workplace. Perhaps a minimum salary to those who earn a high school diploma would give students more individual incentive to complete a high school education. For teachers, to incentivize them to teach to their best ability maintain the increase in pay based on years teaching and the state government can give money to the districts that perform the best in test scores to ensure that teachers will collaborate to figure out how to best educate the students within the entirety of the school instead of incentivizing teachers from individual classrooms.

  18. Krishna January 28, 2016 / 10:34 am

    While I couldn’t agree more with you on how how it would be a much beneficial idea to challenge teachers’ to create a more effective output from their teaching, it is important to look into how the teachers are also automatically categorized by the level of their effectiveness in where they teach. Some of the more higher paying districts also tend to look for better teachers which gives teachers in other districts to have incentive to teach with a higher pay by improving on their skills. This in turn also does create great implications in society and regional economies because people are unwilling to go to the schools with less money and less skilled teachers, therefore the focus is thrusted on schools that have these “better grades” or “rankings” because they consistently have the money to grow and provide their students with better teachers. The incentives here should not be these standard numbers but the purity of the idea of a good education. In a competitive field of education between students and the economical pressure to “be successful”, these “numbers” are likely to be disregarded easily by society; therefore we could take less subjective standpoints and more objective ones that inspire growth with less materialistic motivations. The balance between this has been a highly controversial topic in education and teachers are certainly a very important place to start by motivating them to cover not a “curriculum to aid to ace assessments” to be taught but rather linking all aspects to “real life” and how they would be able to perform in the applicability of these skills such as the ESSA act which supports just this and therefore the focus becomes less subjective.

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