ate can be costly in childcare. When parents arrive late to
pick up their children, caregivers are forced to work extra hours
– often with no compensation. One solution is to charge late parents a small fine to deter this behaviour. But when economists
Uri Gneezy and Aldo Rustichini did just that – introducing a $3
late fee at a group of daycare centres in Haifa, Israel – it had the
opposite effect: the late arrivals more than doubled.
In recent years, behavioural economists like Drs. Gneezy and
Rustichini have begun to study how people respond to incentives using controlled experiments. Their work reveals a host of
psychological effects: we’re risk averse, prone to choking when the stakes
are high, and we over-value the present. Different types of incentives
– financial, social or moral – can have different effects. As a result, policies
In the daycare study, the late penalty failed because it took an important social cost – the desire not to impose on others – and replaced it with
a financial cost that parents found quite affordable. Instructors often use
a similar policy with grades, deducting five or ten percent of the mark
from late assignments. Could this have the perverse effect of encouraging
The comparison between grades and financial incentives is not
far-fetched. After all, students work for grades, and they trade them
for scholarships and a spot in graduate school. Grading practices affect
which courses students take and how much they enjoy them.
So, do students treat grades like money? The question remains unan-swered, but behavioural economists are starting to experiment in the classroom. In one recent study, Sally Sadoff and her colleagues at the University
of Chicago offered trophies and cash to primary and secondary students
if they improved their scores on regular standardized tests. Dr. Sadoff and
her co-authors found that subtle differences in the reward scheme had a
profound effect on student performance. For example, if students had to
wait one extra month to receive the reward, its motivating effect was extinguished, suggesting that students discount the future heavily.
This is a serious problem in education, where incentives are almost
always delayed. But there may be an upside. According to Dr. Sadoff, now
an assistant professor at the University of California in San Diego, it
could help us understand why some teaching practices work better than
others. For instance, in another study she is looking at the effect of giving monthly financial rewards to high school students based on several
measures of performance, including attendance and test scores. These
frequent rewards have a lasting effect: the students in the monthly
program outperform their peers even after the program ends. Dr. Sadoff
says, “You learn more if you put in slow and steady effort.”
It’s a principle Leslie Reid took into account five years ago, when she
embarked on a major shift in her teaching. Newly appointed to the Tama-
ratt Teaching Professorship at the University of Calgary, Dr. Reid began
to think about how she could use grades to fuel the learning process more
effectively. In her introductory geology course, Dr. Reid replaced one of
the two high-stakes midterms with more frequent open-book learning
activities. In the new assignments, her students work in groups, inter-
acting with each other right in the lecture hall. These assignments are
graded and returned one week later. With more opportunities for feed-
back, the students are more motivated to engage with the material. At the
same time, Dr. Reid gains a better sense of where they stand. It has given
her a positive perspective on grading as a mutual feedback exchange.
“It can be a win-win,” she says.
Other insights from the economics literature are more surprising.
With her collaborators, Dr. Sadoff has found that financial rewards are
actually more effective when they are given to students before a test,
under the condition that the money must be forfeited if the student fails
to perform. This is loss aversion at work: people tend to place a higher
value on items that they already own.
Baiting students with cash might not be possible in the university
classroom, but there may be other ways to engage loss aversion. One possibility is a system of points with a base level allocated to each student
on the first day of class (say 35, or 150). The points could then be used to
track participation throughout the semester, with additions for positive
contributions and deductions for missed classes. Then, at the end of the
course, the final tally could be converted to a grade.
Behavioural economics might also explain why grading sometimes
decreases student motivation: attaching an incentive sends a message
that one is required. For instance, in a 1997 study researchers asked
people in central Switzerland whether they would be willing to accept
construction of a nuclear waste storage site in their community. When
financial compensation was offered as part of the deal, it actually made
people less likely to accept the proposal. The incentive backfired because
it signaled that the potential downside would be large.
Similarly, when grades are attached to an activity, it can send a
message that the task must be undesirable. Thus it could be especially
dangerous to hand out marks for the most interesting tasks – such as attendance in elective courses. Dr. Reid also points out that when students
know they’re being graded, it can discourage risk-taking and creativity. “I