What Money Can't Buy
Incentives vs. Virtue
Across the country, school systems are paying children to do better in school. In New York, fourth and seventh graders can get up to $500 for improving their scores on the city's math and English tests. Schools in Georgia pay eighth and 11th graders $8 an hour to attend an after-school learning program.
You would think that, given what's at stake, doing well at school would be its own reward. But, increasingly, both inside and outside the classroom, striving for virtue is being replaced by monetary incentives.
As one principal told USA Today, he is "trying lots of different incentives for doing the right thing." "Incentives" include iPods for attending Saturday study sessions and a flat-screen television for making the all "A" honor roll.
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Many critics prefer the word "bribe" to "incentive." One compared the practice to giving athletes steroids: "Short-term performance might improve but the long-term effects can be very damaging."
Damaging or not, paying people to do what they should already be doing isn't going away. Greensboro, North Carolina, is paying teenage mothers $1 for every day they are not pregnant. Like paying students to improve their grades and test scores, paying teen mothers to not get pregnant appears to be having the desired affect.
The core ideas in these kinds of programs come from a new field known as "behavioral economics." Classical economics assumes that people are rational and act in accordance with their best interests. Behavioral economics knows that, in the real world, people make bad and even self-destructive choices all the time.
The goal of behavioral economics is to identify the "dizzying array of human foibles" and help policy makers take them into account when shaping policy.
In the case of incentive programs like the ones I have described, it means "nudging" people to act in their own best interests. It's an approach, by the way, that is favored by a "number of high-level appointees" in the Obama administration.
While basing policy on human beings as they actually are is certainly preferable to basing them on rational "economic men" that exist only in economists' imaginations (you can count me among the critics on that one).
It doesn't surprise me that these "nudges" can have a short-term positive effect. But it's difficult to imagine these programs making a long-term difference.
On the contrary, the "long term damage" mentioned earlier may very well include creating a generation of people for whom incentives will become a necessity, not a nudge.
To put it in Christian terms, incentives will replace virtue. Instead of doing the right or prudent thing because it's what a moral person does, people will do what they do because they get something out of it. This doesn't build character-it builds calculators.
What's more, in the real world, people don't always reward you for doing the right thing. But there are still consequences for behaving foolishly. How will people raised on a steady diet of nudges avoid these pitfalls?
The answer is that many won't avoid them because they never learned that, for the virtuous person, doing the right thing is incentive enough.
