Say you want pay students to improve their grades. It turns out that the direct approach — just giving them cash for good grades — doesn't work.
But paying them for other things — doing their homework, going to class — does seem to boost achievement, at least in some cases.
That's according to a series of studies that paid out $6.3 million to 38,000 students in 261 schools. Here's the paper, by Harvard's Roland Fryer.
The results are contrary to a basic economic idea: You should pay for output (in this case, grades), and let workers figure out the best inputs (in this case, studying and going to class).
Of course, that idea falls apart if the workers don't really know the relationship between inputs and outputs — in this case, if they don't really know on their own how to get good grades.
Here's how you say that if you're an economist:
The leading theory is that students do not understand the educational production function and, thus, lack the know-how to translate their excitement about the incentive structure into measurable output.
This problem is solved by paying kids to do their work, rather than by paying for results.
Students who were paid to read books, attend class, or behave well did not need to know how the vector of potential inputs relates to output, they simply needed to know how to read, make it to class, or sit still long enough to collect their short-term incentive.
The studies were conducted in public schools in Chicago, New York, Dallas and Washington, D.C. The kids who participated included second graders, middle-school students and ninth graders.
Paying second graders to read books seemed particularly promising — it boosted kids' reading comprehension, relative to kids who did not receive incentive payments. There was still a significant improvement a year after the researchers stopped paying the kids.