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RENEE MONTAGNE, HOST:

Part of the clash between the Chicago teachers and the city was about an issue that's become increasingly visible in school districts across the country. Should the performance of students on standardized tests, be used to evaluate the performance of teachers?

STEVE INSKEEP, HOST:

NPR science correspondent Shankar Vedantam joins us regularly to discuss social science research and has been looking into a related question: How do you compensate teachers so that students perform better?

Hi, Shankar.

SHANKAR VEDANTAM, BYLINE: Hi, Steve.

INSKEEP: OK. So what do you do?

VEDANTAM: Well, I spoke with this economist; his name is John List. He teaches at the University of Chicago. And he's just completed an experiment that looked at teachers in Chicago Heights. Now, this is a struggling school district, not very far from Chicago. And List decided to try something a little different from what's been tried before. He tried to say, is there an incentive system that I can give teachers, that can improve the performance of students? And he used a technique that actually has been used fairly widely in business settings, but hasn't been used before in educational settings. It's not quite a carrot, and it's not quite a stick. It's based, actually, on a psychological principle. Here he is.

JOHN LIST: What we try to capitalize on, in this particular study, is a concept called loss aversion. Once we have something in our possession, we feel that it will be really, really painful to have to give it up.

INSKEEP: Loss aversion.

VEDANTAM: Exactly. So I mean, if I were to make this practical for you, Steve, it would be like saying, I'm going to give you a bonus at the end of the year if you do really well. So that would be the traditional bonus. But the loss aversion would be, I give you your bonus up front. But then I tell you if your performance doesn't stack up, you're going to have to give the money back at the end of the year.

INSKEEP: OK. Subtle difference. He wants to know if this makes a big difference in people's minds. So what was the experiment?

VEDANTAM: So what he did was, he found 150 teachers in Chicago Heights. He divided them into three groups. One group got no incentive at all. One group got a traditional bonus. They were promised $4,000 if their students did really well at the end of the year. A third group was given $4,000 up front and told, if your students don't improve, you're going to have to give the money back at the end of the year.

And what List and his colleagues have found is that student test scores didn't improve when teachers were given a traditional bonus. It made no difference when you promise teachers a bonus at the end of the year. But when you gave the money up front, and told teachers the money could be taken away at the end of the year, it seemed to make a huge difference to student performance. Here he is again.

LIST: What we found is strong evidence in favor of loss aversion. Teachers who were paid in advance and asked to give the money back if their students did not perform, their test scores were actually out of the roof - two to three times higher than the gains of the teachers in the traditional bonus group.

INSKEEP: Wow, that's a huge difference. Why?

VEDANTAM: Well, first of all, List made sure that the teachers weren't cheating. So he made sure that the teachers weren't using their bonus to buy students extra supplies and extra textbooks....

INSKEEP: Oh, OK.

VEDANTAM: ...you know, the teachers weren't teaching longer hours. And the test was standardized, so there was no cheating on the test scores. What he thinks is happening is that the fear of losing the bonus seems to make teachers highly vigilant to underperformance. So if Johnny doesn't get something in class, the teacher doesn't go on to the next subject, or the next concept. The teacher sticks to Johnny, and makes sure Johnny gets it before moving on.

INSKEEP: Because I've already spent that money on the vacation at the Indiana Dunes, and I don't want to have to pay it back because I don't have it anymore.

VEDANTAM: Exactly. But I mean, the effect of this is pretty enormous. So, at least in this one study, the effect of this loss-aversion incentive system seems to turn average teachers into great teachers.

INSKEEP: So what are some of the drawbacks of this system, if any?

VEDANTAM: Well, I think this study would be need to be replicated before you can think about it in terms of policy. This is one school district; they looked specifically at math scores. They don't know if the same thing applies in other ways. It's also possible that the loss-aversion technique could be modified. In other settings, it's been found to be more effective when you take the money back in smaller increments over time, rather than in one, big chunk at the end. But overall, if the results do hold up, I think it could be quite powerful, especially when you consider this could be offered on a purely voluntary basis. You could tell people: If you want the bonus, you're welcome to have it right at the start of the year. There's just a risk that it could get taken back at the end of the year.

INSKEEP: NPR's Shankar Vedantam, solving the problems of the world. Shankar, thanks very much.

VEDANTAM: Thanks, Steve.

INSKEEP: And you can follow him on Twitter @HiddenBrain. You can also follow this program @MorningEdition and @NPRInskeep.

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