What’s Wrong With Cash for Grades? A New Marketplace Podcast

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Our latest Freakonomics Radio on Marketplace podcast is called “What’s Wrong With Cash for Grades?”

(You can download/subscribe at iTunes, get the RSS feed, listen via the media player above, or read the transcript below.)

In it, Steve Levitt talks to Kai Ryssdal about whether it’s effective to pay kids to do well in school. Levitt, along with John ListSusanne Neckermann, and Sally Sadoff, recently wrote up a working paper (PDF here) based on their field experiments in Chicago schools. Levitt blogged about the paper earlier; here’s the Atlantic‘s take.

As Levitt points out, financial incentives are everywhere in life but it is nevertheless a controversial idea to talk about systematically paying schoolkids for better grades. Roland Fryer has experimented and written widely about bribing students (and teachers), and has been both praised and lambasted for it.

This is one of those issues that most people seem to assess based on their prior beliefs (i.e., it’s “wrong” to pay kids for grades because it will kill their intrinsic motivation), and the empirical evidence is at best mixed. But as Levitt discusses, there is at least some reason to think about cash incentives as one helpful tool in our educational fix.

On the other hand, Levitt knows that cash rewards don’t always work out as planned

Audio Transcript

Kai Ryssdal: Time now for a little Freakonomics Radio. It's that moment every couple of weeks we talk to -- usually -- Stephen Dubner, about the hidden side of everything. This week, though, the hidden brains behind the operation: Steve Levitt, economist at the University of Chicago. Steve, how are you?

Steven Levitt: I'm doing great.

Ryssdal: Well, here's the thing: What'd you do with Dubner, man?

Levitt: You know, I love golf. I somehow managed to convince Dubner he loves golf too. So now we've got to flip the coin each week to see who gets to play golf and who has to actually work.

Ryssdal: That's so funny, because you know what? I cannot see Dubner playing golf to save his life, but I guess that's a whole other interview. So what do we got? We're talking about, what, schools today?

Levitt: We are, about incentives, about bribing kids to do better in school.

Ryssdal: Oh good. All right, all you parents out there, get ready to write in. So what do we know about bribing kids? Does it work?

Levitt: One great thing about kids is that they're relatively cheap to bribe. And certainly I know, going back in time, when I was a kid, my parents bribed me. It was just a mainstay of my household, that if I did well in school, they'd give me $50 maybe for every day.

Ryssdal: No, get out of here! Fifty bucks?

Levitt: Yeah, I think almost. Tons of parents do that. I certainly do with my kids.

Ryssdal: So you dangle $20 in front of them and say, 'This is yours if you get an A'? How does it work?

Levitt: One theory about that is that people in general -- but kids especially -- are very present-oriented, that what happens to them tomorrow or 15 minutes from now matters much more than what happens a year later. So that study that I've just done with some colleagues comes to kids, right as they sit down to a test, and says, 'We will give you $20 as soon as the test is over if you improve your performance compared to the last time that you took it.'

Ryssdal: OK.

Levitt: So we did this on over 6,000 kids, using financial rewards and using non-financial rewards like trophies.

Ryssdal: Everybody gets a trophy nowadays, didn't you know that?

Levitt: Yeah, but not in our study. You should have seen the looks on the kids' faces because one of the things we also do was we give them the trophy, we let them hold the trophy, sniff the trophy, to really enjoy the trophy. We sit the trophy right on their desk in right front of them as they take the test, and if they don't do well, we snatch it away from them.

Ryssdal: Oh, you do not.

Levitt: We absolutely do.

Ryssdal: Economists are heartless sons of guns, man.

Levitt: It hurts more to lose something that's yours than it is benefit to gain something.

Ryssdal: My guess would be that the trophies work for like the 3rd graders, but once you get to junior and high school, he wants -- 'show me the money,' right?

Levitt: With the young kids, the trophies worked great, the money works great. It's harder to convince the older kids. There, only the money works and the money really works -- all the time -- works best when you put it in front of them, you let them see it, and then you snatch it back from them when they don't do well.

Ryssdal: What happens though, Steve, when let's say these kids go into college or they go out into life and nobody's there handing them $20 if they do well, right? Do they lose the gains?

Levitt: I mean, I look at my own experience -- which is always dangerous -- but I went away to college and my parents stopped rewarding me for getting good grades. It wasn't like I stopped doing it. The counterargument is that you build up good study habits, hard work, and then those persist over time.

Ryssdal: But come on, you're a Ph.D economist at the University of Chicago, for crying out loud. You're not --

Levitt: Well, I am now, but boy, you should have seen me in college. All I did in college was drink and play wiffle ball. It was a miracle I even made it through.

Ryssdal: What do we know about boys versus girls? Is there a gender difference in how this thing works?

Levitt: There's a huge gender difference that we see here, which is that boys are much more responsive at all age levels to every kind of incentive we throw at them.

Ryssdal: Boys can be bribed.

Levitt: That's exactly right. I think what it really comes down to, and we've seen this in many other settings, is that girls basically always try pretty hard. And when you incentivize them, they can't try that much harder. But boys basically completely slack off unless the stakes are really high.

Ryssdal: You realize, of course, you're kind of hosing me now, because my kids are going to hear this on the radio and they're going to say, 'Dad, $20.'

Levitt: Honestly, it is one of the best investments you can make if it really causes your children to change their behavior. I'll give you an example: So I have a son who doesn't care at all about school; he's only a 3rd grader. But he had a computer-assisted math program, he spent about a total of an hour and 15 minutes on it over the first month that he had it. He asked me for $50 so he could get a new toy, and of course I said no, but then I said, 'Well look, if you can finish the entire 3rd grade math program, I'll give you this $50 toy.' He ended up spending about 40 hours over the next week doing math. He spent more time in that one week on math than he probably spent on his entire life, and we both couldn't have been happier. The beauty is, if you take it by hour, it cost me about $1 an hour to get my kid to study math.

Ryssdal: There's the economist in you coming out right? Come on.

Levitt: Yeah, it's a great deal. I mean, compared to trying to get someone to cut my lawn or cut my hair, it was a bargain. It was a great bargain.

Ryssdal: Steven Levitt at the University of Chicago. Dubner's back in a couple of weeks. Freakonomics.com is the website. Steve, thanks a lot.

Levitt: Thank you Kai.

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  1. Allen says:

    I must be the only one who remembers when kids got rewards from parents for good grades – like a car if you got straight As or maybe the disincentives for poor grades “No TV till your get that English grade above a C”. The argument is not about incentives/disincentives but about who is going to pay and in what form!

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  2. Cor Aquilonis says:

    I resist cash for grades because I don’t really want the goal to be getting good grades, I want to foster a love of learning that translates into good grades. Fostering a love of learning and curiosity about the world in a child requires a lot more work then setting up a simple incentive system, but I think it will be significantly more valuable in adulthood. Perhaps incentivising grades will help spark the love of learning, but I think modeling interest in the world through the family would be more likely to be successful.

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    • Enter your name... says:

      I remember being astonished hen I was 13 that my grade in the art class was much better than that of the best artist in the entire school. The difference was that I turned in my distinctly mediocre paintings on time, and he often didn’t even finish, but moved on to a new technique when he felt he’d made enough progress on this one. He learned more and achieved more, but I had an A- and he had a C.

      A love of learning doesn’t turn into good grades when grades are based on your organization of paperwork (called “turning in homework on time”) and social skills (“participating in group activities”) rather than knowing and learning the material. It’s even worse at some schools, where grades are partly based on whether you buy a box of Kleenex for the classroom. None of that is about mastering the subject.

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      • Jay says:

        The problem is not with the love of learning, it is with the grades because, as you point out, most grades are only tangentially related to real learning. If you pay students for higher grades, many will find a way to get their grades to go up, but let’s not kid ourselves into thinking they are actually learning more. In most cases, I venture to guess, it would cause them to start cheating sooner rather than later.

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      • Cor Aquilonis says:

        Excellent point, and very well put.

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  3. Lassie says:

    When I was a high school freshman, I was offered good money if I would just pass my math classes. You could have offered me a round-the-world-cruise and a million dollars, and I could not have ever, ever passed algebra. I tried. I really really tried. Flunked in school and flunked even worse in summer school. (Everything else? I did OK!) There are limits.

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  4. Menon says:

    I think what would be really relevant is to hear what the incentives do with traditionally low-achieving students, students with low SES or students with any kind of disadvantage. I fear that financal incentives would increase the performance of usually good students to a big extent, but won’t have a considerable effect for low-achieving students, or students with a low self-concept.
    In this case, it would support the strong ones, but leave the weak ones even more behind (cf. the so-called Matthew-effect).

    I consider it a big problem that a lot of new ideas in the framework of school accountability tend to increase the marginalization of students that do not meet the norm – they also deserve an education that leads them to an autonomous life within our society.

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  5. Erik Dallas says:

    Paying kids can be used to foster further learning. The I Have a Dream program (at least in Washington Middle School in Seattle) paid the kids in the program just for perfect weekly attendance. But they paid them in their “checking account” that each kid had to balance the ledger and write checks from. These checks could be used to buy school supplies, food, or other rewards and toys that these middle school kids spent a lot of time planning on what they were saving up for and what they were going to buy. Even though the kids in the program were originally selected as the most troublesome and most likely to fail out of school, the kids were trusted to keep their own accounting, and there was no evidence of cheating. Not only was this a teaching real world math skills but also money management skills, planning, budgeting, and deferred gratification. The rewards were mostly school and nutritional items that might have gone lacking give their families economic situation, and occasionally there was that long planned purchase of a rewarding toy. This group of kids went from being at the bottom of the class to being at the top of the class. The rest of the program and the programs “cash” rewards were well spent.

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  6. Michael says:

    My worry about cash for grades is mostly about implementation. Too many of these incentive programs try to reward ‘improved performance’ instead of ‘high performance’. When you focus your efforts on the worst performing students, rewarding them when they get better, students just above the worst performers are encouraged to let their efforts lapse a bit, to get into the rewarded group.

    I also wonder if trying to help the worst performers would lead to the most benefit. It would certainly help the kid, but I’d imagine an above average kid driven to become exceptional would have a larger impact than a poor performer driven to become average. Added exceptional performance is likely more beneficial to society than similarly reduced poor performance.

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  7. James says:

    I always felt that grades tied to financial rewards was a good idea, perhaps the money is paid into accounts that generate interest ( paid to the district for administrative costs ) and can only be used for college expenses or to start a business in the community.

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  8. steve says:

    I might be the only teacher who has posted a comment. I teach high school math at a school where more than half the students come from low income families. (I also have a business degree from MIT and spent 25 years in the corporate world.)

    In a perfect world, all teenagers would be motivated by intellectual curiosity and a love of learning. They would also see the connection between the the skills/knowledge they develop in K-12 and the careers options they will have after college. However, many students are very focused on tangible, short-term extrinsic rewards. I see no real moral problem with offering financial incentives that are tied to clear, objective forms of achievement. There are already several initiatives such as the Exxon Science and Math Initiative (which pays students who earn high scores on AP math and science exams). Also, many colleges offer merit scholarships which are essentially cash rewards for high academic achievement.

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