What Money Can't (Shouldn't) Buy: Part. 2A. Incentives
Incentives
Cash for Sterilization
Each year babies are born to drug-addicted mothers and many of them will suffer child abuse or neglect. Project Prevention offer drug-addicted women $300 cash if they will undergo sterilization or long-term birth control. More than three thousand women have taken the offer since the program launched in 1997. Critics call the project morally reprehensible, a bribe for sterilization, arguing that offering drug addicts a financial inducement to give up their reproductive capacity amounts to coercion, especially since the program targets vulnerable women in poor neighborhoods. Rather than help the recipients overcome their addiction, the money actually subsidizes it. But the founder, Barbara Harris, believes this is a small price to pay to prevent children from being born with drug addictions. Some of the women who accept the cash for sterilization have been pregnant a dozen times or more, many already have multiple children in foster care. In 2010, Harris took her project to Britain, where the idea of cash for sterilization met strong opposition. Harris has expanded to Kenya, where she pays HIF-positive women $40 to be fitted with intrauterine devices (long-term contraception). In Kenya and South Africa, where Harris next plans, health officials and human rights proponents have voiced outrage and opposition.
From the standpoint of market reasoning, it's not clear why the program should provoke outrage. Some critics say it reminds them of Nazi eugenics. Some argue that drug addicts, desperate for money, are not capable of making a truly voluntary choice when offered easy cash. But Harris replies, if thei rjuedgment is severly impaired, how can they possibly be expected to make sensible decisions about bearing and raising children? Viewed as a market transaction, the deal produces gains for both parties and increases social utility. According to standard market logic, the exchange is economically efficient. It allocates the good -- in this case, control over the addict's reproductive capacity -- to the person who is willing to pay the most for it and who is therefore presumed to value it most highly.
So why all the fuss? For two reasons, which together shed light on the moral limits of marketing reasoning. Some criticize the cash-for-sterilization deal as coercive; others call it bribery. There are actually different objections. Each points to a different reason to resist the reach of markets into places where they don't belong.
The corecion objection worries that when a drug-addicted woman agrees to be streilized for money, she is not acting freely. The financial inducement may be too tempting to resist. She may be coerced, in effect, by the necessity of her situation. In order to assess the moral status of any market transaction, we have to ask a prior question: under what conditions do market relations reflect freedom of choice, and under what conditions do they exert a kind of coercion?
The bribery objection is different. It is not about the conditions under which a deal is made but abouot the nature of the good being bought and sold. COnsider a standard case of bribery. If an unscrupulous character bribes a judge or government official to gain an illicit benefit or a favor, the nefarious transaction may be entirely voluntarily. Neither party may be coerced, and both may gain. What makes the bribe objectionable is not that it's coercive but that it's corrupt. The corruption consists in buying and selling something (a favorable verdict, say, or political influence) that should not be up for sale.
We often associate corruption with illicit payoffs to public officials. But, corruption also has a broader meaning: we corrupt a good, an activity, or a social practice whenever we treat it according to a lower norm than is appropriate to it. For example, having babies in order to sell them for profit is a corruption of parenthood because it treats children as things to be used rather than beings to be loved. Political corruption can be seen in the same light: when a judge accepts a bribe to render a corrupt verdict, he acts as if his judicial authority were an instrument of personal gain rather than a public trust. He degrades and demans his office by treating it according to a lower norm than is appropriate to it. This broader notion of corruption lies behind the charge that the cash-for-sterilization scheme is a form og bribery. It is corrupt that both parties -- the buyer (Harris) and the seller (the addict) -- value the good being sold (the childbearing capacity of the seller) in the wrong way. Harris treats drug-addicted and HIV-positive women as damaged baby-making machines that can be switched off for a fee. Those who accept her offer acquiesce in this degrading view of themselves. This is the moral force of the bribery charge. Like corrupt judges and public officials, those who get sterilized for money sell something that should not be up for sale. They treat their reproductive capacity as a tool for monetary gain rather than a gift or trust to be exercised according to norms of responsiblity and care.
It might be argued that the analogy is falwed. A judge who accepts a bribe in exchange for a corrupt verdict sells something that isn't his to sell; the verdict is not his property. But a woman who agrees to be sterilized for pay sells something that belongs to her -- namely, her reproducitve capacity. Money aside, the woman does no wrong if she chooses to be sterilized; but the judge does wrong to render an unjust verdict even in the absence of a bribe. If a woman has a right to give up her childbearing capacity for reasons of her own, she must also have the right to do so for a price. If we accept this argument, then the cash-for-sterilization deal is not bribery after all.
So in order to determine whether a woman's reproductive capacity should be subject to a market transaction, we have to ask what kind of good it is: Should we regard our bodies as possesions that we own and can use and dispose of as we please, or, do some uses of our bodies amount to self-degradation? This is a large and controversial question that also arises in debates about prostitution, surrogate motherhood, and the buying and selling of eggs and sperm. Before we can decide whether market relations are appropriate to such domains, we have to figure out what norms should govern oru sexual and procreative lives.
The Economic Apporach To life
The price system allocates goods according to people's preferences; it doesn't asses those preferences as worthy or admirable or appropriate to the cricumstance. But, economists increasingly find themselves entangled in moral questions, because of two reasons: one reflects a change in the world, the other a change in the way economists understand their subject. In recent decades, markets and market-oriented thinking have reached into spheres of life traditionally governed by nonmarket norms. More and more, we are putting a price oon noneconomic goods. At the same time, economists have been recasting their discipline making it more abstract and more ambitious. In the past, economists dealt with avowedly economic topics -- inflation and unemployment, savings and investment, interest rates and foregin trade. they explained how countries become wealthy and how the price system aligns supply and demand for pork belly futures and other market goods. Recently, however, many economists have set themselves a more ambitious project. What economics offers is not merely a set of insifhts about the production and consumption of material goods but also a science of human behavior. At the heart of this science is a simple but sweeping idea: in all domains of life, human behavior can be explained by assuming that people decide what to do by weighing the costs and benefits of the options before them, and choosing the one they believe will give them the greatest welfare, or utility. If this idea is right, then everything has its price. The price may be explicit, as with cars and pork bellies. Ir it may be implicit, as with sex, marriage, children, education, criminal activity, racial discrimination, political participation, environmental protection, even human life. Whether or not we're aware of it, the law of supply and demand governs the provision of all these things. Gary Becker, an economist, in The Economic Approach to Human Behavior (1976), rejects the od-fashioned notion that economics is the study of the allocation of material goods. The persistence of the traditional view is due, he specualtes, to a reluctance to submit certian kinds of human behavior to the frigid calculus of economics. Becker seeks to wean us from that reluctance. According to Becker, people act to maximize their welfare, whatever activity they're engaged in. This assumption, used relentlessly and unflinchingly, forms the heart of the economic approach to human behavior. The economic approach applies regardless of what goods are at stake. It explians life-and-death decisions and the choice of a brand of coffee. It applies to choosing a mate and buying a can of paint. Becker continues: I have come to the position that the economic approach is a comprehensive one that is applicable to all human behavior, be it behavior involving money prices or imputed shadow prices, repeated or infrequent decisions, large or minor decisions, emotional or mechanical ends, rich or poor persons, men or women adults or children, brilliant or stupid persons, patients or therapists, businessmen or politicans, teachers or students. Becker does not claim that patients and therapists, businessmen and politicians, teachers and students actually understand their decisions as governed by economic imperatives. But that's only because we're often blind to the wellsprings of our actions. The economic approach does not assume that people are necessarily conscious of their efforts to maximize or can verbalize or otherwise describe in an informative way the reasons for their behavior. However, those with a keen eye for the price signals implicit in every human situation can see that all our behavior, however remote from material concerns, can be explained and predicted as a rational calculus of costs and benefits. Becker illustrates his claim with an economic analysis of marriage and divorce:
According to the economic approach, a person decides to marry when the utility expected from marriage exceeds that expected from remaining single or from additional search for a more suitable mate. Similarly, a married person terminates his/her marriage when the utility anticipated from becoming single or marrying someone else exceeds the loss in utility from separation, including losses due to physical separation from one's children, division of joint assets, legal fees, and so forth. Since many persons are looking for mates, a market in marriages can be said to exist.
Some think this calculating view takes the romance out of marriage. They argue that love, obligation, and commitment are ideals that can't be reduced to monetary terms. They insist that a good marriage is priceless, something money can't buy. To Becker, this is a piece of sentimentality that obstructs clear thinking. With an ingenuity worthy of admiration if put to better use, those who resist the economic approach explian human behavior as the messy, unpredictable result of ignorance and irrationality, values and their frequent unexplained shifts, custom and tradition, the compliance somehow induced by social norms. Becker has little patince for this messienss. A single0minded focus on income and price effects, he believes, offers social science a sturdier foundation.
Can all human action be understood in the image of a market? Economists, political scientists, legal scholars, and others continue to debate this question. But what is striking is how potent this image has become -- not only in academia but also in everyday life. To a remarkable degree, the last few decades have witnessed the remaking of socila relations in the image of market relations. One measure of this transformation is the growing use of monetary incentives to solve social problems.
Paying Kids For Good Grades
School districts across the U.S. now try to improe academic performance by paying children for getting good grades or high scores on standardized texts. LA Dodgers had a promotion that gave free tickets to high school students who made the honor roll. We heard kids being paid by their parents for every A on their report card. More and more financial incentives are seen as a key to educational improvement. The cash payments yielded mixed results. In NY city, paying kids for good test scores did nothing to improve their academic performance. The cash for good grades in Chicago led to better attendance but no improvement on standardized tests. IN Washington, the payments helped some students (Hispanics, boys, and students with behavior problems) achieve higher reading scores. The cash worked best with the Dallas second graders; the kids who got paid $2 per book wound up with higher reading comprehension scores at the end of the year.
Some incentive programs target teachers rather than students. although teachers' unions have been wary of pay-for-performance proposals, the idea of paying teachers for the academic achievement of their students is popular among voters, politicans, and some educational reformers. In 2006, Congress established the Teacher Incentive Fund to provide pay-for-performance grants for teachers in low-achieving schools. The Obama administration increased funding for the program. A privately funded incentive project in Nashville offered middle school math teachers cash bonuses of up to $15,000 for improving the test scores of their students. The bonuses in Nashville had virtually no impact on students' math performance. But the Advanced Placement incentive programs in Texas and elsewhere have had a positive effect. more students, including students from low-income and minority backgrounds, have been encouraged to take AP courses., many are passing the standardized exams that qualify them for college credit. This is very good news, but it does not bear out the standard economic view about financial incentives: the more you pay, the harder studetns will work, and the better the otucome. The story is more complicated. The AP incentive programs that have succeeded offer more than cash to students and teachers; they transform the culture of schools and the attitudes of students toward academic achievement. Such programs provide special training for teachers, laboratory equipment, and organized tutoring sessions after school and on Saturdays. One urban school in Worcester, Massachusetts, made AP classes available to all students, rather than to a preselcted elite, and recruited students with posters featuring rap stars, making it cool for boys with low-slung jeans who idolize rappers like Lil Wayne to take the hardest classes. The $100 incentive for passing the AP test at the end of the year was a motivator, it seems, more for its expressive effect than for the money itself. "There's something cool about money, it's a great extra" (one successful student told The New York Times).
When an economist looked closely at the Advanced Placement incentive proram in low-income texas schools, he found something interesting: the program succeeded in boostin gacademic achievemnt but in a way that the standard "price effect" would predict (the more you pay, the better the grades). Although some schools paid $100 for a passing grade on the AP test, and others paid as much as $500, the results were no better in schools that offered the higher amounts. Students and teachers were not simply behaving like revenue maximizers.
So what's going on? The money had an expressive effect, making academic achievement "cool". That's why the amount was not decisive. Although only AP courses in English, Math, and Sceince qualified for the cash incentives at most schools, the program also led to higher enrollment in other AP courses, such as history and social studies. The Advanced Placement incentive programs have succeded not by bribing students to achieve but by changing atittudes toward achievement and the culture of schools.
HEALTH BRIBES
Increasingly, doctors, insurance companies, and employers are paying people to be healthy -- to take their medications, to quit smoking, to lose weight. You might think that avoiding disease or life-threatening ailments would be motivation enough. But, surprisingly, that's often not the case. One-third ot one-half of patients fail to take their medications as prescribed. When their conditions worsen, the overall result is billions of dollars a year in additional health costs. So doctors and insurers are offering cash incentives to motivate patients to take their meds.
Smoking imposes big costs on comapnies that provide health insurance to their workers. In 2009, GE began paying some of its employees to quit smoking, $750 if they could quit for as long as a year. The results were so promising that GE has extended the offer to all its U.S. employees. The Safeway grocery store chain offers lower health-insurance premiums to workers who don't smoke and who keep their weight, blood pressure, and cholesterol under control. Eighty percent of big U.S. companies now offer financial incentives for those who participate in wellness programs, and almost half penalize workers for unhealthy habits, by chargin gthem more for health insurance.
NBC reality show The Biggest Loser dramatizes the current craze of paying people to slim down. It offers $250,000 to the contestant who achieves the biggest proportional wieght loss during the season.
Doctors, researchers, and employers have tried offering more modest incentives. Unfortunately, the weight losses proved temporary. In Britain, NHS spends 5% of its budget treating obesity-related diseases, the NHS tried paying overweight people up to $612 to lose weight and keep it off for two years. The scheme is called Pounds for Pounds.
Two question for paying people for healthy behavior: does it work? is it objectionable?
From economic point of view, the case for paying people for good health is a simple matter of costs and benefits. The only real question is whether incentive schemes work. Many do object. The use of cash incentives to promote healthy behavior generates fierce moral controversy. One objection is abou tfairness, the other about bribery. The fairness objection is voice, in different ways, on both sides of the political spectrum. Some conservatives argue that overwieght people should slim down on their own: paying them to do so (especially with taxpayer funds) unfairly rewards slothful behavior. These critics see cash incetives as a reward for indulgence rather than a form of treatment. Underlying this objection is the idea that we can all control our own weight, so it's unfair to pay those who have failed to do so on their own, especially if the payments come, as they sometimes do in Britain, from the NHS. Some liberals voice the opposite worry: that financial rewards for good healt (and penalties for bad health) can unfairly disadvantage people for medical conditions beyond their control. Allowing companies or health insurers to disciriminate between the healthy and the unhelathy in setting insurance premiums is unfair to those who, through no fault of their own, are less healthy and so at greater risk. It is one thing to give everyone a discount for joining a gym, but something else to set insuracne rates based on health outcomes that many people can't control.
The birbery objection is mroe elusive. But are they? In the cash for sterilization scheme, the bribery is clear. They are being paid to act, in many cases at least, against their interest. But the same can't be said of cash incentives to help people stop smoking or lose weight. Whatever external ends may be served (such as reducing ehalth costs for comapnies or a national health service), the money encourages behavior that promotes health of the recipient.
Why does the charge of bribery seem to fit, even though healthy behavior is in the interest of the person being bribed? It fits, because we suspect that the monetary motive crowds out other, better motives. Good health is not only about achieving the right cholesterol level and body mass index. It is also about developing the right attitude to our phsyical well-being and treatin gour bodies with care and respect. Paying people to tkae their meds does little to develp such attitudes and may even undermine them. This is because bribes are manipulative. They bypass persuasion and substitute an external reason for an intrinsic one You don't care enough about your own well-being to quit smoking or lose weight? Then do it because I'll pay you $750.
Health bribes trick us into doing something we should be doing anyhow. They induce us to do the right thing for the wrong reason. Sometimes, it helps to be tricked. It isn't easy to quit smoking or lose weight on our own. But eventually, we should rise above manipulation. Ohterwise, the bribe may become habit forming. If health bribes work, worries about corrupting good attitudes toward health may seem hopelessly high-minded. If cash can cure us of obesity, why cavil about manipulation? One answer is that a proper concern for our physical well-being is a part of self-respect. Another answer is more practica: absent the attitudes that sustain good health, the pounds may return when the incentives end.
Cash to quit smoking has shown a glimmer of hope. More than 90% of smokers who were paid for kicking the habit were back to smoking six months after the incentives ended.
In general, cash incentives seem to work better at getting poeple to show up for a specific event , than at changing long-term habits and behaviors.
Paying people to be healthy can backfire, by failing to cultivate the values that sustain good health.
If this is true, the economist's question (do cash incentives work?) and the moralist's question (are they objectionable) are more closely connected than first appears. Whether an incetive works depends on the goal. And the goal, preopely conceived, may include values and atittudes that cash incentives undermine.
Cash for Sterilization
Each year babies are born to drug-addicted mothers and many of them will suffer child abuse or neglect. Project Prevention offer drug-addicted women $300 cash if they will undergo sterilization or long-term birth control. More than three thousand women have taken the offer since the program launched in 1997. Critics call the project morally reprehensible, a bribe for sterilization, arguing that offering drug addicts a financial inducement to give up their reproductive capacity amounts to coercion, especially since the program targets vulnerable women in poor neighborhoods. Rather than help the recipients overcome their addiction, the money actually subsidizes it. But the founder, Barbara Harris, believes this is a small price to pay to prevent children from being born with drug addictions. Some of the women who accept the cash for sterilization have been pregnant a dozen times or more, many already have multiple children in foster care. In 2010, Harris took her project to Britain, where the idea of cash for sterilization met strong opposition. Harris has expanded to Kenya, where she pays HIF-positive women $40 to be fitted with intrauterine devices (long-term contraception). In Kenya and South Africa, where Harris next plans, health officials and human rights proponents have voiced outrage and opposition.
From the standpoint of market reasoning, it's not clear why the program should provoke outrage. Some critics say it reminds them of Nazi eugenics. Some argue that drug addicts, desperate for money, are not capable of making a truly voluntary choice when offered easy cash. But Harris replies, if thei rjuedgment is severly impaired, how can they possibly be expected to make sensible decisions about bearing and raising children? Viewed as a market transaction, the deal produces gains for both parties and increases social utility. According to standard market logic, the exchange is economically efficient. It allocates the good -- in this case, control over the addict's reproductive capacity -- to the person who is willing to pay the most for it and who is therefore presumed to value it most highly.
So why all the fuss? For two reasons, which together shed light on the moral limits of marketing reasoning. Some criticize the cash-for-sterilization deal as coercive; others call it bribery. There are actually different objections. Each points to a different reason to resist the reach of markets into places where they don't belong.
The corecion objection worries that when a drug-addicted woman agrees to be streilized for money, she is not acting freely. The financial inducement may be too tempting to resist. She may be coerced, in effect, by the necessity of her situation. In order to assess the moral status of any market transaction, we have to ask a prior question: under what conditions do market relations reflect freedom of choice, and under what conditions do they exert a kind of coercion?
The bribery objection is different. It is not about the conditions under which a deal is made but abouot the nature of the good being bought and sold. COnsider a standard case of bribery. If an unscrupulous character bribes a judge or government official to gain an illicit benefit or a favor, the nefarious transaction may be entirely voluntarily. Neither party may be coerced, and both may gain. What makes the bribe objectionable is not that it's coercive but that it's corrupt. The corruption consists in buying and selling something (a favorable verdict, say, or political influence) that should not be up for sale.
We often associate corruption with illicit payoffs to public officials. But, corruption also has a broader meaning: we corrupt a good, an activity, or a social practice whenever we treat it according to a lower norm than is appropriate to it. For example, having babies in order to sell them for profit is a corruption of parenthood because it treats children as things to be used rather than beings to be loved. Political corruption can be seen in the same light: when a judge accepts a bribe to render a corrupt verdict, he acts as if his judicial authority were an instrument of personal gain rather than a public trust. He degrades and demans his office by treating it according to a lower norm than is appropriate to it. This broader notion of corruption lies behind the charge that the cash-for-sterilization scheme is a form og bribery. It is corrupt that both parties -- the buyer (Harris) and the seller (the addict) -- value the good being sold (the childbearing capacity of the seller) in the wrong way. Harris treats drug-addicted and HIV-positive women as damaged baby-making machines that can be switched off for a fee. Those who accept her offer acquiesce in this degrading view of themselves. This is the moral force of the bribery charge. Like corrupt judges and public officials, those who get sterilized for money sell something that should not be up for sale. They treat their reproductive capacity as a tool for monetary gain rather than a gift or trust to be exercised according to norms of responsiblity and care.
It might be argued that the analogy is falwed. A judge who accepts a bribe in exchange for a corrupt verdict sells something that isn't his to sell; the verdict is not his property. But a woman who agrees to be sterilized for pay sells something that belongs to her -- namely, her reproducitve capacity. Money aside, the woman does no wrong if she chooses to be sterilized; but the judge does wrong to render an unjust verdict even in the absence of a bribe. If a woman has a right to give up her childbearing capacity for reasons of her own, she must also have the right to do so for a price. If we accept this argument, then the cash-for-sterilization deal is not bribery after all.
So in order to determine whether a woman's reproductive capacity should be subject to a market transaction, we have to ask what kind of good it is: Should we regard our bodies as possesions that we own and can use and dispose of as we please, or, do some uses of our bodies amount to self-degradation? This is a large and controversial question that also arises in debates about prostitution, surrogate motherhood, and the buying and selling of eggs and sperm. Before we can decide whether market relations are appropriate to such domains, we have to figure out what norms should govern oru sexual and procreative lives.
The Economic Apporach To life
The price system allocates goods according to people's preferences; it doesn't asses those preferences as worthy or admirable or appropriate to the cricumstance. But, economists increasingly find themselves entangled in moral questions, because of two reasons: one reflects a change in the world, the other a change in the way economists understand their subject. In recent decades, markets and market-oriented thinking have reached into spheres of life traditionally governed by nonmarket norms. More and more, we are putting a price oon noneconomic goods. At the same time, economists have been recasting their discipline making it more abstract and more ambitious. In the past, economists dealt with avowedly economic topics -- inflation and unemployment, savings and investment, interest rates and foregin trade. they explained how countries become wealthy and how the price system aligns supply and demand for pork belly futures and other market goods. Recently, however, many economists have set themselves a more ambitious project. What economics offers is not merely a set of insifhts about the production and consumption of material goods but also a science of human behavior. At the heart of this science is a simple but sweeping idea: in all domains of life, human behavior can be explained by assuming that people decide what to do by weighing the costs and benefits of the options before them, and choosing the one they believe will give them the greatest welfare, or utility. If this idea is right, then everything has its price. The price may be explicit, as with cars and pork bellies. Ir it may be implicit, as with sex, marriage, children, education, criminal activity, racial discrimination, political participation, environmental protection, even human life. Whether or not we're aware of it, the law of supply and demand governs the provision of all these things. Gary Becker, an economist, in The Economic Approach to Human Behavior (1976), rejects the od-fashioned notion that economics is the study of the allocation of material goods. The persistence of the traditional view is due, he specualtes, to a reluctance to submit certian kinds of human behavior to the frigid calculus of economics. Becker seeks to wean us from that reluctance. According to Becker, people act to maximize their welfare, whatever activity they're engaged in. This assumption, used relentlessly and unflinchingly, forms the heart of the economic approach to human behavior. The economic approach applies regardless of what goods are at stake. It explians life-and-death decisions and the choice of a brand of coffee. It applies to choosing a mate and buying a can of paint. Becker continues: I have come to the position that the economic approach is a comprehensive one that is applicable to all human behavior, be it behavior involving money prices or imputed shadow prices, repeated or infrequent decisions, large or minor decisions, emotional or mechanical ends, rich or poor persons, men or women adults or children, brilliant or stupid persons, patients or therapists, businessmen or politicans, teachers or students. Becker does not claim that patients and therapists, businessmen and politicians, teachers and students actually understand their decisions as governed by economic imperatives. But that's only because we're often blind to the wellsprings of our actions. The economic approach does not assume that people are necessarily conscious of their efforts to maximize or can verbalize or otherwise describe in an informative way the reasons for their behavior. However, those with a keen eye for the price signals implicit in every human situation can see that all our behavior, however remote from material concerns, can be explained and predicted as a rational calculus of costs and benefits. Becker illustrates his claim with an economic analysis of marriage and divorce:
According to the economic approach, a person decides to marry when the utility expected from marriage exceeds that expected from remaining single or from additional search for a more suitable mate. Similarly, a married person terminates his/her marriage when the utility anticipated from becoming single or marrying someone else exceeds the loss in utility from separation, including losses due to physical separation from one's children, division of joint assets, legal fees, and so forth. Since many persons are looking for mates, a market in marriages can be said to exist.
Some think this calculating view takes the romance out of marriage. They argue that love, obligation, and commitment are ideals that can't be reduced to monetary terms. They insist that a good marriage is priceless, something money can't buy. To Becker, this is a piece of sentimentality that obstructs clear thinking. With an ingenuity worthy of admiration if put to better use, those who resist the economic approach explian human behavior as the messy, unpredictable result of ignorance and irrationality, values and their frequent unexplained shifts, custom and tradition, the compliance somehow induced by social norms. Becker has little patince for this messienss. A single0minded focus on income and price effects, he believes, offers social science a sturdier foundation.
Can all human action be understood in the image of a market? Economists, political scientists, legal scholars, and others continue to debate this question. But what is striking is how potent this image has become -- not only in academia but also in everyday life. To a remarkable degree, the last few decades have witnessed the remaking of socila relations in the image of market relations. One measure of this transformation is the growing use of monetary incentives to solve social problems.
Paying Kids For Good Grades
School districts across the U.S. now try to improe academic performance by paying children for getting good grades or high scores on standardized texts. LA Dodgers had a promotion that gave free tickets to high school students who made the honor roll. We heard kids being paid by their parents for every A on their report card. More and more financial incentives are seen as a key to educational improvement. The cash payments yielded mixed results. In NY city, paying kids for good test scores did nothing to improve their academic performance. The cash for good grades in Chicago led to better attendance but no improvement on standardized tests. IN Washington, the payments helped some students (Hispanics, boys, and students with behavior problems) achieve higher reading scores. The cash worked best with the Dallas second graders; the kids who got paid $2 per book wound up with higher reading comprehension scores at the end of the year.
Some incentive programs target teachers rather than students. although teachers' unions have been wary of pay-for-performance proposals, the idea of paying teachers for the academic achievement of their students is popular among voters, politicans, and some educational reformers. In 2006, Congress established the Teacher Incentive Fund to provide pay-for-performance grants for teachers in low-achieving schools. The Obama administration increased funding for the program. A privately funded incentive project in Nashville offered middle school math teachers cash bonuses of up to $15,000 for improving the test scores of their students. The bonuses in Nashville had virtually no impact on students' math performance. But the Advanced Placement incentive programs in Texas and elsewhere have had a positive effect. more students, including students from low-income and minority backgrounds, have been encouraged to take AP courses., many are passing the standardized exams that qualify them for college credit. This is very good news, but it does not bear out the standard economic view about financial incentives: the more you pay, the harder studetns will work, and the better the otucome. The story is more complicated. The AP incentive programs that have succeeded offer more than cash to students and teachers; they transform the culture of schools and the attitudes of students toward academic achievement. Such programs provide special training for teachers, laboratory equipment, and organized tutoring sessions after school and on Saturdays. One urban school in Worcester, Massachusetts, made AP classes available to all students, rather than to a preselcted elite, and recruited students with posters featuring rap stars, making it cool for boys with low-slung jeans who idolize rappers like Lil Wayne to take the hardest classes. The $100 incentive for passing the AP test at the end of the year was a motivator, it seems, more for its expressive effect than for the money itself. "There's something cool about money, it's a great extra" (one successful student told The New York Times).
When an economist looked closely at the Advanced Placement incentive proram in low-income texas schools, he found something interesting: the program succeeded in boostin gacademic achievemnt but in a way that the standard "price effect" would predict (the more you pay, the better the grades). Although some schools paid $100 for a passing grade on the AP test, and others paid as much as $500, the results were no better in schools that offered the higher amounts. Students and teachers were not simply behaving like revenue maximizers.
So what's going on? The money had an expressive effect, making academic achievement "cool". That's why the amount was not decisive. Although only AP courses in English, Math, and Sceince qualified for the cash incentives at most schools, the program also led to higher enrollment in other AP courses, such as history and social studies. The Advanced Placement incentive programs have succeded not by bribing students to achieve but by changing atittudes toward achievement and the culture of schools.
HEALTH BRIBES
Increasingly, doctors, insurance companies, and employers are paying people to be healthy -- to take their medications, to quit smoking, to lose weight. You might think that avoiding disease or life-threatening ailments would be motivation enough. But, surprisingly, that's often not the case. One-third ot one-half of patients fail to take their medications as prescribed. When their conditions worsen, the overall result is billions of dollars a year in additional health costs. So doctors and insurers are offering cash incentives to motivate patients to take their meds.
Smoking imposes big costs on comapnies that provide health insurance to their workers. In 2009, GE began paying some of its employees to quit smoking, $750 if they could quit for as long as a year. The results were so promising that GE has extended the offer to all its U.S. employees. The Safeway grocery store chain offers lower health-insurance premiums to workers who don't smoke and who keep their weight, blood pressure, and cholesterol under control. Eighty percent of big U.S. companies now offer financial incentives for those who participate in wellness programs, and almost half penalize workers for unhealthy habits, by chargin gthem more for health insurance.
NBC reality show The Biggest Loser dramatizes the current craze of paying people to slim down. It offers $250,000 to the contestant who achieves the biggest proportional wieght loss during the season.
Doctors, researchers, and employers have tried offering more modest incentives. Unfortunately, the weight losses proved temporary. In Britain, NHS spends 5% of its budget treating obesity-related diseases, the NHS tried paying overweight people up to $612 to lose weight and keep it off for two years. The scheme is called Pounds for Pounds.
Two question for paying people for healthy behavior: does it work? is it objectionable?
From economic point of view, the case for paying people for good health is a simple matter of costs and benefits. The only real question is whether incentive schemes work. Many do object. The use of cash incentives to promote healthy behavior generates fierce moral controversy. One objection is abou tfairness, the other about bribery. The fairness objection is voice, in different ways, on both sides of the political spectrum. Some conservatives argue that overwieght people should slim down on their own: paying them to do so (especially with taxpayer funds) unfairly rewards slothful behavior. These critics see cash incetives as a reward for indulgence rather than a form of treatment. Underlying this objection is the idea that we can all control our own weight, so it's unfair to pay those who have failed to do so on their own, especially if the payments come, as they sometimes do in Britain, from the NHS. Some liberals voice the opposite worry: that financial rewards for good healt (and penalties for bad health) can unfairly disadvantage people for medical conditions beyond their control. Allowing companies or health insurers to disciriminate between the healthy and the unhelathy in setting insurance premiums is unfair to those who, through no fault of their own, are less healthy and so at greater risk. It is one thing to give everyone a discount for joining a gym, but something else to set insuracne rates based on health outcomes that many people can't control.
The birbery objection is mroe elusive. But are they? In the cash for sterilization scheme, the bribery is clear. They are being paid to act, in many cases at least, against their interest. But the same can't be said of cash incentives to help people stop smoking or lose weight. Whatever external ends may be served (such as reducing ehalth costs for comapnies or a national health service), the money encourages behavior that promotes health of the recipient.
Why does the charge of bribery seem to fit, even though healthy behavior is in the interest of the person being bribed? It fits, because we suspect that the monetary motive crowds out other, better motives. Good health is not only about achieving the right cholesterol level and body mass index. It is also about developing the right attitude to our phsyical well-being and treatin gour bodies with care and respect. Paying people to tkae their meds does little to develp such attitudes and may even undermine them. This is because bribes are manipulative. They bypass persuasion and substitute an external reason for an intrinsic one You don't care enough about your own well-being to quit smoking or lose weight? Then do it because I'll pay you $750.
Health bribes trick us into doing something we should be doing anyhow. They induce us to do the right thing for the wrong reason. Sometimes, it helps to be tricked. It isn't easy to quit smoking or lose weight on our own. But eventually, we should rise above manipulation. Ohterwise, the bribe may become habit forming. If health bribes work, worries about corrupting good attitudes toward health may seem hopelessly high-minded. If cash can cure us of obesity, why cavil about manipulation? One answer is that a proper concern for our physical well-being is a part of self-respect. Another answer is more practica: absent the attitudes that sustain good health, the pounds may return when the incentives end.
Cash to quit smoking has shown a glimmer of hope. More than 90% of smokers who were paid for kicking the habit were back to smoking six months after the incentives ended.
In general, cash incentives seem to work better at getting poeple to show up for a specific event , than at changing long-term habits and behaviors.
Paying people to be healthy can backfire, by failing to cultivate the values that sustain good health.
If this is true, the economist's question (do cash incentives work?) and the moralist's question (are they objectionable) are more closely connected than first appears. Whether an incetive works depends on the goal. And the goal, preopely conceived, may include values and atittudes that cash incentives undermine.
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