MARKET REASON(NG RENDERS MORAL CO+NSIDERATIONS IRRELEVANT---Episode 6

                      USING MONETARY INCENTIVES 
                      TO SOLVE SOCIAL PROBLEMS 

   Paying people to be sterilized is one brazen example. Here's another : school districts across the United States now try to improve academic performance by paying children for getting good grades or high scores on standardized tests. The idea that cash incentives can cure what ails our schools looms large in the movement for educational reform. 
   Back in the 1950s, I heard of kids being paid by their parents for every A on their report card. Some considered this slightly scandalous. But it never occurred to anyone that the school itself might pay for good grades. I remember hearing that some major league baseball team had a promotion in those years that gave away free tickets to high school students who made the honor roll. This was of no value to Kilgore youngsters who made the honor roll, being as the closest major league baseball team was in St. Louis. Despite that, I don't think any of my friends thought of this as an incentive --- it was more of a publicity move. 
   Things are different now. More and more, financial incentives are seen as a key to educational improvement, especially for students in poorly performing urban schools. 
   A recent Time magazine cover put the question bluntly :"Should Schools Bribe Kids?" Some say it all depends on whether the bribes work. 
   Roland Fryer, Jr., an economics professor at Harvard, is trying to find out. Fryer, an African American who grew up in tough neighborhoods in Florida and Texas, believes that cash incentives may help motivate kids in the inner-city schools. Backed by foundation funding, he has tested his idea in several of the largest school districts in the United States. Beginning in 2007, his project paid out $6.3 million to students in 261 urban schools with predominantly African American and Hispanic populations from low-income families. Different incentive schemes were used in each city. 

* In New York City, participating schools paid fourth graders $25 to score well on standardized tests. Seventh graders could earn $50 per test. The average seventh grader made a total of $231.55. 

*In Washington, D.C., schools paid middle school students cash rewards for attendance, good behavior, and turning in their homework. Conscientious kids could make up to $100 every two weeks. The average student collected about $40 in the biweekly payoff and a total of $532.85 for the school year.

*In Chicago, they offered ninth graders cash for getting good grades in their courses : $50 for an A, $35 for a B, and $20 for a C. The top student made a handsome haul of $1,875 for the school year.

*In Dallas, they pay second graders $2 for each book they read. To collect, students have to take a computerized test to prove they've read the book. { The results of Fryer's studies are summarized in an article by Amanda Ripley, "Should Kids Be Bribed to Do Well in School?" Time, April 9, 2010 }. 

   The cash payments yielded mixed results. In New York 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. { Fryer, "Financial Incentives and Student Achievement" ; Bill Turque, "D.C. Students Respond To Cash Awards, Harvard Study Shows," Washington Post, April 10, 2010.} 
   Fryer's project is one of many recent attempts to pay kids to do better in school. Another such program offers cash for good scores on Advanced Placement exams. AP courses expose students to challenging college-level material in math, history, science, English and other subjects. In 1996, Texas launched the Advanced Placement Incentive Program, which pays students from $100 to $500 (depending on the school) for earning a passing grade(a score of 3 or higher) on AP exams. Their teachers are also rewarded, with $100 to $500for each student who passes the exam, plus additional salary bonuses. The incentive program, which now operates in sixty Texas high schools, seeks to improve the college readiness of minority and low-income students. A dozen states now offer financial incentives to students and teachers for success on AP tests. 
   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, politicians, and some educational reformers. Since 2005, school districts in Denver ; New York City ; Washington, D.C. ; Guilford County, North Carolina ; and Houston have implemented cash incentive schemes for teachers.  In 2006, Congress established the Teacher Incentive Program to provide pay-for-performance grants for teachers in low-achieving schools. The Obama administration increased funding for the program. Recently, 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, sizable though they were, 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. And 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 students will work, and the better the outcome.  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 tough urban school in Worster, Massachusetts, made AP classes available to all students, rather than to a preselected 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 the money," one successful student told The New York Times. "It's a great extra." The twice-weekly after-school tutoring sessions and eighteen hours of Saturday classes provided by the program also helped. 
   When an economist looked closely at the Advanced Placement incentive program in low-income Texas schools, he found something interesting : the program succeeded in boosting academic achievement but not 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," wrote C. Kirabo Jackson, the author of the study. 
   So what was going on ? The money had an expressive effect --- making academic achievement "cool." That's why the amount was not more decisive. Although only AP courses in English, math, and science 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 succeeded not by bribing students to achieve but by changing attitudes toward achievement and the culture of schools.