I recently read an interesting book titled Economics 2.0. The book has a Freakonomics pedigree, but reads more like a newspaper or a blog. The benefit of this format is that the authors are able to review a wide variety of economic studies. The downside is there isn’t any real thesis. The book is basically just: “here are summaries of some interesting economic research.” Many of the papers reviewed, however, are interesting and this week I will recount some of the sections that peaked my interest.
Does paying parents to be on time increase punctuality?
Economists generally believe that when you pay someone more to do an activity, they will respond by doing more of the activity. This may not always be the case.
Uri Gneezy and Aldo Rustichini (2000) ask the following question: What will happen when a kindergarten charges parents a fee for being late picking up their children? Generally economists would predict a decrease in tardiness. However, when Gneezy and Rustichini conducted this experiment in Israeli daycare centers, they found that the late fee actually increased tardiness! After the fine was removed, punctuality did not revert to earlier levels.
The authors argue that charging a price broke a social covenant to be on time to pick up your kid. Because the late fee put a price on tardiness, it became a market transaction and thus was viewed as an acceptable behavior. “A powerful, intrinsic motive was crowded out by a weaker, extrinsic one.”
- Norbert Häring and Olaf Storebeck (2009). Economics 2.0: What the best minds in economics can teach you about business and life. Palgrave MacMillan, New York, NY.
- Uri Gneezy and Aldo Rustichini (2000). “A Fine is a Price” Journal of Legal Studies, v29(1).