Several years ago I read Michael Kremer’s article entitled “Randomized Evaluations of Educational Programs in Developing Countries: Some Lessons” in the 2003 AER Papers and Proceedings issue (jstor link). This brief article reviewed some of the recent results of evaluating the effects of various different programs on educational outcomes in the developing world. What particularly caught my eye was this paragraph summarizing a teacher incentive program in Kenya:
Some parent-run school committees in the area provide gifts to teachers whose students perform well. Glewwe et al (2002a) evaluate a program that provided prizes to teachers in schools that performed well on exams and had low dropout rates. In theory, this type of incentive could lead teachers either to increase effort or, alternatively, to teach to the test. Empirically, teachers responded to the program not by increasing attendance, but by increasing prep sessions designed to prepare students for exams. Consistent with a model in which teachers responded to the program primarily by increasing effort devoted to manipulating test scores, rather than by increasing effort at stimulating long-term learning, test scores for pupils who had been part of the program initially increased but then fell back to levels similar to the comparison group at the end of the program. [p. 104, emphasis added]
This provides a nice ‘real-world’ example of exactly what can go wrong when providing incentives in a multi-task situation – that is one where the ‘agent’ (here the teacher) performs multiple tasks not all of which can be monitored equally. As such it should make us wary of the current trend to ever more performance-based reward structures in everything from schooling to health-care.