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Paying Kids For Good Grades

Dec 24, 2011 • Behavioral Economics, Demand, Supply, and Markets, Economic Debates, Households, Innovation, Thinking Economically • 223 Views    No Comments

What happens when you combine a $100 student payment with a teacher bonus for high A.P. grades, better lab equipment, free tutoring, Saturday classes and extra teacher training?

At one Boston school, the results for an A.P. statistics class were:

  • A surge in enrollment from 12 in 2008 to 61 in 2010.
  • A grade of 3 or more for 70% of the class including 31 low-income students.
  • A grade of 5 for 1/4 of the class. Worldwide, 13% of all students taking the A.P. stat test got the highest grade.
  • A $7300.00 cash bonus for the teacher.

Paying kids for grades is controversial. This NYC program was discontinued.

Here, a Harvard professor discusses the issues that surround money for grades and why it can fail. His conclusions indicate that “traditional price theory” (i.e. a high price) might not work for grades but they can be successful for other tasks such as reading books.

The Economic Lesson

Paying for grades related to supply and demand.

  • Supply: Land, labor and capital became cheaper because a nonprofit was providing teacher training, student preparation (tutoring) and lab equipment.
  • Demand: The high price that the school was willing and able to pay crossed the supply curve at a large quantity.  As a result many students were willing and able to “produce” A.P. scores of at least 3.

Harvard research implied, though, that it was crucial to have had teacher training, student preparation (tutoring) and lab equipment.

An Economic Question: How might you draw demand and supply curves that illustrate a before and after for the market in AP grades? Assume that what is paid for good A.P. grades can include money and intangibles like pleasure.

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