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The behavioral economist goes to school

The behavioral economist goes to school

By Archit Jain

ISRO’s launch of a record 104 satellites last week was a pleasant reminder that Indian scientists and engineers have made an indelible mark in the international halls of fame. In no uncertain terms, India is winning the battle of pushing its brightest minds to the vanguard of global technology and medicine.

Choosing one’s battles

But it is losing the war – forty percent of its third graders cannot read. The Indian education system has always been good at the upper end of the distribution, which is where the historically privileged elite come from. But the screening and nurturing of high-performing students has been at the expense of adding value to all students. Even though the Right to Education Act, which in 2009 made education free and compulsory for all children aged six to fourteen, enrolled 230 million children in schools, a tiny fraction of those enrolled is getting a proper education. A survey conducted by ‘Pratham’ in 2013 shows that a mere quarter of fifth graders could perform three-digit-by-one-digit division problems — a skill normally taught in third grade.

Seventy percent of third graders could not identify two-digit numbers and sixty percent could not read a first-grade level paragraph. This ought to raise some red flags.

But losing the war

The reasons are forthright – teachers don’t show up, children don’t show up, the class size is too big, there are few or no books available, and whatever ‘learning’ takes place is through rote repetition or at least this has been the popular belief up until now.

The sole emphasis on children’s low ability to perform well on standardized tests obscures the possibility that, in addition, they aren’t motivated enough to push themselves to study for a test and perform well. After all, a five-year-old doesn’t go to school because she wants a better life — she must be persuaded that school is fun now, or given no better option. Research from neuroscience shows that while parts of the brain corresponding to a motor and sensory process mature early, higher cognitive areas like the prefrontal cortex — which is responsible for planning, self-control and working memory — does not fully develop until a person is twenty.

A five-year-old doesn’t go to school because she wants a better life — she must be persuaded that school is fun now, or given no better option.

The prospect of higher earnings more than a decade into the future, therefore, exerts the negligible influence on a child’s decision to pay attention in class today or to complete her homework tonight. This phenomenon referred to as ‘hyperbolic discounting’ in behavioral economics lingo, explains why children might invest far too little effort in an activity that has undisputed benefits for them in the long run.

Thumbs up for science

What works, instead — as researchers studying the Chicago public schooling system found — are immediate rewards. Instant delivery of financial and non-financial incentives had a substantial impact on test scores of the students they surveyed. But this impact disappeared, as hyperbolic discounting would predict when the incentives were given with a delay. No wonder then that Indian children under invest in their education — the rewards from our education system, like higher standards of living, almost always come with a delay. Another implement in the behavioral economist’s toolbox is ‘loss aversion’, the idea that loss avoidance is preferable to gain acquisition of an equal magnitude.

Another implement in the behavioral economist’s toolbox is ‘loss aversion’, the idea that loss avoidance is preferable to gain acquisition of an equal magnitude.

And indeed, experiments where a $10 bill was handed out to students at the beginning and taken away from them in case they did poorly on a test, saw better results than experiments where a $10 bill was given to meritorious students after they took the test. Loss aversion also works with teachers — another study in Chicago found that giving teachers their performance bonuses upfront and removing them if students do not meet standards, rather than giving the bonuses at the end of the year if students do meet the standards, increased student test scores enormously.

Nurturing them young

In Kenya, free de-worming treatment in primary schools not only improved health outcomes but also reduced school absenteeism by twenty-five percent. This has proven to be one of the most cost-effective ways in boosting school enrollment, at only $3.50 for each extra year of schooling. In Colombia, cash payments to families whose children regularly attend school increased school attendance.

MHRD Minister

Psychological analysis is proving to be an important tool for developing education policy in India. | Photo Courtesy: The Wire

The effect on attendance persisted even if the children’s friends  — and not they themselves — received the transfers. ideas42, an American behavioral consultancy, reduced dropout rates of a few colleges from seventeen percent to nine percent by texting assignment deadlines to students and showing them videos of other students who face similar challenges in college. Insights from psychology have a lot to teach about how to conduct education policy, and the Indian government, which is planning to launch a Nudge Unit within NITI Aayog, has evinced a willingness to listen.


This is the first article in a six-part series that explores how insights from psychology can be used for economic development. 
Featured Image Credit: Unsplash
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