Carrots and Sticks

Half-term brings a time for reflection and on the train heading north with the family, to visit family, I maintained my fix of economics via The Economist. I particularly enjoyed an article on StickK.com, a website allowing users to set and monitor contracts to achieve personal goals. The founders, graduate economics students Dean Karlan and John Romalis, got the idea when they used contracts to create sufficient incentives to both lose weight. If one failed to meet their weight loss target, they were to pay the other $10,000. It worked (unsurprisingly?) and now the site apparently has 50,000 users who have pledged either serious sums of money (to charity) or public humiliation (via the website) to provide sufficient incentives to succeed in giving up smoking, losing weight, taking more exercise or generally just becoming a better person.

With the family gathered and The Economist stashed away, I was reminded of the article by a new incentive system my sister has devised to get her sons (aged 10 and 7) to be more helpful around the house. As a busy childminder she spends most days clearing up after her own and other peoples’ children. After trying a command and control approach with her boys (“Tidy your rooms!”, “Please help to wash up!”) with limited success, they have now adopted a market-based approach with a target of 10 chores to perform in return for their weekly allowance.

Unsurprisingly, it’s working. The average 10 and 7 year old boy can endure any level of tension and threats - but now they have a genuine incentive to help, they are actively seeking new opportunities to find ways of being useful. Obviously the weekly allowance has to be higher than previous, but the difference is more than made up for by greater harmony and - just as importantly for my sister - the chance to put her feet up once in a while.

Recent news articles have examined carrot and stick approaches to participation in the labour market. Is it all about the reward from work being greater than the immediate gratification offered by leisure? Or are there fundamental structural issues at play as well?

I tried out the new incentive scheme with my nephews on Sunday afternoon and was very pleasantly surprised. The 7 year old eased my ageing back with a very good shoulder massage (£1) and they both read stories to my daughter (50p each) with even more relish than usual.

It was even more successful from my point of view as, somewhere in the excitement of negotiating prices and performing their jobs to the best of their ability, they forgot to collect most of the money.

Perhaps the reward for good work has to be more than financial? Another lesson, perhaps, for the policy-makers…

Unit 2 Macro: Cyclical and Structural Economic Issues Facing the UK [23 May 2012]
Unit 2 Macro: Evaluation on Supply-Side Policies [21 May 2012]
Revision notes on unemployment [20 May 2012]
Unit 1 Micro: Economics of Cocoa Prices [12 May 2012]
Unit 1 Micro: Economics of a Minimum Wage [12 May 2012]
Unit 2 Macro: Revision Notes on Supply-side Policies [10 May 2012]
Unit 2 Macro: Unemployment Glossary [5 May 2012]
Macro Revision: Putting Things in Context [29 Apr 2012]
Unit 1 Micro: The Collapsing Price of Carbon [3 Apr 2012]
Unit 1 Micro: Revision on Producer Subsidies [2 Apr 2012]
Unit 1 Micro: Revision on Producer Cartels [31 Mar 2012]
Unit 2 Macro: Policies to Drive Economic Recovery [9 Mar 2012]
Daniel Kahneman on decision-making [5 Feb 2012]
Unit 1 Micro: Winning the War on Deforestation [5 Feb 2012]
Unit 2 Macro: Videos on Productivity [17 Jan 2012]
Economics at the Movies - Freakonomics [9 Jan 2012]
Unit 1 Micro: Externalities from Metal Theft [2 Jan 2012]
Unit 1 Micro: Biomass Subsidies and Timber Prices [30 Dec 2011]
Unit 3 Micro: Sub Normal Profits - BP Leaves the Solar Industry [21 Dec 2011]
Economics of Deforestation [20 Dec 2011]
Prezi on Information Failures [20 Dec 2011]
Unit 2 Macro: Long Term Unemployment - A Human Story [15 Dec 2011]
Unit 2 Macro: Will a Youth Jobs Subsidy Work? [30 Nov 2011]
LSE lecture: Darwin economy [13 Nov 2011]
Behavioural Economics: Bittersweet Symphony - The Psychology of Food [8 Nov 2011]
Unit 2 Macro: Video Clips on Unemployment [6 Nov 2011]
Unit 3 Micro: Impulses to Change Management Models [5 Nov 2011]
Unit 3 Micro: UK Executive Pay - All in it Together? [29 Oct 2011]
Unit 1 Micro: Is the Sun Dipping on Solar Subsidies? [27 Oct 2011]
Can the “invisible hand” solve Africa’s poverty? [13 Oct 2011]
Unit 1 Micro: Copper prices and a copper crime wave [10 Oct 2011]
Unit 1 Micro: The Supply and Demand Rap! [28 Sep 2011]
Unit 1 Micro: Drink Driving and Government Intervention [26 Sep 2011]
Unit 1 Micro: Exercise on Market Supply [26 Sep 2011]
Behavioural Economics - The IKEA effect [25 Sep 2011]
Study Note - The Basic Economic Problem: Scarcity and Choice [13 Sep 2011]
50% tax rates - Chuck it George [7 Sep 2011]
Unit 2 Macro: Reducing Unemployment after a Recession [11 Jul 2011]
Glastonbury, rain, mud, abandoned tents and negative externalities. [4 Jul 2011]
Unit 1 Micro: Are carbon taxes ineffective? [20 Jun 2011]
Poor Economics - Esther Duflo at the LSE [3 Jun 2011]
AS Macro Key Term: Supply-Side Policies [25 May 2011]
Unit 3 Micro: Monopsony Power in Markets [19 May 2011]
Super-cooperators and Game Theory [19 May 2011]
Unit 3 Micro: Perfect Competition [19 May 2011]
A2 Micro: Innovation Efficiency and Welfare [18 May 2011]
A2 Micro: Ownership and Control in Modern Businesses [18 May 2011]
Unit 3 Micro: Diseconomies of Scale [18 May 2011]
Review of “Adapt” by Tim Harford [9 May 2011]
Dominos Pizza turns to Behavioural Economics [5 May 2011]
AS Micro Revision: Public and Private Goods [21 Apr 2011]
Key AS Micro Terms: Prices [15 Apr 2011]
AS Macro Key Term: Frictional Unemployment [11 Apr 2011]
RES Essay Competition - Obesity and a Fat Tax [7 Apr 2011]
AS Micro Revision: Banana Prices [1 Apr 2011]
The Power of Incentives [31 Mar 2011]
Economics Q&A: Should the CAP be scrapped? [14 Feb 2011]
EU Economics: Hopes for a low carbon future in Europe [3 Feb 2011]
Youth Unemployment in the UK [24 Jan 2011]
Winner of the Fun Theory Competition [23 Jan 2011]
Ariely on Limitations of Rational Economics [23 Jan 2011]
Economics Q&A: What are some of the benefits and drawbacks of a period of rising world food prices [4 Jan 2011]
Trees as private and public goods [3 Jan 2011]
Behavioural Economics - Nudge Squared! [30 Dec 2010]
Behavioural Economics - Public Policy and Behavioural Change [30 Dec 2010]
Behavioural economics links [13 Dec 2010]
Pricing tricks and behavioural economics [12 Dec 2010]
Promising news on deforestation [2 Dec 2010]
Boris’s Bikes - Gearing up for Success? [30 Oct 2010]
Dan Ariely at the LSE [19 Oct 2010]
Jerome Kerviel and the Principal Agent Problem [5 Oct 2010]
Animating the Ultimatum Game [6 Sep 2010]
Inequality and the risk of financial crisis [25 Aug 2010]
Monkeynomics! [2 Aug 2010]
The Upside of Irrationality [22 Jul 2010]
Questions in Behavioural Economics - Combatting obesity [30 Jun 2010]
Questions in Behavioural Economics - The Longest Match and Loss Aversion [30 Jun 2010]
Questions in behavioural economics - How can framing be used to influence public decisions? [27 Jun 2010]
Questions in behavioural economics - Why is the placebo effect important? [26 Jun 2010]
Questions in behavioural economics - Why do we engage in herd behaviour? [25 Jun 2010]
Recycling waste - goodbye stick, hello carrot [7 Jun 2010]
Innovation to get the British economy growing again [7 Jun 2010]
Unit 2 Macro: How can supply-side policies help in a recession? [6 Jun 2010]
Housing and the British Economy [5 Jun 2010]
Specific Supply Side policies [5 Jun 2010]
A selection of revision notes on supply side policies [1 Jun 2010]
Why is it so hard to tickle yourself? [25 May 2010]
Unit 3 Micro: Efficiency and Price Intervention in Markets [21 May 2010]
Dan Ariely’s new book - the Upside of Irrationality [21 May 2010]
A2 Economics Revision - Direct and Indirect Taxation [9 May 2010]
The Irrationality of Shaving [2 May 2010]
Issues and Prospects for the UK Economy in 2010 [25 Apr 2010]
Build a Tower - Build a Team [22 Apr 2010]
A Fun Way to Get People to Obey Speed Limits [2 Apr 2010]
RES Essay Competition - Inequality Title [1 Apr 2010]
Behavioural economics - lessons from an ad man [9 Mar 2010]
Climate Crunch - Making the Economics Fit [4 Feb 2010]
Focus on the National Minimum Wage [24 Jan 2010]
Jimmy’s Global Harvest [8 Jan 2010]
How Markets Fail - the logic of economic calamities [26 Dec 2009]

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