Thursday, March 3, 2016

The Carrot and the Stick - Or How to Create a Fat, Lazy, Surly Donkey

NOTE: I found five more old posts that caught my fancy, and so I am reproducing them here.

There has been a recent trend in governmental circles. That is the adoption of supposedly "market based" solutions to problems completely unrelated to the market, solutions usually based upon the suggestion of various economic theorists. These theories usually have several features in common. First, they are almost always based on minimizing harm, second they tend to reverse conventional thinking on societal problems, and finally, they tend to arouse a lot of scorn wherever they are suggested. Oh, and they are completely wrong. Though I doubt many advocates would admit tot hat last one.

Let us give an example or two. For instance, traditional societies discouraged teen pregnancy by heaping scorn upon those who became pregnant, ostracizing them and labeling their offspring with various unflattering titles. It was a harsh fate to befall the individual who became pregnant, but was justified by those who did so on the grounds that the suffering of the girl and her child prevented the much greater harm of many pregnant teens. 

In modern times, compassionate individuals, with "progressive" attitudes about sexuality did a lot of work to destroy the stigma attached to out of wedlock births. And as a consequence of the removal of stigma (exacerbated by the welfare states' encouragement of illegitimate births) there was an explosion of teen pregnancies, an explosion which reached beyond the traditional impoverished teens into the middle and even upper classes. And, not surprisingly, those who argued for the moral neutrality of teen sexuality discovered that there may have been a good reason for discouraging teen pregnancies, as those teens who became pregnant began to fail to complete school, failed to find good jobs, fell into poverty, and also adopted a number of other self-destructive or damaging behaviors. 

And so modern thinkers were confronted with the daunting task of restoring the controls on teenage pregnancy without restoring the societal pressures that kept the teens in check. In other words, they needed to figure out how to keep teenagers from getting pregnant without stigmatizing pregnant teens and their babies. In fact, given their progressive views, without even criticizing teen sexual activity.

Enter the economic theorists.

As with most modern economic theories of "harm abatement" these theorists started from the premise that the old solution, "the stick", was inefficient, and we need to adopt a more positive solution, "the carrot"1. And so they develop various schemes which center around the concept of identifying "at risk" girls and then offering them various inducements not to get pregnant. Most often these take the form of monetary payments, but sometimes non-monetary alternatives are suggested as well.

Nor is this unique to the problem of teen pregnancy. A similar scheme has been proposed for students who are in danger of failing school. Though the advocates never mention it, most such students lack the traditional incentives, such as societal approval for performing well in school and parental pressure to do well. Finding themselves in a subculture where doing well in school is actually seen as a bad thing, and with parents either simply indifferent, or themselves sharing the prevailing attitude toward education2, these students must rely on personal motivation to carry them through their studies. Lacking sufficient motivation, these students often fail. To solve this problem, the carrot-centered economists suggest the solution of offering cash payments, or other incentives, to keep these students in school and successfully learning.

Many object to this on a variety of grounds, most often that it is a waste of money and that no one should be paid for doing "what they should be doing anyway". However, such objections rarely offer any sort of reasoned argument against the proposal. And as a result many have formed the impression that these theories, while unconventional, are viable solutions to a host of societal ills. So, I think it is time to look at them more objectively and ask what the logical outcome of such approaches would be.

First, let me say that superficially they would "work", in a pragmatic sense3. For those students inducted into such programs, provided the funds were great enough, based upon their desire for rewards as well as their attraction to the behavior being discouraged (teen pregnancy, poor grades, whatever), they will likely be motivated to behave in the desired way. That is, if you take a group of students and pay them for good grades, you will likely get better grades, and, to a point, better in direct proportion to the amount you pay out. (That is, $10 a week will get better grades than $5 a week and worse than $50 or $100.) Obviously, there is an upper limit to this improvement, based both upon the students' inherent capabilities, and the declining marginal benefit of each additional dollar4, but prior to reaching that limit, this theory holds true for the individual students.

So, on what grounds do I say the theory is wrong?

On the grounds that, while it achieves the short term goals, it fails to achieve them in a sustainable way, and fails to produce results comparable to the older system it hopes to supplant. Or, to make it more simple, as with most "pragmatic" solutions, it adopts a myopic visions (see  "The Shortcomings of Pragmatism", "Utopianism and Disaster", "Greed Versus Evil" and "Negative and Positive Rights") and looks only at the immediate consequences without taking in the larger picture.

For example, one of the reasons we have a problem is that there is a cultural perception that certain goals are not worthwhile. For example, that teenagers becoming pregnant is a morally and consequentially neutral event, or that doing well in school is of no significance. By paying students to do these things, we reinforce this impression. While we may continue to tell them they need to do well in schools because it is a value in itself, if we have to pay them to do well, we make that sound like a lie and tell them they need to do well in school only because it pays monetary rewards. This serves only to reinforce the perceptions that caused the problem in the first place, making the situation worse, not better.

A second, and more serious problem, is the impact on borderline cases, those with the same pressures, but who are not in the program in question. Now, not only do they not have an incentive to behave in desired ways, they actually have an incentive to behave in ways that we do not want, so as to make themselves eligible for such programs. For example, students who are not motivated to do well in schools, but who are not in the program paying for good grades will have an incentive to do more poorly so they may eventually be included in such a program and get paid. In other words, for those outside the programs, we are actually creating an incentive to misbehave.

And that is the biggest problem of all. By sending the message that there really is no reason to behave in desired ways except to get paid, and by creating incentives for those outside the program to behave badly in order to be included, such programs make the original situation, where some still held to traditional values and behaved well, while others did not, worse, creating a situation where, inevitably, we would have to include every member of the group in our program, as we have destroyed all non-monetary incentives.

What makes this truly pathetic is that there is a simple, cost effective solution. That being the much maligned "stick". The old societal pressures that said "do well in school or face scorn", "get pregnant and you will be shunned" and so on, might have been harsh, but they worked. And they did less harm than our "understanding" response does. Yes, shunning teen pregnancies and treating illegitimate children badly harmed a handful, but on the other hand, by discouraging teen pregnancy, it also prevented the harm we currently suffer thanks to thousands of pregnant teens. So the choice is, some social stigma for a small gorup, or the massive social damage of many times that many pregnant teens. Looke dat from that perspective the scorn seems a small harm.

But, of course, modern minds cannot comprehend the use of shame, or even societal approval5, to encourage or discourage behavior. Being so firmly set on "nonjudgmental" approaches, they have to smuggle in their judgmental approaches by offering cash incentives for behaving in approved ways6. And so they plan to spend a fortune to achieve results far inferior to those achieved without a dime spent or a single government program in the past. All so a few promiscuous teens don't feel unhappy.

It seems a strange approach to me.

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1.In essence the prototype of this approach was the penal system reform movement of the 1960's and later, which sought to eliminate punishment as the primary goal of prison and to instead emphasize rehabilitation, training and opportunities. And we can see just how effective that has been by looking at our cities. As their societal reforms removed any stigma from imprisonment, the only effective deterrent remaining is a long prison sentence. And, as we can see, those areas which have enacted longer prison sentences have seen a significant drop in crime. On the other hand, there is no correlation at all between training or other rehabilitation programs and crime rate. (Excepting where such programs go hand in hand with shorter sentences, in which case there is a very significant negative correlation.) See "A Rational Approach to Punishment", "Motives Unimportant", "Sunday Morning Talking Heads", "Symmetry and Asymmetry in Government".

2.I discussed this antipathy to education in several posts. In some ways this is the logical outcome of our worship of the juvenile, as discussed in "I Blame the Romantics", "Graphic Novels, Comic Books and Cultural Barometers" and "An Interesting Article".  On the other hand, as I discussed in "The Important Lesson of Racism" and "Utopianism and Disaster", it is also often the outcome of racial separatism. However that is a topic which deserves its own post.

3. As I mention it here, I would suggest reading my many objections to pragmatism as a political philosophy in "The Shortcomings of Pragmatism", "Pragmatism Revisited" and "Pragmatism Revistied, Again".

4. For those not versed in all the complexities of marginal efficiency and marginal benefit, here is a short explanation. If you are giving student $5 to improve their grades, then adding $5 will produce a significant improvement. If you are giving them $50, adding another $5 will produce smaller improvements. And if you are giving them $1000, adding $5 will probably produce almost no improvement at all. Theoretically, ever dollar will continue to produce some minute improvement, even at very high levels, but in reality, most likely at some point adding more money will simply produce no benefit, whether because  we have reached the students' maximum possible grades or because they have enough money that additional money offers no incentive to improve.

5. Those so firmly committed to being nonjudgmental can't even approve the use of simple social approval to encourage things such as abstinence, as it would imply that those doing otherwise are "wrong". If you doubt this, look at how gleefully they tear down any abstinence-based sex education. While they think we can stop teen pregnancy through bribes, they refuse to believe that simple social pressures could discourage pregnancy, totally ignoring the fact that ti did that very thing for centuries before promiscuity was made the preeminent individual right.

6. The oddest thing about "nonjudgmental" modern thinkers is they are still judgmental. They still oppose teen pregnancy and doing badly in school, but they can't say anything critical. So they smuggle in their value judgments by paying teens to behave the way they want. The fact that this is every nit as judgmental as the more traditional use fo shame and criticism seems to elude them.

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POSTSCRIPT
The programs I describe seem to have fallen into some disrepute recently, about the same time liberals became "progressives". I suppose the explicit way these programs throw money at a problem make them a hard sell to center-right independents, and, if the victory of the blue dogs show us anything, it is that the independents are a bit farther right than the Obama victory makes many think. So the "Progressives" find themselves doing all they can to hide their more explicit ties to traditional liberalism, including programs such as these.

Originally posted in Random Notes on 2009/09/20.

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