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…