Merit pay and ‘loss aversion’

Uh oh, educators, hold onto your hats! It appears that a new catchphrase is coming to school reform, and it’s called “loss aversion,” explains Larry Ferlazzo, a high-school teacher in Sacramento who writes a blog for educators and a teacher advice column. Loss aversion is a psychological finding that losing something makes us feel worse than gaining the same thing makes us feel better. A group of economists published a study two weeks ago implementing this strategy with students. They wanted to see if students would try harder on a standardized test if they knew they would get cash or some other kind of immediate prize if they improved on their results. They tried offering these rewards in a couple of different ways, but found the biggest test improvement would come if they gave the student the money ($20) or non-cash award before the test and then told them they would have to give it back if they didn’t score well. There are a number of issues with this study, including the fact that the gains do not appear to have carried over to carry over to the future and that it appears to be a relatively small number of students. The authors also appear to ignore recent studies that have shown that loss aversion can have particularly damaging effects on many people…

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