Wednesday, March 08, 2006

Which is the hardest terrain for incentives?

One of my first jobs during my high school was teaching a Class 6 kid in Kolkata. A tuition for geography and maths. Seemed pretty easy. What I am not sure is how he made a kid of me to the point that we had pillow fights and I broke the precious vase in his house. What followed is too embarassing to be narrated here. But the lesson stuck.

When you are dealing with children, designing incentives to make them follow your decision is very tough. If you have followed the posts What are the wrong types of incentives? and How to make your daughter arrive home early from a party?, you will know what I am talking about.

Donald Cox, an economist has a short piece on the lessons of economics in dealing with children in Parent-onomics 101: Can Economics Help You Be a Better Parent?

His lessons can be summarised in three points.
  • Sometimes, let them have a taste of what lies ahead in order to arrive at a decision.
  • Often, a no-bargaining position is better than one open to discussion.
  • "...explicit payments could actually dilute intrinsic motivation by turning every family activity into a nickel-dime bargaining game."
And I agree with his theme "Families are fundamentally different from markets, after all, and the subtle tug of altruism and reciprocity can be more effective — not to mention more civil — than explicit prices."

Experimental economics needs to learn a few lessons from kids as well.

Hat-tip from Babysh!

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