Clay Shirky’s TED Talk on how cognitive surplus will change the world.

July 31, 2010, 2:35pm

“Day-care is day-care the world over; working parents with children under school age need someone to watch their children during the day. Sometimes day-care is set up as a public service, other times as a business, but in either case, the parents and the day-care workers have a potential daily clash of interests: pick-up time. The workers have the outside lives, so they want all the kids safely reunited with their parents by a set time. The parents, on the other hand, busy at work or running errands and never entirely in control of their travel time, want some slack to pick up their children later than the appointed hour.

The study’s ten day-care centers in Haifa ran until four P.M., though no penalty for picking up children late was specified. Gneezy and Rustichini observed closing time in the centers to see how often parents were late; in a normal week, there were seven or eight late pickups at each center. Then they instituted a penalty six of the centers: henceforth, they announced, parents would be fined for picking their children umpire than ten minutes late, a fine that would be automatically added to their bill. (The other four centers, the control group, operated unchanged to ensure that any observed effects in the six selected schools were the result of the fine.)

The new rule was imposed at the six centers the following week, and its effect on the parents’ behavior was immediate: their lateness increased. In the first week, the average number of late pickups rose to eleven; to fourteen in the week after that; and to seventeen the week after that. The episodes of lateness finally topped out a month into the experiment at around twenty a week―nearly triple the pre-fine number. Thereafter, for as long as the fine was in place, the number fluctuated, but it never fell below fourteen and remained closer to twenty most weeks. Meanwhile, the number of late pickups in the four control centers didn’t change.

From the point of view of deterrence theory, this result was perverse. The fine was small, just ten shekels (about three dollars), but it should still have had some deterring effect; however bad a late pickup was before the fine was instituted, it should have been ten shekels worse after. And even if it was too small to have a deterring effect, it shouldn’t have increased the frequency of lateness. And yet that’s just what it did.

The pre-fine bargain between parents and teachers was what Gneezy and Rustichini labeled an “incomplete contract”―a set of relations that took place partly in the market but left considerable room for the interpretation of certain behavioral norms, including those around pick-up time. As the noted in their paper, “Parents could form any belief on the matter, as they probably did, and act accordingly.” Once the fine was instituted, however, that ambiguity collapsed, along with the behavioral norms that had been established. The fine turned day care from a shared enterprise into a simple fee-for-service transaction, allowing the parents to regard the workers’ time as a commodity, and a cheap one at that. The parents assumed that the fine represented the full price of the inconvenience they were causing, and it seemed to remove any fears that they might suffer some unspecified consequence for abusing the workers’ goodwill.

Gneezy and Rustichini kept the fine in place for three months, then ended it. Once the fine stopped, however, the number of late pickups per week didn’t return to pre-fine levels; in fact, it remained as high as it had been when the fine was in place. Inducing parents to see the day-care workers as participants in a market transaction, rather than as people whose needs had to be respected, had alters the parents’ perceptions of the workers, an alteration that outlived the fine itself. One might impose a fine significant enough to deter lateness, the paper noted, but the experiment showed that market transactions are not merely additive to other human motivations; they alter them by their mere presence.”

From Clay Shirky’s Cognitive Surplus (pp. 132-134), on Uri Gneezy and Aldo Rustichini’s paper “A Fine Is a Price”.

July 31, 2010, 12:53am