Welcome to the Profit of Education website. Continuing the conversation begun in the book Profit of Education, we discuss the latest economic evidence on education reform.

I have an odd theory for an economist

Economics begins with the idea that people respond to incentives, particularly to monetary incentives. When it comes to incentive pay, I fear some reformers place too much faith in the power of incentives. Don’t misunderstand, higher teacher salaries are necessary to attract more of the best into the profession. But that’s a different point from believing that bonuses and such get better performance from teachers who’ve already signed on.

Two kinds of incentives do matter. Everyone likes to be seen as a success. So when a school uses an evaluation system that teachers believe in, those teachers will respond because they want to get a “gold star”– not because of a few bucks extra in their paycheck. The second incentive element is that professionals like to help each other out and to work in environments that brings everyone up to snuff. Meaningful evaluation systems encourage teachers to help other teachers, and encourage administrators to offer better support than the traditionally dreadful in-service “training.”

In other words, meaningful evaluation really matters. The role of incentive pay is more as an enabler of evaluation than it is in the traditional economics role of offering a financial reward.

That’s my theory, but there’s not a lot of hard evidence behind it. However, Dan Goldhaber and Joe Walch have a new article on Denver’s long-running ProComp incentive pay experiment that is suggestive. ProComp uses a multi-facted incentive pay system. To go along with this, ProComp uses multiple evaluation measures. And Denver made lots of other changes to go along with ProComp (better student information systems, changes in rewards for principals, etc.) Here’s a quote from Goldhaber and Walch.

We find significant student achievement gains associated with the implementation of ProComp. The … evidence generally suggests gains in student achievement for students assigned to both teachers participating in the ProComp pay system as well as non-participating teachers.

Teachers outside Denver’s merit pay system improved after ProComp was established even though they weren’t (financially) incentivized. That suggests to me that what may really matter about incentive pay isn’t the financial incentive, it’s the healthy kick in the pants to the whole system.

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