Sound a bit harsh? Perhaps. But if this theory is right, it could also be a major breakthrough.

THE POWER OF THREATS



Thanks to education reformers such as former D.C. schools chancellor Michelle Rhee, many of us are now familiar with the idea of merit pay -- the notion that teachers' earnings should be tied to their students' success. Unions have pushed back hard against the idea. In terms of public policy, it often translates into handing out year-end bonuses to instructors who get the best results, with the hope that the promise of a larger paycheck will motivate them to work harder when they're up in front of the chalkboard.

But Levitt, Fryer and Co. argue that there's a serious problem with merit pay. So far, they say, there's been scant evidence that it actually works. Studies of teacher incentive programs in Tennessee and New York City failed to find any signs that they improved student learning. In the New York experiment, which Harvard's Fryer conducted, the impact may have even been detrimental.

Enter loss aversion. The authors theorized that instead of offering a lump-sum bonus to teachers come summertime, it might be more effective to give instructors money upfront, then warn them that they would have to pay it back if their students didn't hit the proper benchmarks. Rather than tap into teachers' ambition, they'd tap into their anxiety.

To test their idea, the authors designed an experiment for the 2010-2011 school year involving 150 K-8 teachers from Chicago Heights, a low-income community in Illinois. The instructors were randomly assigned to a control group or one of two main bunches, which I'll shorthand as the "winners" and the "losers." The winners agreed to work under a traditional year-end bonus structure, where they could make up to $8,000 extra based on their students' standardized test scores. The losers were given $4,000 off the bat and informed that if their students' turned in below-average results, they'd have to pay a portion of it back commensurate with just how poor their scores were. On the flip side, an above-average performance could earn them additional bonus money, up to the full $8,000.

The authors then divided the winners and losers again so that some teachers would be rewarded based on their results as teams of two, and others would be rewarded based on their results as individuals.

Come vacation time, the losers had won. In math, paying teachers a year-end bonus had no statistically significant effect. When teachers had money to lose, though, their students over performed. The impact was large -- the equivalent of improving a teacher's skills by one full standard deviation -- and the pattern held whether teachers were compensated as a team or as individuals. The authors' data on reading scores turned out to be shakier, since most students ultimately had more than one instructor working with them on language skills, but it indicated a similar trend.