Imagine that you have a series of plumbing problems in your house—clogged sinks, backed up toilets—and decide to hire a plumber. Which of these two incentive structures would you choose?

(A) The plumber only gets paid when the problems are fixed.
(B) The plumber will continue to be paid indefinitely for working on the problem, and will continue to get paid as long as the problem persists

Most of us would choose option A since we are more interested in functional indoor plumbing than we are in providing a paycheck for plumbers. Hard-working plumbers should prefer option A too since it respects their dignity and skills. The vocation of the plumber is to solve plumbing problems, not to latch onto make-work projects.

So if most people would choose option A, why does the government almost always adopt an incentive structure that reflects option B?
Read more on Why Government Workers Should Get Pay Decreases for Longevity…

I have written on several recent occasions about the role of incentives in education, both for teachers and for students (see here, here, and here). Yesterday, David Burkus, editor of LDRLB, wrote about a recent study by Harvard University economic researchers on the role of incentives in teacher performance. Interestingly, they found that incentives (such as bonus pay) are far more effective if given up front with the caution that they will need to be returned if the teacher’s performance is not up to par. When teachers regarded the bonuses as already their property, they fought far more effectively to protect them.

Read more on Education and Incentives…