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Suggested Citation:"9 Education." National Academies of Sciences, Engineering, and Medicine. 2023. Behavioral Economics: Policy Impact and Future Directions. Washington, DC: The National Academies Press. doi: 10.17226/26874.
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9

Education

The ongoing COVID-19 pandemic has both highlighted and exacerbated long-standing problems in public education. Scores on the National Assessment of Educational Progress released in October 2022, for example, showed the largest declines since 1990 in reading performance and a first-ever decrease in mathematics performance for nine-year-old students.1 These and other declines in test performance have disproportionately affected low-income students, students from historically underserved groups, and English-language learners (Kuhfeld, Soland, & Lewis, 2022; Office for Civil Rights, 2022). But the urgency of addressing these negative effects of the pandemic comes in the context of decades of work to address persistent problems: to boost student achievement and attainment, reduce achievement gaps, and provide strong motivations for teachers and administrators to make choices that will benefit student learning.2

Behavioral economic interventions have the potential to address many of the factors that impede educational attainment and achievement, from students’ motivations to bureaucratic challenges associated with securing admission and funding for postsecondary education. Researchers have begun to examine how behavioral economics successes in other domains could apply to challenges in K–12 and postsecondary education, and the volume of such research has increased in the past decade. Scholars have

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1 See The Nation’s Report Card: https://www.nationsreportcard.gov/highlights/ltt/2022

2 For data on achievement gaps and trends, see https://cepa.stanford.edu/educational-opportunity-monitoring-project/achievement-gaps/race/. For data on educational attainment, see https://nces.ed.gov/programs/raceindicators/indicator_rfa.asp

Suggested Citation:"9 Education." National Academies of Sciences, Engineering, and Medicine. 2023. Behavioral Economics: Policy Impact and Future Directions. Washington, DC: The National Academies Press. doi: 10.17226/26874.
×

studied interventions targeting students, teachers, and parent–child interactions at the elementary, secondary, and postsecondary levels, although the quantity of studies varies considerably across these domains.

Thus far, those approaches to educational improvements have not borne substantial fruit (Levitt et al., 2016; Damgaard & Nielsen, 2018). This chapter focuses on the limited available research on parent–child interactions, access to postsecondary schooling, and ways to improve teacher performance, linking this literature to the five core principles.

PARENT–CHILD INTERACTIONS

Researchers have explored the use of nudges and rewards of various kinds to boost achievement among students at various stages of development, focusing on the behavioral factors that may influence parent–child interactions. Parents are clearly crucial teachers and role models in their children’s lives. While they realize the importance of educational investments in their children, the potential impact of a particular event, such as reading to their child, can seem vague and remote, while the competing demands on their time, coupled with fatigue at the end of the day, are immediate and well understood (Lavecchia, Liu, & Oreopoulos, 2016).

To address the achievement of younger students and overcome parents’ limited attention and present bias, researchers have tested the use of low-touch nudges, such as goal setting, reward programs, text reminders, and efforts to increase parents’ engagement with their young children to improve literacy (Mayer et al., 2019; York, Loeb, & Doss, 2019). These nudges can serve as commitment devices and reminders of the importance of these activities for parents when they are faced with more immediate work and family obligations.

Moreover, even with the best of intentions, parents often have inaccurate beliefs about their children’s education. For instance, they may have limited information about the number of days their child is absent or have an inaccurate understanding of an appropriate number of absences for a child. To overcome these limitations, one recent light-touch nudge in Philadelphia showed that a letter sent home to parents informing them of their child’s absences increased daily attendance and decreased chronic absenteeism (Rogers & Feller, 2018).

Adolescents also have a particularly strong present bias, which can lead them to make suboptimal choices about their education. In this situation, too, parents may not be aware of their children’s choices or the significance of those choices in the long term. One recent study in Wisconsin found that sending brochures to parents informing them of the benefits of science, technology, engineering, and mathematics (STEM) classes, along with a newly created website, increased STEM high school coursework

Suggested Citation:"9 Education." National Academies of Sciences, Engineering, and Medicine. 2023. Behavioral Economics: Policy Impact and Future Directions. Washington, DC: The National Academies Press. doi: 10.17226/26874.
×

completion (Harackiewicz et al., 2012). These researchers provided information to the parents, rather than the students, understanding that parents will communicate their preferences to their children and will often make more beneficial decisions that focus on children’s long-term welfare rather than their short-term preferences.

ACCESS TO POSTSECONDARY EDUCATION

An area that has received significant research attention is the application of behavioral economic ideas for increasing college applications, applications for financial aid, and college enrollment for students who have completed high school. The benefits to both individuals and society when students complete high school and obtain postsecondary degrees are significant. However, low-income students and those from historically underserved groups tend to fall out of the education pipeline more easily than do their more advantaged peers (with similar performance metrics): they are less likely both to attend college and to opt for more selective institutions (Hoxby & Avery, 2013; Wilbur & Roscigno, 2016). Factors that may impede lower-income students include behavioral biases (status quo, debt aversion, and present bias), the administrative burden of the admissions process, and their uncertainty about how to obtain financial aid (Dynarski & Scott-Clayton, 2006; Hoxby & Turner, 2015; Dynarski et al., 2021). The process of learning about college, applying for admission, and applying for financial aid poses a significant administrative burden (see Chapter 13) that is daunting for any student but especially so for historically disadvantaged students.

One promising approach has been to address students’ inaccurate beliefs about their prospects at key points in the education life cycle, such as the transition from middle school to high school coursework. Interventions have been designed to foster students’ belief in their intellectual capacity, affirm their perception of the value of school, and challenge negative stereotypes (e.g., Yeager et al., 2016). Work conducted in the United Kingdom suggests that interventions designed to influence parents’ expectations about the benefits of a university degree are promising (Delavande & Fumagalli, 2019).

A number of studies have addressed the fact that students may be unaware of financial aid opportunities available to them and frequently underestimate their likelihood of receiving aid and admission—that is, they have inaccurate beliefs (Hoxby & Turner, 2015). For example, two states have run large-scale programs to increase college attendance among low-income students to counter such beliefs. Michigan informed a cohort of low-income students of an available benefit: any low-income state resident admitted to the University of Michigan was guaranteed four years of free

Suggested Citation:"9 Education." National Academies of Sciences, Engineering, and Medicine. 2023. Behavioral Economics: Policy Impact and Future Directions. Washington, DC: The National Academies Press. doi: 10.17226/26874.
×

tuition and fees (Dynarski et al., 2021). Researchers found that the students who received the distinctive mailing that explained the benefits were nearly 2.5 times more likely to apply than those who did not receive it (68% and 26%, respectively). They also reported that approximately one-fourth of the students who applied in response to the mailing were students who otherwise would not have applied to college at all.

Researchers in California sought to increase financial aid applications among low-income students who were qualified to receive aid by altering the content of letters sent to high school seniors (Linos, Reddy, & Rothstein, 2021). They found that the revised letters, which informed students of scholarship opportunities and offered social-belonging messages (conveying that all students would be welcome), generated more applications than the original letter; however, the revised letters did not ultimately increase scholarship use. In a second field experiment, they also included cost information for the schools in which the students indicated interest, obtained from their Free Application for Federal Student Aid (FAFSA) applications. The cost information increased the likelihood that students enrolled in their lowest-cost alternative, which was frequently a community college, shifting them away from four-year public and private California schools.

These studies suggest that relatively simple changes in the way information is provided can overcome inaccurate beliefs and thus increase postsecondary applications and enrollments. Furthermore, these studies show that potential students tend to acquire information about college access and funding gradually, so it is important that interventions are repeated multiple times and aligned with the issues that potential students confront. For example, many students begin to think about paying for the actual costs of higher education only after they are admitted; thus, it may be useful to provide information about actual costs and financial assistance at an earlier stage in the process so that students do not rule out the possibility of college because they lack information about possibilities for aid.

Default settings have also been tested as a way of lowering administrative burden in the education context. When Maine passed legislation that required all public high school juniors to take the SAT in 2006, the proportion of students who took the test increased by 43 percent and enrollment in four-year colleges rose 4 to 6 percent among public high school seniors (Hurwitz et al., 2015).

Researchers have also studied nudges designed to increase completion of the FAFSA form, which requires a considerable amount of time and knowledge. The goal of the nudges is to overcome limited attention and present bias. For example, in one innovative field experiment, several low-income families were offered free assistance filling out the FAFSA as a component of tax services at H&R Block (Bettinger et al., 2012). Families included in the treatment group were also given cost information for local

Suggested Citation:"9 Education." National Academies of Sciences, Engineering, and Medicine. 2023. Behavioral Economics: Policy Impact and Future Directions. Washington, DC: The National Academies Press. doi: 10.17226/26874.
×

colleges. This combination of services increased FAFSA completion, receipt of financial aid, college attendance, and college persistence.

FAFSA completion is also one of the few areas in which researchers have attempted to use nudges to expand a program that was successful at a smaller scale. In one study, the Common Application, a vehicle through which many prospective college students apply to multiple colleges simultaneously, was used to convey reminders to students to complete the FAFSA early (Bird et al., 2021). These messages incorporated personalization, were from organizations with which the students would be familiar, and highlighted deadlines. In a second portion of the study, researchers used messaging through a portal that allows state residents to use one application for all of the state’s public four-year colleges, several private colleges, and community colleges.

However, the authors reported that these interventions did little to increase either enrollment or financial aid receipt, and they offered three possible explanations that may be relevant for other domains. First, the interventions were done on a large scale through impersonal state- or national-level institutions. Students may place less trust in these more distant entities, so similar interventions offered by local ones could be more successful. Second, because these large-scale interventions included a large set of potential students, the messages were necessarily less customized to specific student recipients. Finally, the authors also noted that students are likely more informed about FAFSA now than in the past, which would reduce possible treatment effects. Such nudges as emails and texts have been unsuccessful (Bergman, Denning, & Manoli, 2019).

Looking across the available work, the interventions designed to encourage students to pursue further educational attainment either make the tasks involved easier or simply provide information and reminders about what needs to be done and thus aim to overcome inaccurate beliefs.3 Those that actually simplify the tasks, such as providing help with FAFSA forms, changing policy defaults, and providing consistent advising, show consistent positive results (e.g., Hurwitz et al., 2015; Barr & Castleman, 2021). Reminders and enhanced information have been less successful (e.g., Avery et al., 2021; Barr & Castleman, 2021; Bird et al., 2021). These results suggest that further study in several areas would be beneficial: using defaults and offering small incentives for key decisions, such as registering for courses that will count toward a degree or other objective, and developing ways to strengthen engagement with advisors and mentors.

It is also important to note that although matriculating in college is a vital step, many young people who do so fail to earn a degree: just over

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3 The committee benefited from a presentation by Ben Castleman of the University of Virginia at a workshop in July 2022.

Suggested Citation:"9 Education." National Academies of Sciences, Engineering, and Medicine. 2023. Behavioral Economics: Policy Impact and Future Directions. Washington, DC: The National Academies Press. doi: 10.17226/26874.
×

one-half of students who enroll in a four-year degree program earn the degree within six years, and approximately one-third of those who enroll in a two-year program complete it (Oreopoulos & Petronijevic, 2019). It is likely that behavioral factors contribute to the reasons some students fail to thrive academically in college or drop out, but studies of approaches based on behavioral economics, such as nudging students to improve study habits or set goals, have not yet borne fruit (Oreopoulos & Petronijevic, 2019; Clark et al., 2020).

TEACHER PERFORMANCE

Behavioral economics approaches have also been applied to influence teachers’ performance, as measured by the test results of their students. Financial incentives have been used to motivate teachers to take actions to improve their students’ performance.4 This may sound like a straightforward economic incentive, but behaviorally informed approaches to this incentive are designed to take advantage of understanding people’s responses to incentives framed in specific ways. In one example, community college instructors were offered a $50 bonus for every student who passed an exam (Brownback & Sadoff, 2020). They were given part of the cash bonus in advance but would lose some of the bonus if fewer than half of their students passed and earn more if more than half passed. The researchers found that this loss-framed incentive increased student performance and also reduced course dropout rates, although teachers prefer contracts with a gain frame.5

A similar study in the K–8 setting compared the efficacy of versions of a teacher incentive program that used either a gain- or loss-frame bonus system to target student performance on a math test; it showed significant positive effects for the loss-framed bonus and insignificant results for the gain-framed bonus (Fryer et al., 2022). Researchers who have looked at financial rewards for teachers without the loss frame have found limited or no benefits (e.g., Allan & Fryer, 2011; Springer et al., 2012; Dee & Wyckoff, 2015; Imberman, 2015; Loyalka et al., 2019).

It is worth noting a few critiques of this approach. For example, an examination of the effects of such incentives on Black–White test score gaps found that they were actually exacerbated by a teacher bonus program (Hill & Jones, 2021). Critics have also questioned the theoretical basis for this type of incentive: the assumption that teachers may know how to use more

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4 Researchers have also examined the use of financial incentives offered directly to students, but evidence for this approach is mixed (see, e.g., Fryer, 2011; Levitt et al., 2016).

5 Researchers have found that the possibility of losing a prospective benefit is more highly motivating to people than the prospect of gaining a similar benefit (see, e.g., Romanowich & Lamb, 2013; Czibor et al., 2022).

Suggested Citation:"9 Education." National Academies of Sciences, Engineering, and Medicine. 2023. Behavioral Economics: Policy Impact and Future Directions. Washington, DC: The National Academies Press. doi: 10.17226/26874.
×

effective practices but choose not to make the additional effort required until motivated to do so by external incentives (McArdle, 2010; Kozlowski & Lee Lauen, 2019). In addition, teacher performance is the product of decisions and other factors that play out daily over months, which involve complex incentives and other behavioral principles.

FINDINGS

Education is a central influence in children’s and adolescents’ lives, and efforts to improve educational performance can create large social returns. Researchers have produced research on ways to influence parent–child interactions, boost college attendance and applications for financial aid, and boost test scores through influencing teacher practice. This body of work points to several areas as particularly promising:

  • The use of low-touch nudges to affect parent–child interactions can directly address issues with limited attention and present bias, which limit the effectiveness of those interactions with respect to education challenges.
  • Steps to directly reduce the administrative burden of applying to college and applying for financial aid, as well as providing support to students for these tasks, have increased college applications and applications for financial aid.
  • Creating default choices for high school students, such as automatic registration for college admissions tests, encourages them to take steps to pursue postsecondary education.
  • For teacher performance, providing loss-frame incentives for teacher compensation is a promising avenue, although the available research is quite limited, and teachers prefer gain-framed contracts.

There are many more questions than answers about how behavioral economics approaches can address challenges in education. For example, young children and adolescents are still developing cognitively, and it is possible that behaviorally based interventions could be most effective if tailored to key developmental stages. Another possibility is that designing interventions that are specifically targeted to males and females, taking into consideration their differing developmental trajectories, could enhance their effectiveness, but researchers have not yet shown how such tailoring might work. So far, the bulk of the available research focuses on postsecondary schooling, so much less is known about how behaviorally based interventions can improve performance for middle school students. Would a loss frame for teacher pay matter for young children? These are just a few of the unanswered questions.

Suggested Citation:"9 Education." National Academies of Sciences, Engineering, and Medicine. 2023. Behavioral Economics: Policy Impact and Future Directions. Washington, DC: The National Academies Press. doi: 10.17226/26874.
×

There are reasons such research is especially difficult in education settings. Children are a protected class, so institutions rightly impose stringent safeguards for research with them. These necessary safeguards make it more complex to perform studies in schools. Future behavioral economics research will require patience to plan and implement, following researchers from other disciplines who have conducted research in schools ethically and responsibly. The behavioral economics work already conducted points to the potential for significant benefits in this important domain.

REFERENCES

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Bird, K. A., Castleman, B. L., Denning, J. T., Goodman, J., Lamberton, C., & Rosinger, K. O. (2021). Nudging at scale: Experimental evidence from FAFSA completion campaigns. Journal of Economic Behavior & Organization, 183, 105–128. https://doi.org/10.1016/j.jebo.2020.12.022

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Clark, D., Gill, D., Prowse, V., & Rush, M. (2020). Using goals to motivate college students: Theory and evidence from field experiments. Review of Economics and Statistics, 102(4), 648–663. https://doi.org/10.1162/rest_a_00864

Czibor, E., Hsu, D., Jimenez-Gomez, D., Neckermann, S., & Subasi, B. (2022). Loss-framed incentives and employee (mis-)behavior. Management Science, 68(10), 7065–7791. https://doi.org/10.1287/mnsc.2021.4280

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Dee, T. S., & Wyckoff, J. (2015). Incentives, selection, and teacher performance: Evidence from IMPACT. Journal of Policy Analysis and Management, 34(2), 267–297. https://doi.org/10.1002/pam.21818

Delavande, A., & Fumagalli, L. (2019). Information, expectations and transition to higher education. Nuffield Foundation. https://www.nuffieldfoundation.org/wp-content/uploads/2019/02/information-expectations-transition-higher-education-1.pdf

Suggested Citation:"9 Education." National Academies of Sciences, Engineering, and Medicine. 2023. Behavioral Economics: Policy Impact and Future Directions. Washington, DC: The National Academies Press. doi: 10.17226/26874.
×

Dynarski, S., Libassi, C. J., Michelmore, K., & Owen, S. (2021). Closing the gap: The effect of reducing complexity and uncertainty in college pricing on the choices of low-income students. American Economic Review, 111(6), 1721–1756. https://doi.org/10.1257/aer.20200451

Dynarski, S. M., & Scott-Clayton, J. E. (2006). The cost of complexity in federal student aid: Lessons from optimal tax theory and behavioral economics. National Tax Journal, 59(2), 319–356. https://doi.org/10.17310/ntj.2006.2.07

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Fryer, R. G., Levitt, S. D., List, J., & Sadoff, S. (2022). Enhancing the efficacy of teacher incentives through framing: A field experiment. American Economic Journal: Economic Policy, 14(4), 269–299. https://doi.org/10.1257/pol.20190287

Harackiewicz, J. M., Rozek, C. S., Hulleman, C. S., & Hyde, J. S. (2012). Helping parents to motivate adolescents in mathematics and science: An experimental test of a utility-value intervention. Psychological Science, 23(8), 899–906. https://doi.org/10.1177/0956797611435530

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Hurwitz, M., Smith, J., Niu, S., & Howell, J. (2015). The Maine question: How is 4-year college enrollment affected by mandatory college entrance exams? Educational Evaluation and Policy Analysis, 37(1), 138–159. https://doi.org/10.3102/0162373714521866

Imberman, S. A. (2015). How effective are financial incentives for teachers? IZA World of Labor. https://doi.org/10.15185/izawol.158

Kozlowski, K. P., & Lee Lauen, D. (2019). Understanding teacher pay for performance: Flawed assumptions and disappointing results. Teachers College Record, 121(2), 1–38. https://doi.org/10.1177/016146811912100206

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Linos, E., Reddy, V., & Rothstein, J. (2021). Demystifying college costs: How nudges can and can’t help. Behavioural Public Policy, 1–22. https://doi.org/10.1017/bpp.2022.1

Loyalka, P., Sylvia, S., Liu, C., Chu, J., & Shi, Y. (2019). Pay by design: Teacher performance pay design and the distribution of student achievement. Journal of Labor Economics, 37(3), 621–662. https://doi.org/10.1086/702625

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Suggested Citation:"9 Education." National Academies of Sciences, Engineering, and Medicine. 2023. Behavioral Economics: Policy Impact and Future Directions. Washington, DC: The National Academies Press. doi: 10.17226/26874.
×

McArdle, F. (2010). Preparing quality teachers: Making learning visible. Australian Journal of Teacher Education, 35(8), 60–78. https://doi.org/10.14221/ajte.2010v35n8.5

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Suggested Citation:"9 Education." National Academies of Sciences, Engineering, and Medicine. 2023. Behavioral Economics: Policy Impact and Future Directions. Washington, DC: The National Academies Press. doi: 10.17226/26874.
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Behavioral economics - a field based in collaborations among economists and psychologists - focuses on integrating a nuanced understanding of behavior into models of decision-making. Since the mid-20th century, this growing field has produced research in numerous domains and has influenced policymaking, research, and marketing. However, little has been done to assess these contributions and review evidence of their use in the policy arena.

Behavioral Economics: Policy Impact and Future Directions examines the evidence for behavioral economics and its application in six public policy domains: health, retirement benefits, climate change, social safety net benefits, climate change, education, and criminal justice. The report concludes that the principles of behavioral economics are indispensable for the design of policy and recommends integrating behavioral specialists into policy development within government units. In addition, the report calls for strengthening research methodology and identifies research priorities for building on the accomplishments of the field to date.

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