Wiping the Guilt...

Have you ever been late to pick up your child from daycare?

It happened to me last year. During one hellacious traffic day, I was 15 minutes late to pick up my daughter. The daycare charged me Rs 100 for the first ten minutes, and then 10 each additional minute. I was required to pay the fee immediately when I arrived.

I was embarrassed, but ponied up immediately for the late fee. The teachers have lives of their own, and my tardiness kept them from their families.

Many daycare facilities across the country have similar policies. This presents an interesting question: do these late fees work?

Do they actually deter parents from being late to pick up their children?

Two economists, Uri Gneezy and Aldo Rustichini, tried to pin down the nature of this disincentive. They began an in-depth study of the “deterrence hypothesis.”

The deterrence hypothesis predicts that the introduction of a penalty that leaves everything else unchanged will reduce the occurrence of the behavior subject to the fine.

From January to June 1998, ten private daycare centers in the city of Haifa, Israel changed their late fee policies. During the twenty-week study, the economists toyed with the late fee structure.

In the first four weeks, the lateness of parents was tracked. On average, eight late pickups were recorded per week.

In week five, they instituted the first fine. Parents were charged $3 per child every time parents arrived more than 10 minutes late.

In their 2005 book Freakonomics, authors Steven D. Levitt and Stephen J. Dubner detailed what happened next.

After the fine was enacted, the number of late pickups promptly went… up. Before long, there were twenty late pickups per week, more than double the original average. The incentive had plainly backfired.

Why did the late pickups actually increase after the fine was enacted? According to the economists, the daycare centers substituted a “market norm” for a “social norm.”

For “only $3 a day,” parents could essentially “buy off their guilt.” With no fine in place, a strong social contract was in place. If a parent was late, they simply felt guilty about it. This shame became a powerful motivator in the need to pick up their kids on time.

But once the fine was imposed, the day care center had inadvertently replaced the social norms with market norms. Now that the parents were paying for their tardiness, they interpreted the situation in terms of market norms.

In other words, since they were being fined, they could decide for themselves whether to be late or not, and they frequently chose to be late.

In the final weeks of the study, the fine was removed. Did the parents return to their normal rate of late pickups?

No - the rate of late pickups even increased slightly. For the parents, returning to the social norms of guilt-induced motivation did not return. It was nirvana for the parents; they could “arrive late, pay no fine, and feel no guilt.”

The lesson becomes clear. When the economic incentive defeats the moral incentive, the moral incentive will inevitably wither and vanish, crushed by a very human tendency.