This quandary was later coined the endowment effect and was explained through the concept of loss aversion--the idea that individuals feel substantially more pain from losses than pleasure from exact same-sized gains. Therefore it follows that individuals will be more motivated to avoid a loss than to achieve a gain of an equal amount (for an example of the endowment effect, watch this Wendy’s commercial).
To better illustrate the power of the endowment effect, consider this: A group of researchers found that factory employees performed better when their bonuses were given to them up front, but could be taken away if they didn’t meet certain criteria, as opposed to if bonuses were framed as rewards contingent upon stipulated goals. The only thing that changed was the way the bonus was framed.
Could this seemingly irrational behavior also be used to boost students’ classroom performance?
Using the same concept from the previous example, Steven Levitt (of Freakonomics) and other researchers conducted an experiment to see if varying incentive frameworks for teachers could improve student performance. The researchers told one group of teachers before a test that they would receive a bonus (a gain) only if their students performed sufficiently on the test. Meanwhile, the researchers offered a different group of teachers the bonus upfront, but told them it could be taken away if their students didn’t perform sufficiently (a loss). They found that on average, when the incentive was framed as a loss, student’s math test scores increased by 0.2 to 0.4 standard deviations. That’s a big gain. For comparison, researchers estimate that increasing teacher quality by one standard deviation is associated with annual student achievement gains of 0.15 to 0.24 standard deviations in math.
These findings point to the possibility that performance can be improved by taking advantage of the existing hard-wiring in humans’ brains. Researchers at the Royal Society for the Encouragement of Arts, Manufactures, and Commerce (RSA) are trying to make use of this glitch by asking educators to rethink how they grade students.
Instead of having students start off with a base-line of no grade, RSA researchers suggest that educators may be able to boost student performance by starting everyone with an “A” and then letting the endowment effect do the rest.
The theory is that students will place higher value on an “A” they are given to start off with than a hypothetical “A” they may or may not achieve. If the theory holds, researchers expect students who start off with an “A” to be more motivated to avoid losing their high grade than students who begin the year with, quite literally, nothing to lose grade-wise.
This “Everyone Starts with an ‘A’” model could have the most profound effects on students who have the most to lose—that is, those least accustomed to getting “A’s”. In particular, this incentive framework may induce a student who is normally on the cusp between letter grades (between a “B” and an “A” or a “C” and a “B” or), to work just a little harder – enough to get over that hump.
While pedagogical experts should be the ones determining how this grading technique could be incorporated in the classroom, schools could first experiment with a conservative approach. For example, this technique could be used to calculate a portion of a student’s total grade, such as a student’s homework grade. This way, teachers and schools could assess any unintended negative consequences of the new grading system on a smaller level before shifting away from the current system. In particular, it would be interesting to see if the endowment effect reduces teachers’ likelihood of decreasing a student’s grade if they start off at an “A”. If that’s true, then the “Everyone Starts with an “A”’ model would just add to existing grade inflation problems.
Either way, this approach shows how a better understanding of the endowment effect could be incorporated in the classroom to help schools rethink approaches to rewards and punishments. Even more encouraging is that this new system could theoretically improve student performance without adding additional costs or radically altering existing systems. This should come as a welcome alternative at a time when it seems that most proposals to change educational frameworks are sweeping and far reaching."