A System Without Incentives

Even senioritis can be explained by economics. I was sitting at home the other day, trying to focus on my calculus homework, when I realized that I simply had no motivation to continue. Unable to concentrate, my mind drifted and began thinking about the cause of my lack of motivation. Below are my conclusions. I will present my thoughts over the course of my next few blog posts. 

1. The GPA system at our school does not incentivize me to go beyond what's minimally required.

For the unaware, our school awards a 4.0 for an A in any class (90%-100%). Let's assume, for a minute, that the grade you get in a class is directly proportional to the time you invest into it and that you can predict perfectly the time you need to spend to get a certain grade (aka perfect information). In this case, why would any student invest more than the minimally required time to get a 4.0? They wouldn't.

However, seeing as perfect information is not available in real life (though I would argue that our first assumption holds true in general), people invest extra time to get higher grades purely as a measure of insurance. For example, not knowing how hard the final will be, you study more than what is necessary to get a 90%. As such, we can analyze the market for grades using insurance analysis (substituting price for time and grade for output). Saving the mathematical analysis for a later date, I'll simply note that the most important thing to keep in mind is that most people are risk adverse and tend to prefer at least some degree of insurance. This is more or less due to the fact that marginally, a very small increase in the number of hours invested can yield a very large increase in GPA (for example, the GPA difference between an 89% and a 90% is an entire point, but it may only take a few extra minutes of studying to achieve that 1% increase).

But even with this in mind, it's important to note that there is virtually no difference between a 98% and a 90%. I realize now that the later on into the year I go, the less my high school grades actually matter. As a result, I've become more risk tolerant because the potential downfall from a negative outcome (getting a low grade) has become significantly less.

School systems realize this perverse incentives system and many have taken the necessary steps to remedy it. Many schools now operate based on a 100 point scale, directly scaled to a student's percentage score. This system, in my opinion, is much better for motivating a student to achieve to his fullest, as the amount of time you invest will now be correctly reflected in your GPA.