Two rhetorical questions:
When you pay a loan broker based on the total number of loans he doles out, without considering whether or not the borrowers will actually be able to repay these loans, what happens?
When you pay a CEO based on the short-term profits he generates, rather than the long-term stability of the company, what happens?
Unless you hibernated your way through the last four years, you probably noticed that these aren’t rhetorical questions at all. We know exactly what happens. They lead to the worst financial crisis the world has seen in decades.
In economic terms, we can blame the disastrous results on misaligned incentives. If the incentives we offer don’t actually support the outcome we desire, we end up encouraging behavior that may sabotage our own goals. Instead of expanding homeownership to millions of people, we let them take on mortgages they will never be able to pay back. Instead of creating wealth for investors nationwide, we encourage unnecessarily risky ventures.
Now, the problem of misaligned incentives has infected our educational system. To some, the solution to our education woes is perfectly clear: teachers must be compensated based on their teaching abilities. Effective teachers merit higher pay, and ineffective teachers… well, should be fired. It’s simple, smart business.
It’s also a gross oversimplification of the issue.
I fully believe in merit pay, actually. In fact, I would love to be rated on my teaching.
For all you skimmers out there, let me say this again (it’s okay, I’m a high school teacher. I’m used to repeating myself):
I would love to be rated on my teaching.