So That’s It

Kindergartens and day care centres across the world regularly have to confront parents who are late to pick up their children.

Some time ago, six day care centres in Haifa, Israel, decided to deal with this problem in a somewhat unconventional fashion, introducing a system of fines for late pick-ups. In the language of economists, they created an incentive for the parents to collect their children on time in an area, where such an incentive was lacking. However, soon after all the day care centres dropped the fines. It turned out that the share of parents who arrived late nearly doubled after the fine was introduced.

How is this possible? The anthropologist and economist Samuel Bowles explains that the fine turned showing up late into an economic transaction. Originally, coming on time was an act of being considerate to the teachers, who otherwise would have to stay after their working hours. The fine undermined this relationship by allowing the parents to essentially buy the option to come late. The incentive targeted at selfish financial interest did not reinforce the existing unselfish compassion with the teachers, but rather replaced it. Even before the fines were put in place, there was in fact an incentive to pick up kids on time. This incentive, however, was one that economists struggle to get hold of, one that did not originate from one’s self-interest, but rather from concern for others. And as the six day care centres realised, the original unselfish motive was even stronger than the new “economic“ one.

The question of how economists should reflect such “nobler“ motives in their models is the central focus of my dissertation. In particular, I focus on how such models can be applied to public policy. Should public institutions, laws and social norms assume that everyone is a selfish knave (as David Hume recommended), or should we also rely on the motives that cannot be harnessed by force, such as sympathy or virtue? As usual in academic literature, my own contribution does not bring a clear-cut answer. I do argue, however, that society cannot rely solely on individual selfishness harnessed to the service of general good by appropriate “rules of the game.“ Good instutions are no substitute for good people.  

Dissertation writing has taken most of my summer, but it is already the final task needed to complete my Master’s degree. I passed all final exams, though this time it was a particularly demanding and exhausting battle. I am most pleased by my success in econometrics, the subject that traditionally scares LSE economics postgraduates the most. Even this year more than a quarter of my classmates did not get past this hurdle.

My next life plans span so far only the nearest future. Beginning in October, I am joining the European Commission for a half-year traineeship. Specifically, I will be part of the team that prepares estimates of economic and other impact of the EU trade policies. Afterwards, I would like to find a permanent employment in economic advisory. I am planning to apply both to private consultancies, as well as to public instutions and international economic organisations. At the moment, I am most attracted by the European public sector – the Commission, ECB or the European Investment Bank.

This entry is a farewell to my KFF blog after four years, just as I’m bitterly saying goodbye to the life of a student and state-funded medical insurance. Studying at prestigious institutions abroad has been a fantastic experience, one which I owe to a number of people and one that I perceive as committing me to a certain life path.

 

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