Showing posts with label incentives. Show all posts
Showing posts with label incentives. Show all posts

Friday, December 30, 2011

Penalty points and road safety: is there really a link

According to the Irish Independent, drivers in Ireland face a raft of new penalty offences – to be introduced by the end of 2012. In the article the minister, Leo Varadkar justified the clampdown, saying: “Each measure we take to advance road safety increases the likelihood that lives will be saved.” The article also quotes Conor Faughnan of the AA as saying that the penalty points system had changed driver behaviour.

So it is true? Road safety is a big topic on which there is a fair of research internationally and there have been a few papers on the Irish experience – penalty points were introduced in 2002. Here is a quick summary of a few papers I found.

Hussain et al. (British Journal of Oral and Maxillofacial Surgery 2006) look at maxillofacial injuries. They simply compare the number of various injuries in the year before and after the 2002 reform. They assert that “The introduction of legislation led to a 61% reduction in the need for emergency maxillofacial operations.” Clearly the design does not support such an assertion and subsequently in the paper they seem to acknowledge that a causal link cannot be firmly established. Yes indeed. Just comparing means before and after tells you nothing. Maybe the series just goes up and down a lot. Maybe something else happened. Lots of the other outcomes they consider don’t change at all. And of course if you look at enough outcomes you are bound to find some differences (though the paper does not appear to contain a single p-value or confidence interval).

At least two other papers were generated by this reform.

Healy et al. (Injury 2004) look at spinal injuries. This paper follows a similar methodology as the previous one but at least does some inference “In the first 6 months of the new speed penalty system the number of RTA (road traffic accident) related spinal injuries was 17. This was significantly lower then the same period in the previous 4 years when on average of 33 admissions occurred (P < 0:05, Chi-sq=3:96, d:f: =1)”. The same issue arises ‘though: how can one attribute the change to the reform? Interestingly in the second 6-month period after the reform, the number of RTA related injuries rose again so it looks, to me at least, that any effect was shortlived. Looking at their Table 2 it is far from clear the reform had any effect. Again, simply comparing means before and after is uninformative.

Butler et al. (Irish Journal of Medical Science 2006) also looks at spinal injuries (the authorship of the two papers overlap) and seem to report much the same result: an initial fall in RTA related spinal injuries that were not sustained.

Based on these 3 papers (there are others which I haven’t looked at) the evidence that the introduction of penalty points in 2002 was effective seems pretty underwhelming although a casual reading of these papers would not leave you with that impression. As the system changed in 2003, with additional offences introduced, it would be difficult to estimate the long run effect of the reform.

The possibility that such a reform had a temporary effect with people regressing to their usual driving standards quite quickly is plausible to me. I came across a paper that looked at whether conviction for driving offences lowered risk of death subsequently (Redelmeier et al. The Lancet 2003). They find it reduces the risk of death sharply in the immediate aftermath of a conviction but the effect was much smaller after 2 months and not significant after 3-4 months.I wonder is this a general finding.

Road safety is an emotive topic and it is essential that policy is based not on anecdote or gut instinct but on good evidence. Inferring whether the points system improved road safety is probably difficult or impossible given the data available. That does not mean one shouldn’t consider such policies – my guess is that the loss function is asymmetric: introducing penalty points probably can’t do any harm. But exaggerated claims of efficacy are never justified.

Wednesday, November 02, 2011

A short film about incentives

You may have seen some really clever animations made using Xtranormal. There are lots on Youtube. The one below, by yours truly, is not quite so good but even Sergei Eisenstein had to start somewhere you know.

The truth about incentives
by: kdenny

Sunday, October 23, 2011

Drive: The surprising truth about what motivates us

The Royal Society of Arts has published an amazing set of animation videos by Andrew Park (on Youtube and elsewhere) about a whole range of intellectually challenging and complex ideas and one of them has some surprising ideas about motivation and the role of incentives that should be of interest to anyone working on behavioural economics. The Guardian gives the background to these videos here.



Monday, October 18, 2010

5000 pounds offered to students who fail A-levels

One school in the UK is so confident of its success rate that it is offering 5k to any student who doesn't pass their A-levels, conditional on them having good attendance and assignment submission records. The BBC reports "It is the latest example of cash or gift incentives being used in schools - either to encourage good behaviour or to discourage bad." At first glance, offering teenagers money to fail seems counterintuitive as an incentive for performance. But as a signal of the school's confidence in its quality, it clearly has some advantages. However, they should be careful. If I were the type of teenager who valued 5k over my education or if I was pretty sure I was going to fail anyway, then this school would look pretty appealing! Also, marginal teenagers might think that 5k is a lot of money and might also be discounting the future at a very high rate.

Friday, September 10, 2010

Perverse effects of rent controls

The Law of Unintended Consequences or how well meaning policies have counter-productive effects through generating perverse incentives is a staple of introductory microeconomics courses.
This example from Greg Mankiw's blog is particularly nice. Basically, its how universities in New York buy up property, whose prices are depressed due to rent-control. They rent them to faculty & pay them less accordingly. The implicit subsidy is not taxable so the professor's earnings reflect that i.e. they are even lower as a result.

Sunday, October 25, 2009

Bankers compensation

The issue of the appropriate compensation/incentives for bankers is a hot topic given the financial crisis in Ireland and elsewhere. Many people, I suspect, just to want to string 'em up. On a more constructive note it is worth asking what behavioural economics & psychology can tell us about how bankers respond to incentives. This paper is a contribution to addressing that question.

Banker compensation and confirmation bias.
Sabourian, H. Sibert, A.C.
Confirmation bias refers to cognitive errors that bias one towards one's own prior beliefs. A vast empirical literature documents its existence and psychologists identify it as one of the most problematic aspects of human reasoning. In this paper, we present three related scenarios where rational behaviour leads to outcomes that are observationally equivalent to different types of conformation bias. As an application, the model provides an explanation for how the reward structure in the financial services industry led to the seemingly irrational behaviour of bankers and other employees of financial institutions prior to the credit crisis of that erupted in the summer of 2007.
http://d.repec.org/n?u=RePEc:cam:camdae:0940&r=cbe

Monday, September 14, 2009

Teacher Performance Pay: Experimental Evidence from India

This paper uses an RCT to evaluate the effect of performance pay for teachers. Well, it works but the effect sizes look small to me: about a 30% bonus to up the standard deviation by about .2? An expensive policy I think.

Teacher Performance Pay: Experimental Evidence
Karthik Muralidharan & Venkatesh Sundararaman

Performance pay for teachers is frequently suggested as a way of improving education outcomes in schools, but the theoretical predictions regarding its effectiveness are ambiguous and the empirical evidence to date is limited and mixed. We present results from a randomized evaluation of a teacher incentive program implemented across a large representative sample of government-run rural primary schools in the Indian state of Andhra Pradesh. The program provided bonus payments to teachers based on the average improvement of their students' test scores in independently administered learning assessments (with a mean bonus of 30% of monthly pay). At the end of two years of the program, students in incentive schools performed significantly better than those in control schools by 0.28 and 0.16 standard deviations in math and language tests respectively. They scored significantly higher on "conceptual" as well as "mechanical" com ponents
http://d.repec.org/n?u=RePEc:nbr:nberwo:15323&r=edu