On making students happy and being irrational

18 Jul, 2015 at 22:27 | Posted in Economics | 3 Comments

Striving for full disclosure, in subsequent years I included this statement in my course syllabus: “Exams will have a total of 137 points rather than the usual 100. This scoring system has no effect on the grade you get in the course, but it seems to make you happier.” And, indeed, after I made that change, I never got a complaint that my exams were too hard.

001Sci_Am_Robot_vs_Human_RationalityIn the eyes of an economist, my students were “misbehaving.” By that I mean that their behavior was inconsistent with the idealized model at the heart of much of economics. Rationally, no one should be happier about a score of 96 out of 137 (70 percent) than 72 out of 100, but my students were. And by realizing this, I was able to set the kind of exam I wanted but still keep the students from grumbling.

This illustrates an important problem with traditional economic theory. Economists discount any factors that would not influence the thinking of a rational person. These things are supposedly irrelevant. But unfortunately for the theory, many supposedly irrelevant factors do matter.

Richard Thaler


  1. Because most people do not ‘do the math’ and instead follow their feelings and intuitions we logical reasoners can easily recognize them as irrational. In the case of the small grade difference, the real impact would be between a passing 65 and a failing 63, the 63 would have been a passing 65 if the grading system were rational, so I am not convinced that the students are the only irrationalists in this particular case.

    On a larger and more significant scale, the disparity between house ownership with the attached mortgage, and renting is rarely explained to people in terms of taxes and equity. The result is that almost 40% of the population are relegated to renting and therefore make no investment and have no resulting equity. Our construction and banking industries play on this confusion and may even keep wages low in order to capitalize.

  2. This relates to the cognitive bias called anchoring. It’s at the basis of pricing in marketing & advertising.

  3. I think this summarizes pretty well why macroeconomists have not fully embraced behavioural economics. You see, most macroeconomists believe that the best they can do is to provide explicit policy rules that, once in place and are known, creates stability and promote growth (or perhaps happiness). What Thaler is doing is going rogue and breaking a norm of 100 to 137. Sure, it will throw some students off and maybe they are temporarily happier, but what are the policy implications? That we should all mark exams out of 137? Why not 10,000? Why not even more?

    I believe, and I think I’m speaking for mainstream macroeconomists here, that if a rule of 137, or 10,000, were to be implemented the resulting “happiness” would, at least eventually, vanish. Students would adjust to the new norm, and act accordingly. Now, Thaler could still piggyback on the fact that he is breaking the norm and set the maximum score at 173 or something, and perhaps benefit from doing so. But he benefits solely because he is breaking an otherwise solid rule. If we all follow Thaler’s example, I do not think anything good would come out of it.

    Or are you advocating that exams should be marked out of a million or more?

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