The case of ‘payment-by-results’: re-examining the effects of an incentive programme in nineteenth-century English schools

Abstract

Performance-based management is a recurring and controversial strategy for education reform. This paper examines a nineteenth-century English experiment in paying schools by results and uses concepts from personnel and behavioural economics to understand its decline. Like many recent education reforms, payment-by-results sought to bring schools and teachers under the ‘laws of supply and demand’. The unintended outcomes of the policy, which ultimately led to its end, included narrowing of the curriculum, cheating and manipulation by schoolteachers and managers, and increased risk and uncertainty in the teaching profession. The paper begins by exploring the role of economics principles in the drafting of the policy. It continues to explore how the programme unravelled, with special attention to issues of perverse incentives, teacher motivation, risk, and uncertainty. Building on recent studies of analogous modern experiments in performance-based management, this paper finds important parallels to current policy concerns. The lessons learned address the fundamental relationship between incentives and teacher motivation and the role of economic theory in education policy.