Incentives intended to help a market can fail when the outcome is different than anticipated. In Naked Economics, Charles Wheelan emphasizes that “incentives matter” in the economic world today. Both good and bad policies along with many incentives can be seen in my life as a student at Ursuline Academy. The most important policy for seniors is “Exemption from Finals” which gives us the opportunity to be exempt from taking any finals if certain requirements are made. The Ursuline “Exemption from Finals” policy can ultimately be defined as good or bad depending on the incentives.
Wheelan states, “Good policy uses incentives to channel behavior toward some desired outcome.” For example, London began charging a congestion fee for all drivers entering a certain area of the city, eventually decreasing traffic by 20 percent. At Ursuline, the “Exemption from Finals” policy requires students to maintain a 90 or above average in each class throughout the second semester . By giving seniors the opportunity to be exempt, this requirement incentivizes students to study and work hard in order to maintain good grades.
Conversely Wheelan also writes, “Bad policy either ignores incentives, or fails to anticipate how rational individuals might change their behavior to avoid being penalized.” He uses the example of Mexico implementing a law that limited the amount of cars on the streets based on the license plate number in order to reduce pollution. However, people either decided to buy a second car or keep their old one so that they could drive every day, therefore creating more pollution. This policy came with a perverse incentive, an incentive that leads to a different outcome than expected. Similarly, the “Exemption from Finals” policy comes with perverse incentives. Another requirement to be exempt from finals is that the student may not have 3 or more absences per class per semester. This rule was made in order to discourage skipping class since it is common among senior students at all schools. But the outcome that followed was not expected. Students are either too stressed about taking their finals or are on the borderline of how many absences they are allowed that they come to school sick. I talked with a group of 12 students about this issue. 7 of the 12 have come to school sick with either the flu, laryngitis, a fever, a migraine, pink eye, or strep throat in order to maintain 3 or less absences in each class. This perverse incentive leads seniors to believe that getting exempt from finals is more important than their own well-being.
It can be seen that the “Exemption from Finals” policy is compiled of good and bad incentives. The good incentives are provided for a problem that students want to fix, like their grades, and should encourage them to make a change, but not to an unrealistic standard. The bad incentives try to fix a problem that is not a major concern to students, like attendance, and therefore prove to be ineffective.
 Charles Wheelan, Naked Economics: Undressing the Dismal Science (New York: W.W. Norton & Company, 2010), 34.
 Ibid., 39.
 Ibid., 39.