Easy 100s: Incentive Outweighs Externality

Samantha Pozo, Stewart AM period, Honorbound

It is no surprise that every day in my Macroeconomics class, my classmates and I, knowing we will have a quiz on the Naked Economics reading, come in ready to negotiate. As soon as our teacher asks, “Girls are we ready for the quiz,” we respond “Can it be open book” or “Can it be a group quiz?” Commonly, my teacher answers no; however, day after day we continue to ask. You may ask yourself, why are my classmates and I so persistent despite the continuous loss? I think it is safe to say that because groups quizzes and our collective knowledge gives us a reassurance of a better grade we are all motivated by the incentive of getting good grades with less individual effort and a greater collective effort. In economic terms, we can argue that by taking the quizzes as a group, we maximize our total utility by contributing to giving answers and in turn receive pleasure from a one hundred. Although this is ideal, we must think about the externalities of group quizzes. As Charles Wheelan explains in chapter three of Naked Economics, “private behavior has broader social consequences”; consequently the individual act of studying or not studying for the quiz affects a person’s ability to contribute to the group quiz effort (56).[1]

In group quizzes, like in our economy, “individuals have an incentive to do things that make them better off. According to an article by Sravani, an advantage to group testing is higher efficiency with less power from each individual.[2] This is in fact a benefit of group testing; however, what happens to the efficiency when a person does not study? The externality of not studying affects the overall efficiency because to get a high grade more power is needed from fewer individuals who did study. Those who did not study “have a powerful incentive to be free riders” on the group quiz, making themselves better off at the expense of others’ knowledge.(72).[1]  Like free riders, the students that did not study benefit freely and receive answers at no cost and with no effort due to a positive externality. On the other hand, the private act of studying contributes to the larger social cost of receiving a high grade. As Wheelan describes, it is difficult to solve the free riders issue. For example, in the group quiz a part of the group could not be isolated. Although some students who studied may feel cheated, in a group quiz, because they worked hard to receive a high score and the free riders did not work as hard or at all and received the same score, the incentive and reassurance of a good grade drives collaboration and draws students to preferring group quizzes.

The externalities involved in a group quiz may be different each time based on the individual’s private actions, but our incentive is so motivating, that my class continues to ask, “Can it be a group quiz?”

[1] Wheelan, Charles. “Government and the Economy: Government is your friend.” In Naked Economics: Undressing the Dismal Science, 54-79. New York, NY: Norton & Company, 2010.

[2] Sravani. “Advantages and Disadvantages of Individual and Group Testing.” Wise Step. July 10, 2016


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