Debate Magazine

The Problem with a “complete Contract”

By Stevemiranda

From a recent post by Dan Ariely, a behavioral economist at Duke University:

Most of the time, when you hire people you don’t want to specify exactly what they are to do and how much they would get paid—you don’t want to say if you do X you will get this much, and if you do Y you will get that much. That type of contract is what we call a complete contract. Creating one is basically impossible, especially with higher-level jobs. If you try to do it, you cause “crowding out.” People focus on everything you’ve included and exclude everything else. What’s left out of the contract tends to drop out of their motivation as well. You are taking away from their judgment and goodwill and teaching them to be like rats in a maze.

It happens with all kinds of compensation. A consulting company once told me they made a rule that if you stayed until 8 in the office, you could order food and use the car service to get home. So what happens? A ton of people are there at 8. Nobody’s there at 8:05. It’s the same with pay: If you are hiring the right people, you don’t want to include anything too specific in the contract. You want people to buy into the objectives of the company.

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In traditional schooling, the relationship between teacher and student is defined by a complete contract. Students—the ones who care, at least—focus on everything the teacher has included and exclude everything else.

When working with students, you don’t want to mandate anything too specific, because ideas that some students may find inspiring are more likely to be “crowded out.” You want students to buy into all the richness of possibility their education can offer them.

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The field of behavioral sciences has made tremendous advances since the industrial school model was created in the 19th century. When we talk about schools, however, our society acts as if that field of study doesn’t exist.

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