A math teacher in Fort Myers, Florida is under fire for teaching his students about supply and demand within a market-based system. Jeff Spires’ problem appears to be his choice of pedagogical vehicle: purchasing their own grades. Spires was suspended from Charlotte County High School in Charlotte County, Fla., without pay on Oct. 14 and resigned two weeks later. This “new math” approach could have promise for wider applications as discussed below. Think of it as a variation of Adam Smith’s work, a type of “Wealth of Students” approach to the job market.

Spires reportedly admitted that he was under financial stress and facing bankruptcy. In one curious quote, he reportedly said “Maybe I see the kids are as desperate as I am,” he told the school’s investigators.

The story, however, raises the question of whether selling grades would be not only have pedagogical value but efficient value. In this case, a junior at the school said he paid Spires $40 on at least two occasion to change grades so that he ended the quarter with a B instead of a C. Now, I ask you, did he not learn an important lesson of supply and demand? After all, as Thomas Carlyle said, “teach a parrot the terms supply and demand and you’ve got an economist.” These students are far better than a parrot.

These students were motivated enough to raise funds to improve their position. Adam Smith noted “The real tragedy of the poor is the poverty of their aspirations.” These students have no poverty of aspirations or energy. Moreover Spires showed that in a market system self-interest drives exchanges since “it is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.”

My criticism is that one would think that this would be a more efficient market if left to a bidding process so the students with the greatest need for grade enhancement can prevail. If Spires wanted to use a non-bidding market, he should have graduated the costs for improvement. A move from a C to a B would be less costly than a move to the top of the class. What is also interesting is the question of whether this system is efficient under a Pareto, or alternatively, a Kaldor-Hicks approach. Grade enhancement certainly creates “losers” if the hyper-competitive environment of college-bound students if non-capital rich students are pushed down in ranking. On the other hand, does it produce more winners than losers under Kaldor-Hicks? There may be negative externalities for less affluent students, but a recognized market for grades may trigger a loan market for the purchase of grades.

One argument could be that more affluent students have more resources to proceed to college and thus have a greater need to purchase marginal benefits in the grade market. That system, however, may be more efficient if the better students can choose to sell their own grades as companies sell pollution credits. Thus, if a top student can stay competitive while exchanging a couple of grades for cash, it would be wealth maximizing to allow the exchange. The purchaser is in dire need for the grade while the seller has a surplus of such grades.

With my final coming up in torts, I would be interested in any bids. I prefer the conventional model as a producer of grades selling to consumers of grades. I would think the following price menu would reflect the value to the professional standing of first-year students. The price would be more for first-year students than third-year students (where grades are less determinative on job placement). This price range is based our own tuition and the average starting pay of our students. Each step would be cumulative so if you want to move from a D to a B-, it would cost $7000. Also, “jumps” into new grade categories (for example from a C to a B would be valued more). Likewise, the move from a failing to a non-failing grade would be more valuable since it has the added value of allowing the student to avoid taking the course again. In the latter case, the grade purchase is still less than the cost of retaking the course. How many students (if this were approved as a legitimate market) pay these prices?:

Conversion Cost

F to D $6000

D to C- $2500

C- to C $1000

C to C+ $1000

C+ to B- $2500

B- to B $1000

B to B+ $1000

B+ to A- $3000

A- to A $4000

A to A+ $6000

A move from an F to an A+ would cost $18,000 – a price designed to limit the availability of this transformation to only those students with the extreme need or excessive wealth. This would be particularly cost-effective for part-time students who may be better served earning money during the period of studying that would be eliminated by a grade purchase. Thus, a Capitol Hill lobbyist could earn tens of thousands of dollars if she was able to use the study period for torts all term to do work on the Hill. A good student could calculate just enough studying to put himself in a solid grade category to rely on a grade purchase to go the remainder of the distance. Thus, a half effort could put the student in the B range and cash could then be used to make up the difference to an A.

Likewise, for students seeking judicial clerkships, it might be cost effective to pay the $6000 to put yourself at the top of the class in securing a high-value clerkship with the promise of a higher starting salary and greater opportunities that follow such clerkships. The hidden hand of the market would sort out those who would be most benefitted from incremental improvements in their grades. At the same time, the school could save money in allowing hard-working academics like myself in keeping such proceeds as part of our compensation package. Our annual salaries would then become a base for commission like sales. Of course, that could lead to a perverse incentive for academics in making classes harder to drive up the demand for grade purchases. They are after all a type of academic monopoly. But no system is perfect . . .

Source: ABC