Teachers and Risk Aversion

Daniel Bowen, a graduate of Arkansas' education reform PhD program and now a post-doc at Rice, just published a study demonstrating the risk-aversion of aspiring teachers and a positive association between risk aversion and effectiveness. Education Economics is on an 18-month delay through my library access, so I have not read the full original text yet. A few of his former Arkansas colleagues have plugged the study today (Jay P. Greene on his blog, Michael McShane through AEI), and my comments are mostly based on their second-hand accounts.

Dan Lortie's 1965 ethnography Schoolteacher remains one of the most definitive pieces of research on teachers and teaching culture. His findings, including the risk-averse nature of teachers, inform my perception of almost every educational policy or effect thereof. For example, when I consider a policy involving incentives such as merit pay, I think of how that would interact with the general risk aversion and emphasis on psychic rewards that permeate the teaching workforce. Schoolteacher is fifty years old now, but despite how much the policy landscape has changed, hypotheses grounded in its depiction of teacher culture still predict the effects of education reforms with remarkable consistency. As valuable as that one book continues to be, continued research on the culture of teachers is clearly an undervalued tool in the crafting of more effective and efficient education policy, and I'm happy to see a study like Risky Business gain visibility.

Schoolteacher offers one explanation for the low risk tolerance of teachers, and I offer another also taken from sociological theory. Though they are not competing hypotheses, the policy and reform implications may be quite different.

Fear of the Unknown

Lortie hypothesizes that the aspiration to teach reflects an affinity for the context of teaching seen during one's own time as a student. People who liked their time in schools, liked what they saw their teachers doing, probably feel more drawn to the profession than those who hated it all. 

This explanation could be reinforced by risk aversion, since exposure to the work of teachers breeds a greater familiarity with teaching than any other profession during most students' young lives. For naturally risk-averse youngsters, the greater "fear of the unknown" presented by literally every other profession could make teaching the most attractive line of future work by default; they only have to like it enough prefer it to uncertainty. To the extent that familiarity with the nature of the work drives the relationship between teaching and risk tolerance, we may anticipate teachers to be resistant to any reform that challenges this familiarity (McShane's "implication #3"). 

Social Reproduction

Upwardly mobile individuals from lower-middle-class families, including first-generation college students, may seek low-risk professions like teaching out of necessity. These individuals may not be able to take on the risk of loans accrued in medical, law, or business schools, or the greater costs associated with moving to where these jobs are. Careers in these fields are competitive to begin with, but the risk of not finding a job only increases for individuals with little social capital. Large amounts of economic capital can help insulate more wealthy students from any financial risks created by loans or a protracted job search, while their greater social capital makes it more likely that they have influential contacts in their desired field as well as fields they see as fall-back opportunities.

By contrast to these other professions, teaching presents fewer barriers to entry, involves less debt, offers opportunities in almost every city (which opens the potential to live with family while getting established), and every high school graduate knows several teachers to serve as contacts and mentors even if they have few contacts in other fields. Seen this way, risk tolerance may be more of a reflection of one's socioeconomic circumstances than a static psychological trait. But the Risky Business study considers risk tolerance in a game with monetary consequences. This is a narrow conceptualization of risk tolerance that may not generalize to non-pecuniary outcomes like curricular change or experimenting with classroom technologies. 

Perhaps more importantly, consider the comparison group: the experiment compares aspiring teachers to students in law and business school, groups who have selected into massive amounts of initial debt and cut-throat job markets. It's not surprising that these students demonstrate greater risk-tolerance, but that may be because they come from environments that make it easier to take on such risks. This is certainly something I'll look to see if the authors address when I get access to the full article.

Takeaways

As this entire post shows, I think the relevant issues related to teachers' characteristic levels of risk tolerance have greater significance with regard to teacher recruitment than teacher performance.  

It is hard to tell if McShane's suggestion that "risk-loving" teachers might be enticed to the profession by merit pay scales and increased threat of accountability sanction is merely to provide a counter-point or something he actually believes could happen. Hopefully it is the former, as risk is something that is merely tolerated in return for potential gains. Given the choice of a guaranteed $100, or the chance to either win or lose $100, no one is "enticed" by the addition of risk. So, how much does the latter figure have to be before the risk becomes "worth it"? That depends on your risk tolerance; the more risk averse you are, the larger that number has to be.

This is the important point. If, as McShane acknowledges, merit pay scales and the increased threat of contract terminations for teachers and schools adds risks, the increases in freedom or earning potential have to be large enough to offset teachers' intolerance to the loss of certainty. That may involve increases in public costs in any environment, as even a highly risk-tolerant teacher will place some value certainty and expect any loss in this area to be offset by corresponding increases in other areas of value like earning potential or autonomy. The more a teacher values certainty, the greater the increases in other perks must be to offset an introduction of risk. The natural risk-aversion of our current teaching force, then, suggests that we've been able to get this labor at a discount by attracting teachers who put a relative premium on stability, which costs less to offer than salary increases.

This post has attempted to explain that discount. The familiarity with teaching that students gain during their K-12 careers might be the most effective recruiting tool the profession currently has, and the stability offered by the profession may help it compete for talented individuals in risk-averse socioeconomic positions. 

But I fear the current trajectory of education reforms, especially regarding teacher compensation and evaluation, is only likely to make the pool of aspiring teachers more risk-tolerant through a process of attrition, not addition. That is, these reforms add uncertainty to the future of the profession of teaching that may reduce the interest of more risk-averse candidates without pulling a single thrill-seeker from law, business, or medicine.