This summer FREE is hosting two seminars for seminary professors, other academics involved with religion, and federal judges. The July program will examine environmental and social justice and will include an excursion to Butte, America. What can we learn about booms, busts, and revitalization from the Butte experience? What does and can religion contribute during disruptive times?

We titled our August seminar “Stewardship Parables from Greater Yellowstone.” This program includes a field trip to the Park with a former supervisor of Yellowstone and the chief wolf biologist. Our goal is to promote better understanding of the complexities of managing ecosystems enmeshed in political, cultural, and economics forces.

Both programs include MSU professors and draw upon the University’s many resources and contacts. Basic economics provides the organizing core of each. One important task is to explain how the economic way of thinking can promote constructive social cooperation.

A key responsibility in building social cooperation is to create social arrangements that encourage individuals to consider other people’s interests. Good intentions alone will rarely suffice. To promote good outcomes, leaders create institutions that produce clear information and incentives to act upon it. University of Chicago economist, Dr. Brett Baden describes one successful example below, his church’s childcare program.

-John Baden

Good Institutions Foster Saintly Behavior

By Brett Baden

Catholics understand how hard it is to make a Saint. And they realize that most people are not saints, but far from it. Big city Catholic parishes strive to provide a sense of community in the urban diaspora by providing schools and integrating them with the activities of the parish church. Catholic schools have long been well regarded for their emphasis on small class sizes and high educational quality.  

For urban schools, where many households have dual bread-winners, the schools also provide a community service by providing additional hours of extended care for working parents’ children, often both before school and after. This before and after-school care is a godsend for many parents who must contend with long work hours and often long and trying traffic conditions.  

Before school care is straight-forward – drop the child off in the morning before school, at some time after the before-care service opens (say 7 am for a school day beginning at 8). Payment is for the hour and the punctuality of the parents is up to them; they are not penalized for showing up after 7, but they do have to pay for the full hour of before-care regardless. If parents show up early, they must wait until opening time. No one is upset, the rules are clear, a valuable service is provided and paid for. The “market” clears. There is little opportunity for sainthood, but there is also no villainy, and no reason for acrimony to develop.

After school care is another matter. Working parents in an urban setting rush home from work to pick up their precious children and spirit them home. If all goes well, the system works – parents pick up their kids from the after-care on time and move along with their evenings. However, almost invariably, someone is late picking up their kids. This type of occurrence can create bad feelings, recriminations, and ultimately break the system and even lead to its abolition. The solution to is not straightforward. The following story describes how one school overcame this problem.  

Saint Clement’s is a Catholic School in Chicago’s Lincoln Park neighborhood. It is located in a wealthy parish, in one of the nicest neighborhoods in the city. The neighborhood is home to many working professionals because it provides several amenities – plentiful housing, close proximity to public parks and the lake-front, a public zoo, great restaurants and theaters, and easy access to the elevated train to Chicago’s central business district. Many Chicago residents avoid Lincoln Park altogether, however, because the presence of all of these amenities for a large residential population makes for congestion and crowding.  

This is the setting for Saint Clement’s extended care services. Several parents wish to avoid the bottlenecks that occur around the residential streets that surround the school in the morning, and are able to pay the six dollar drop-off fee for the 7 am to 8 am before-care service. This service is always provided, but parents can choose to use it on any day they wish – and this leads them to use the service when the value of their time in the morning is higher than six dollars, or their willingness to pay to avoid the drop-off bottleneck is six dollars or more.  

There are fewer congestion problems for parents picking up their children from the extended care services. These services are offered from three to six daily, and parents can arrive when it is most convenient for them to within that window. Since after-care provides services to more parents the before-care service, this is a provided as a subscription service. People pay for the provision of after care and can then use it as much as they like.

However, there is a limit to the use of after-care – closing time. And someone is always late for closing time. There is substantial congestion among almost all transportation modes in Chicago, and occasional mishaps can delay parents on their way to pick up their children. The amount of congestion in the surrounding Lincoln Park neighborhood exacerbates this problem.    

In an ideal world, no one would ever be late except by accident, and the school would provide the after care in the case of accidents for free or for a small nominal fee. This sort of set up, however, can create a situation of moral-hazard, where parents can “allow accidents to happen,” and not face any consequences if they do. In other words, a purely friendly, forgiving system will encourage people who may be less than saints (such as commuters who have just worked all day) to not exercise proper care or time management sufficient to pick their kids up on time.

Some sort of incentive system is necessary. One option is to have a friendly system but to express great disapproval and publicly humiliate those who are late. This social monitoring can have important reinforcing effects, but will only be effective for those who feel tightly bound to the community. Other parents may be willing to brave the wrath of the after-care consistently. Disapproval is usually meted out in a single dose, and if a parent is willing to endure that, they have effectively “paid” for extended child care and will use it as much as they want.  

This same effect occurs when a child care facility imposes a flat fee for a late pick-up. For some people, the value of their extra time will be worth more than the late fee. The parents who value their time greatly then pay the flat late fee, and essentially “buy” additional child care. For these “buyers” there is no incentive to hurry; moral hazard is still present. The price of getting the care is more expensive, but once the price is paid, there is no reason to hurry and pick the child up.[1]  

Saint Clement’s has come up with a novel approach that applies basic economic principles, namely that prices should increase as goods become more scarce. By making prices increase as scarcity becomes more binding, those who pay the price have a greater and greater incentive to conserve. The “good” in this situation is the goodwill of the after-care worker, who will become increasingly dissatisfied the longer they have to wait for a tardy parent. If the parents have no incentive to hurry, these after-care workers are likely to become less and less saintly. This can result in a decrease in the quality (or friendliness) of care. Unfortunately, the children who receive their care are, In a sense, hostage to the after-care workers’ good will and the institutional framework the parents face.

Saint Clement’s however, charges two dollars per minute for after-care later than 6 pm. As such, being five or ten minutes late is not too costly, and this can provide some additional revenue for the school. However, the effective hourly rate is $120 per hour, and this is a very high value of time for most households (even Lincoln Park households). That price will motivate action. No one complains about this rate – it does not overly penalize slight infractions, and implicitly parents know that leaving their children at aftercare for an extra hour is poor behavior.   

As a result, remarkably few parents are late, and very few are more than ten minutes late. This motivating principle extends to multiple situations; even when there are transit disruptions or blizzards parents will arrange their affairs such that their children are picked up on time, or very close to six o’clock. And on rare occasions, St. Clement’s Catholic School can provide a dispensation and forgive fees for parents who are late… due to an act of God.