In a paper published in Journal of Legal Studies in 2000, Uri Gneezy and Aldo Rustichini asked an old but very controversial question:

Does punishment work?

The idea was very simple: would introducing a fine for bad social behaviour reduce the incidence of those behaviours? Most would say: Obviously! And in fact many studies had demonstrated the effectiveness of punishments in the Psychology laboratories. But Uri and Aldo wanted to see if this works in real life settings.

They persuaded 10 private day-care centres for pre-school children in the city of Haifa to participate in their 20-weeks long field study. In all of these centres, parents brought their children in around 07:30 and picked them up at 16:00. Every centre had about 35 children.

First, all schools were observed for 4 weeks to get a good idea of how frequently parents showed up later than 16:10. After this baseline period of observation, for 13 weeks, in 6 randomly chosen centres a fine was introduced for delayed pickups. An announcement was posted on the school notice boards saying that every time a parent was more than 10 minutes late, a fine of 10 NIS (equivalent to about 3$) would be added to their monthly bill. The other 4 schools served as control. After week 17, fines were removed.

The results (see Figure 1) were anything but expected. In schools where a fine was introduced, average number of late-coming parents increased. The fine had had the opposite impact. Gneezy and Rustichini offered several alternative explanation for this surprising observation. In the most interesting one, they claimed that parents interpreted the fine as a price. Before fines were introduced, parents most important incentive to be on time was a social norm: that the teachers also needed to go home and one should not waste their time. But after the fine was introduced, delays became another service, another commodity that parents could “purchase”. The fine took away the moral and social significance of the transgression and increased the incidence of the bad behaviour.