Thank you for being the faculty member for this session and developing the case materials – the two introductory videos you shared are really informative and helped contextualise this case learning wonderfully.
It was interesting how outcomes based financing solutions in education are often proposed as a way to resolve the principal-agent problem. As you mentioned, there are various complicating factors that make it challenging to improve education outcomes through outcomes based financing (such as identifying outputs and outcomes or working with the variety of principals and agents in education).
There was one challenging assumption that I wanted to highlight, which you also alluded to. The assumption that financial incentives will improve the delivery of educational outcomes may not always hold. Sometimes, financial incentives can have the opposite effect. Consider the overjustification effect which is an observation that offering external rewards (such as money) for an activity can end up eroding one’s intrinsic motivation for doing those activities over time.
Of course this is not to say that those delivering education outcomes should not be financially rewarded, but to highlight just how complicated and fine-grained the considerations of incentivization need to be. In a purpose driven sector such as education, it is dangerous to assume that greater financial rewards will always lead to more motivated educators or better education outcomes.