Imagine a school where the number of books checked out from the library is used to judge the school’s literacy efforts. 

Absurd, right? 

Yet this mirrors the reality in many American government schools today (note: my focus is on public, government-funded middle and high schools).

A conversation with a brilliant public school teacher recently illuminated this problem:

Teacher: “If a student turns in a blank paper with just their name, I can’t give them a zero. The grading system won’t let me. It automatically assigns 60%.” 

Me: “Why?”

Teacher: “We were told it’s done to create equitable outcomes and not disadvantage kids who might come from more challenging backgrounds.”

Me: “I’m sensing  you’re skeptical?”

Teacher: “Well, that’s what they say but it’s really about increasing graduation rates. Funding in our state is driven by graduation rates and this drives them up.”

Welcome to the world of perverse incentives in America’s public government school system.

The Incentive Trap

Charlie Munger once said, “Show me the incentives, and I’ll show you the outcome.” Our public schools are a case study in this principle.

We consistently reward A while hoping for B.

The result? A system that often contradicts its own goals.

In my conversations with teachers about The School of Entrepreneuring, I’ve heard about tons of misaligned incentives from teachers in US public government schools.

Grade Inflation: The GPA Illusion

We reward high GPAs, hoping for an accurate assessment of student learning and skills. Instead, we get inflated grades, reducing the value of transcripts and discouraging students from challenging themselves.

Attendance Pressure: The Daily Numbers Game

We reward and fund schools based on high daily attendance, hoping for engaged students and effective learning environments. Instead, we get pressure to maintain attendance at all costs, even encouraging sick students to attend and schools to manipulate attendance records.

Dropout Prevention: The Low Standard Trap

We fund schools based with low dropout rates while hoping for genuine student engagement and success. Instead, we get lowered academic standards and “push-through” practices to keep struggling students enrolled.

College Readiness Obsession: The Narrow Path

We reward college enrollment rates, while hoping for lifelong learners prepared for various careers. Instead, we get an unhealthy focus on college admissions, a squashing of student curiosity and neglecting vocational options and pushing students into unsuitable paths.

Special Education Labeling: The Funding Shortcut

We reward the identification of special needs students through increased state funding, hoping for appropriate support. Instead, we get over-identification, misallocation of resources, and potential stigmatization.

Homework Completion: The Rush of Non-Learning

We reward homework completion while hoping for mastery of the material. Instead, we get students rushing through assignments without truly understanding the content. More insidiously, we’re teaching them to solve the wrong problems and teaching them in the wrong way.

When Incentives Turn Criminal

These misaligned incentives don’t just hurt students and US competitiveness. Sometimes, they spawn outright fraud:

• New York: 100+ NYC high schools abused “credit recovery” programs, allowing students to quickly make up failed courses and even cheat on them to boost graduation rates. This led to a rapid rise in graduation rates and graduating students who didn’t possess adequate skills or knowledge.

• Atlanta: Educators, including principals and teachers, changed students’ answers on the Criterion-Referenced Competency Tests (CRCT), a standardized test, to improve scores. This was driven by pressure to meet performance targets tied to funding and job security. Several educators were convicted of racketeering and other charges.

• El Paso: Administrators “disappeared” low-performing students from test pools to boost the district’s test scores and graduation rates. The superintendent was sentenced to prison for fraud.

• Washington D.C.: An investigation revealed that the school had been graduating students who did not meet attendance or credit requirements. This was linked to pressure to improve graduation rates, which were tied to performance evaluations and funding.

• Chicago: Several schools falsely inflated enrollment numbers to secure more funding and avoid closure or consolidation. This included counting students who had transferred or dropped out.

The list goes on, each scandal more disheartening and unsurprising than the last.

A Call to Action

The cancer of perverse incentives has metastasized throughout our government schools. It’s time we recognize that these aren’t just unfortunate side effects—they’re the predictable outcomes of a system that incentivizes these behaviors. We need to stop pretending that tinkering at the edges will make a difference.

The real question we should be asking isn’t how to fix the system as it stands, but whether it’s time to dismantle it altogether. A system so deeply corrupted by its incentives may not be worth saving. We must ask ourselves: Is it more radical to demand a complete overhaul or to continue placing our faith in a system that consistently fails our children?

What we need is a revolution in education, one that tears down the structures that reward mediocrity and dishonesty and builds in their place an institution that values true learning, critical thinking, integrity, and the well-being of every student. Anything less is merely rearranging deck chairs on the Titanic.

Let’s hope we have the courage to start anew.

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We are building The School of Entrepreneuring to develop formidable young leaders. If you’d like to get involved, please reach out to me at anands (at) gmail (dot) com. Or if you just want to stay updated, sign up below.