The Obvious Fix That Backfired
Suppose you run a daycare, the doors close at four, but parents keep drifting in late, and every late pickup means a teacher stays behind, watching the clock while a child waits. The fix looks obvious: charge the late parents a small fine, a few dollars a time, enough to sting, not enough to be cruel. Make lateness cost something, and parents will hurry.
That is the deterrence hypothesis, one of the most durable ideas in law and economics: punishment works by changing the price of behavior, so raise the price of a bad act and people buy less of it. The logic is clean. It rarely gets tested in the field, because the answer seems known in advance, yet in 1998 two economists decided to test it anyway.
Ten Daycares, One Small Fine
Uri Gneezy, then at the Technion in Haifa, and Aldo Rustichini, at Tilburg University, recruited ten private daycare centers in Haifa, each holding up to 35 children and charging parents 1,400 new Israeli shekels a month, about $380 at the time. The contract said the center operated from 7:30 until four and said nothing about what happened if a parent came late, so before the study there was no fine, and when parents ran late a teacher simply stayed with the child.
For the first four weeks the researchers only counted, and then, at the start of week five, six centers chosen at random posted a notice on the bulletin board: any parent arriving more than ten minutes late would pay a fine of 10 shekels per child, about $2.70, added to the monthly bill. Two children late meant 20 shekels, paid to the owner rather than to the teacher who stayed late, the other four centers changed nothing and served as the control group, and after twelve weeks the fine was removed without explanation while the counting continued for four more weeks.
Ten shekels was small but not trivial: a parent late every weekday for a month would owe 200 shekels, about 14 percent of the monthly fee.
Lateness Doubled, Then Got Worse
The fine did not reduce lateness. It doubled it. In the six fined centers, late pickups averaged 8.0 per center per week at baseline, and once the fine arrived the average climbed to 16.4 per week, a rise of 105 percent, while the control centers drifted slightly downward, from 10.0 to 9.2. The gap between the two groups is the honest measure of the fine's effect: about 9.2 extra late pickups per center per week, or roughly 660 extra late pickups across the six fined centers during the twelve fine weeks.
Then came the second surprise: when the fine was removed at week 17, lateness did not fall back but rose again, to 18.7 late pickups per center per week, 134 percent above baseline, while the controls sat at 8.3. Across the sixteen weeks after the fine arrived, the six centers logged about 960 extra late pickups they would not have had otherwise. The paper's tests found the increase significant and the removal effect nil, while the two groups were statistically indistinguishable before the fine began.
Gneezy and Rustichini's explanation starts with the contract, which said nothing about lateness, so a parent who ran late faced an unknown consequence, and that uncertainty kept parents cautious. The fine removed the uncertainty and replaced it with a number: the worst that could happen was now a 10-shekel charge, so lateness stopped being a breach of a social understanding and became a service a parent could buy. Parents rarely arrived after 4:30, so at 15 to 20 shekels an hour for a babysitter, a half hour of extra care was worth 7.50 to 10 shekels, and the fine was 10. The daycare had, without meaning to, published a menu.
The Strongest Counterargument
The strongest case against this result is that it has never been directly repeated in the field: the experiment ran in ten centers in one city in 1998, randomized by center rather than by parent, six against four, with no preregistration, which was not yet standard practice, so a single unusual center could move the averages, and the post-fine period lasted only four weeks.
The closest attempt to reproduce it went the other way: in 2020, Cherie Metcalf and colleagues translated the daycare scenario into vignette surveys on Amazon's Mechanical Turk, and in both their daycare study and a parallel tax study, fines reduced the anticipated bad behavior, with little sign of the fine crowding out social motivation, and once the fine was removed, behavior returned to baseline.
That failure to replicate deserves a fair hearing, and it also has a clear limit, because a survey asks people to imagine being fined while a field experiment fines them: people predict they would hurry to avoid a charge, then weigh a 10-shekel fee against leaving work early and choose the fee. The honest position is that the daycare result is a single field experiment with a striking effect and no direct field replication, but its mechanism, that money can reframe a social obligation as a purchase, has better support than the daycare numbers alone: Gneezy and Rustichini found that students promised 1 percent of the charity donations they collected brought in less than students promised nothing, and a 2024 replication with 245 pairs confirmed it.
What We Didn’t Prove
This was one small field experiment, ten centers in a single city, run over twenty weeks in 1998, six in the treatment group and four in the control, testing one fine, 10 shekels, for one behavior, late pickup, where the consequence of lateness had never been spelled out. It says nothing about large fines, and the authors say so themselves: they do not claim the effect holds every time a fine is introduced, and a very large fine would probably stop everyone being late. And it measured late arrivals, not the welfare of the children or the teachers, so it cannot say whether the parents who bought the extra half hour were happier, or the teachers more resentful.
The Bottom Line
A 10-shekel fine for late pickup did not deter parents: it nearly doubled late arrivals, from 8.0 to 16.4 per center per week, and removing the fine left lateness higher still, at 18.7, because the fine worked as a price, not a punishment, and priced the teacher's extra half hour at almost exactly the going babysitter rate. The result has never been directly replicated in the field, and a survey-based attempt found the opposite, so treat it as a warning about small fines in incomplete contracts, not as a law of human nature. But the warning is serious: if you fine a behavior without making the fine hurt, you may be selling the behavior instead of stopping it.
What You Can Do
Before you fine something, check whether the fine is big enough to deter or small enough to become a price: if a fee is cheaper than complying, people will pay it and carry on, so set the fine above the price of the behavior, or do not fine at all. If you run a school, a gym, or a workplace with a late fee, track the numbers for a month before and after any change, and if lateness rises after the fee, you have bought the problem: raise the fee, pair it with a non-monetary consequence, or remove it and restate the expectation in plain words. And when someone offers you a small payment to do something you would have done for free, notice the shift. Once money enters the picture, the question stops being whether the task is worth doing and becomes whether the price is worth accepting.
Sources
- Gneezy, U., & Rustichini, A. (2000). A Fine Is a Price. Journal of Legal Studies, 29(1), 1-17. doi:10.1086/468061
- Gneezy, U., & Rustichini, A. (2000). Pay Enough or Don't Pay at All. Quarterly Journal of Economics, 115(3), 791-810. doi:10.1162/003355300554917
- Metcalf, C., Satterthwaite, E. A., Dillbary, J. S., & Stoddard, B. V. (2020). Is a Fine Still a Price? Replication as Robustness in Empirical Legal Studies. International Review of Law and Economics, 63, 105906. doi:10.1016/j.irle.2020.105906
- Asulin, Y., Heller, Y., & Munichor, N. (2024). Comparing the effects of non-monetary incentives and monetary incentives on prosocial behavior. European Economic Review, 165, 104740. doi:10.1016/j.euroecorev.2024.104740