It was the third iteration of his family’s tendering scheme for the kids’ household chores that finally ironed out the kinks, writes Eric Crampton.

Back in 1968, economist Friedrich Hayek wrote that competition is a discovery procedure. Some information about the world simply would not exist without the process of market competition that discovers it.

Parenting is a discovery procedure too – some information about it is difficult to acquire without going through the process. Applying a few economic insights can make some bits of parenting just a little less painful – like sorting out the household chores.

Every household has some chores that the kids are just expected to do as part of the general terms and conditions of family membership. But other chores are more onerous, both for the kids and for the parent, and love and empathy within the family can only get you so far. Managing some tasks can too easily be more painful than just doing them yourself.

If cleaning the cats’ litter box is a particularly objectionable task, which kid gets the job? If they take it in turn, whose turn is it this time? Is dealing with the cat box really worse than sweeping the floors? How much worse? And what happens if one of the chores doesn’t get done?

You could take this as just a parenting problem needing long conversations with each child about which task they’d really rather undertake, followed by anguish about whether any of the resulting complaints were real or strategic. It can be genuinely hard to tell which child more greatly dislikes any particular task – their preferences and abilities change, and they can behave strategically as well. The kids themselves might not really know what they’d prefer doing unless they put some thought into it and gain some experience. Sorting it out is not always easy.

Fundamentally it is more of an economic problem than a parenting problem. So good parenting can involve applying an economic solution.

Our tendering system started about two years ago, when the kids were around 9 and 7. The kids were getting a lot better at doing things. And they wanted more pocket money than the dollar-a-day we had been providing at bedtime on days free from generalised ratbaggery.

That stipend too involved a bit of economic thinking. There is some evidence, albeit contested evidence, that people are loss-averse. Imagine a happiness scale that’s like a thermometer – it can go below zero into painful territory. Getting a dollar at the end of the day is nice – think of it as a plus 25 on our thermometer. Losing a dollar that you thought was going to be yours – that’s more like a minus 30.

So if the kids expect that the dollar at the end of the day is theirs unless they screw something up, well, that can be a better motivator than getting a dollar as reward for good behaviour. And scaling payment to the quantum of ratbaggery, rather than just taking it away for any amount of it, mitigates problems you can otherwise get if the kid is sure that the dollar is already lost.

But back to the tendering system. As parents, we really didn’t know what allocation of chores would result in the least amount of grief. We needed information that the kids could not really credibly deliver to us. They might not even know it themselves without being put to the choice. We needed a procedure to elicit that information. And, at least as importantly, we needed a procedure that reduced the hassle in getting the allocated chores done.

And sealed bid tenders seemed just the thing.

Chores were transformed. These now weren’t painful things to be avoided – they were desirable things to be won.

We started by asking the kids what kinds of chores they might want to start taking up in exchange for a bit more pocket money. I really did not want to be doing the cat box so suggested it as a likely chore for the list. The older child suggested the children’s laundry. And we added mopping and sweeping up to the list.

I wrote the chore list on two separate pieces of paper and sent the kids back to their rooms to write down how much they would have to be paid, per week, to complete the chores. I noted that we would not necessarily accept the lowest bid, or any bid. If one child were the lowest bidder on all three tasks but could not possibly complete all three tasks in a week, that wouldn’t work out either. And we could just keep doing the chores ourselves if the bids were unrealistic.

The children came back with their carefully folded bid sheets, each hoping to win their preferred chores.

The tendering procedure accomplished three important goals.

First, it told us each child’s real preference ordering across tasks. The information that we would have had a very difficult time truthfully eliciting in any other way – they wrote it down for us on the piece of paper. And lying about their preferences, as they might otherwise be tempted to do, could be costly for them – they could wind up doing the task they didn’t want, or missing the opportunity to do a task for a price they had judged sufficient to make it worthwhile.

All of that was what we expected of a tendering process given Hayek’s point about competition as a discovery procedure. Competition helps us to discover things that were previously unknowable. The kids learned how much they were really willing to accept in order to do a chore, and we learned which task should go to which child.

Its second effect was one I’d hoped for but hadn’t quite expected to come through as strongly as it did. Chores were transformed. These now weren’t painful things to be avoided – they were desirable things to be won. If the boy didn’t win the chore, the girl would. They were both worried that the other might win all of the chores. Just imagine!

Finally, and relatedly, it helped reduce complaints about getting the chores done. Whenever one of the children grizzles about doing the chore he or she had won, it really isn’t an issue. We can simply remind them that we can flip to our alternative supplier. The threat of losing the chore’s payment to the sibling is a strong motivator. Competition is not just a discovery procedure, it is also a disciplining device.

I was surprised to discover that other parents hadn’t used sealed bid tenders as a way of harnessing the discovery procedure of competition among siblings.

After the first running of the tendering process, our son won the laundry and the floors; our daughter won the cat box. She had been so worried that her older brother would win all of the chores that she lowballed all of her bids, so we paid her more than her bid for her allocated chore.

Then we discovered something else that I really ought to have planned out better in advance. Oral agreements about just what is involved in each task are not quite enough. For the floors, how frequently did they need to be done? For the laundry, is it a breach of the terms of the tender if a load is left sitting in the washer for too long? How often do the cat boxes need cleaning, and does the task also include cleaning up any mess on the floor around the cat box?

The second iteration of the tendering process followed very quickly, along with more precise written terms for each task. The same tasks were awarded at the same prices, but with more certainty about what was involved. We did not re-run the tendering system until a third iteration, a year later, when preferences over tasks had changed; we took the opportunity to even more precisely define each task while we were at it.

At this point, the economists in the room usually start wondering whether the children have colluded against us. If the kids coordinated their bids, they could get more money from their parents. But we always remind them that we do not need to accept the lowest, or indeed any, bid. Over three rounds of the tendering process, we have yet to see evidence of collusion.

Really, I’m happy either way. If the children don’t collude, we get the chores done without aggravation and at reasonable prices. If they do collude, they will have learned something important about how to bargain with each other – and I can always adjust on other margins.

Parenting is a discovery process. I was surprised to discover that other parents hadn’t used sealed bid tenders as a way of harnessing the discovery procedure of competition among siblings.

And I believe in sharing one’s discoveries.

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