In the ratings game, not losing is more important than winning

If I gave you £100, you would be pretty pleased. But if I took away £100, your reaction would likely be a lot stronger – you’d be downright angry.

In behavioural economics, this is called loss aversion: losing something seems to be a lot more psychologically powerful than a gain.

Something along these lines appears to be happening in Germany when “elite” status is given to or taken away from universities by the government. Students basically ignore universities that win “elite” status (or at least they don’t apply to them in greater numbers). Yet they shun those institutions that have it removed.

Watch the evening news, and this makes a kind of sense: we are much more attuned to disasters, conflicts and all-round bad news than things that are going well. “People, maybe for evolutionary reasons...react much more to negative news than to positive news,” said Berthold Wigger, chair of public finance and public management at the Karlsruhe Institute of Technology, and one of the authors of the study, “Status effects of the German Excellence Initiative”, which was published in the International Journal of Economics and Finance. “So we are much more aware of what negative things are going on.”

This means that schemes such as the Excellence Initiative in Germany, or the forthcoming teaching excellence framework (TEF) in the UK, are potentially no upside and all downside for university reputations. If you do well, students may not notice, and you are left with the risk of losing the special status, which will create far more headlines and have far more reputational impact than gaining the gold star in the first place.

It therefore might even be sensible for UK vice-chancellors to aim for stability, rather than top marks, in the new TEF rating. If you go all out to try to move from silver to gold, this leaves you open to slipping back down again the next year. Better not to have moved at all.

Of course, these results from Germany are highly tentative for now, given that there are few universities that have lost their excellence status. And UK students already have many other ways to judge universities, not least the TEF’s research counterpart, the research excellence framework, and a stack of league tables.

But loss aversion is yet another reason why treating students as rational consumers, who calmly shop for the best course having digested all the necessary information, is a rather naive view of reality. 

david.matthews@tesglobal.com