Education: Excerpt from Economics in Two Lessons

by John Quiggin on December 29, 2016

Here’s another excerpt from my book-in-progress, Economics in Two Lessons. As usual, praise is welcome, useful criticism even more so. You can find a draft of the opening sections here.

In the section over the fold, I’m looking at education.

In a modern society, education is the most important single factor determining a person’s life chances. The average who holds a professional or doctoral degree earns more than twice as much as someone without a four-year college degree, and is virtually assured of being employed (at a time of deep depression in 2011, only 2.5 per cent of higher-degree holders were unemployed). In economic terms, the education sector is one of the largest in the economy.

However, this statistical analysis seriously underestimates the economic importance of sector, because it ignores the First Lesson. The true cost of education comprises not just the salaries of teachers and the cost of running schools and universities, but the opportunity cost of the time spent in education by students.

The failure to take proper account of the First Lesson is a big problem in understanding the economics of education. But the failure to understand the Second Lesson has been much more of a problem for policy.

Simple-minded analyses based on a simplistic reading of the First Lesson have driven the irsteducation debate in the US and other English-speaking countries for the last few decades. The dominant idea is that education is a product like any other and that the best guarantee of good education is market competition between providers. The villains in this story are public goods and, especially, teacher unions.

To make education more like a private good, advocates of he First Lesson tried to change the conditions of both supply and demand. On the demand side, the central proposal was that of education ‘vouchers’, put forward most notably by Nobel Prizewinning economist at the University of Chicago, Milton Friedman. The idea was that, rather than funding schools, government should provide funding directly parents in the form of vouchers that could be used at whichever school the parents preferred, and topped up, if necessary by additional fee payments.

As is typically the case, voucher advocates ignored the implications of their proposals for the distribution of income. In large measure, vouchers represent a simply cash transfer, going predominantly from the poor to the rich. The biggest beneficiaries would be those, mostly well-off, who were already sending their children to private schools, for whom the voucher would be a simple cash transfer. Those whose children remained at the same public school as before would gain nothing.

On the supply side, the central idea was the introduction of for-profit schools and colleges to a sector traditionally dominated by public and non-profit educational institutions. For-profit educational institutions had a spectacular rise and fall.

The most notable entrant in the US school sector was Edison Schools. Edison Schools was founded in 1992 and was widely viewed as representing the future of school education. Its plans were drawn up by a committee headed by John Chubb, the co-author of the most influential single critique of public sector education in the United States (Chubb and Moe 1990). For-profit schools were also introduced in Chile and Sweden.

At the university level, for-profit enterprises proliferated with the University of Phoenix was the most notable example. For-profit trade and vocational schools also expanded in the US, and, even more dramatically in Australia, where a poorly-designed subsidy scheme produced a spectacular expansion.

The story was much the same everywhere: an initial burst of enthusiasm and high profits, followed by the exposure of poor practices and outcomes, and finally collapse, with governments being left to pick up the pieces.

Edison Schools, launched on the stockmarket with a flourish in 1999, lost most of its value and was subsequently taken private. At its peak, Edison ran hundreds of schools throughout the US. It has now faded into obscurity under the name EdisonLearning.

Sweden introduced voucher-style reforms in 1992, and opened the market to for-profit schools. Initially favorable assessments were replaced by disillusionment as the performance of the school system as a whole deteriorated. Scores on the international PISA test plummeted https://www.theguardian.com/world/2015/jun/10/sweden-schools-crisis-political-failure-education and dissatisfaction became general

https://www.theguardian.com/world/2015/jun/10/sweden-schools-crisis-political-failure-education

By 2015, the majority of the public favoured banning for-profit schools. The Minister for Education described the system as a ‘political failure’, Other critics described it in harsher terms.

The Swedish for-profit ‘free’ school disaster

Although a full analysis has not yet been undertaken, it seems likely that the for-profit schools engaged in ‘cream-skimming’, admitting able and well-behaved students, while pushing more problematic students back into the public system. The rules under which the reform was introduced included ‘safeguards’ to prevent cream-skimming, but such safeguards have historical proved ineffectual in the face of the profits to be made by evading them.

Similar processes took place in Chile, under the influence of the Chicago-trained reformers whose policies were implemented by the Pinochet dictatorship. There were glowing initial reports, but the eventual outcome was to amplify inequality without improving performance. Chile banned for-profit education in 2015

http://www.gob.cl/2015/06/01/inclusion-law-the-key-changes-to-come-with-the-new-legislation/

https://dianeravitch.net/2016/11/16/tom-ultican-why-for-profit-education-always-fails/

The for-profit university sector followed a similar trajectory. The University of Phoenix epitomised the process. Enrolments peaked at 600 000 in 2010, but had fallen to 142 000 by 2016 as the US government cracked down on shady enrolment practices. Other for-profit universities closed altogether or converted to non-profit status

Perhaps the most spectacular boom and bust took place in my native Australia. From tiny beginnings around 2007, a scheme to provide loans-based funding for vocational training grew into a full-blown educational and budgetary disaster. Even more than in the for-profit US university sector, the companies involved found it profitable to exploit the weaknesses of the funding system, and the fact that students could not judge the quality of education in advance, rather than to do the hard work of providing improved education.

The results speak for themselves. By the time a conservative government radically restricted the scheme in late 2016, the estimated losses to the budget ran into the billions of dollars, while thousands of students were left with unrepayable debts and worthless qualifications. Meanwhile, the public system of Technical and Further Education, which had worked well for decades had suffered grave and possibly irreparable damage.

The failure of full-scale privatisation left the field open to the main remaining alternative ‘charter’ schools. The idea of charter schools was originally put forward by Albert Shanker, the president of the American Federation of Teachers. His idea was to encourage schools where teachers had more opportunities to try out innovative approaches, and where the student body would be more diverse, both economically and racially.

In the hands of the education reform movement, however, charter schools took on a very different tone and purpose, much closer to that of the for-profit model that failed with Edison. While some independent charter schools have pursued innovation along the lines suggested by Shanker, others are part of chains relying on services like management companies, including for-profits like EdisonLearning.

Charter schools have been, and remain, politically popular with Republicans and Democrats alike. Duncan. The only problem is that, according to the empirical evidence, they don’t work. Charter schools have not failed spectacularly, as for-profits have done, but they have not yielded any significant return for the money and political effort that has been poured into their expansion.

http://www.in-perspective.org/pages/student-achievement

Nationally, there is very little evidence that charter and traditional public schools differ meaningfully in their average impact on students’ standardized test performance.

Moreover, although the evidence is murky it seems that an increasing proportion of charters are being run on a for-profit basis, even in cases where formal structure is non-profit. Given the failure of the for-profit model in general, the prospects for the future are not good.

Why has market-oriented reform of education been such a failure? Every part of the Second Lesson is relevant here. On the ‘production’ side, education is, in many respects similar to other industries. Prices send signals about the cost of providing particular courses of study in particular ways, and of the rewards of one kind of employment or another. Institutions and educators respond to those signals. Students try to weigh the cost and the likely monetary benefits of continuing education, or of seeking employment, along with less tangible costs and benefits, and decide accordingly.

On the other hand, an analysis based on prices falls down badly in the attempt to describe education as a market transaction. All the terms of the Second Lesson are relevant here. Education is characterized by market failure, by potentially inequitable initial allocations and, most importantly, by the fact that the relationship between the education ‘industry’ and its ‘consumers’, that is between educational institutions and teachers on the one hand and students on the other, cannot be reduced to a market transaction.

The critical problem with this simple model is that students, by definition, cannot know in advance what they are going to learn, or make an informed judgement about what they are learning. They have to rely, to a substantial extent, on their teachers to select the right topics of study and to teach them appropriately.

Moreover, any specific course of education is a once-only experience in most cases. Students may judge, in retrospect, that particular teachers, courses or institutions were good or bad, but in either case they are unlikely to return, so that there is no direct market return to high quality performance.

The result is that education does not rely on market competition to any significant extent to sort good teachers and institutions from bad ones. Rather, education depends on a combination of sustained institutional standards and individual professional ethics to maintain their performance.

The implications for education policy are clear, at least at the school level. School education should be publicly funded and provided either by public schools or by non-profits with a clear educational mission, as opposed to corporate ‘school management organisations’.

Post-school education raises more complex problems, regrettably beyond the scope of this book. But the key element should be to make high quality post-school education available, and affordable, for all young people.

{ 57 comments }

1

Bill Hawil 12.29.16 at 10:50 am

With very little education, I,am hardly qualified to comment on this topic.
I do consider that education should be available to all students irrespective of their parents wealth, by the government, and if the higher educated earn more, then they should pay more taxes so that the government have the funds to provide free education.
One subject which is not taught in school or Universities, is to control greed, which is the biggest malaise in the world today, as it was thousands of years ago

2

Joel 12.29.16 at 12:01 pm

At work so i dont have the time to read the whole thing right now. Just wanted to say that swedish education scores improved recently (measured 2015, published this november or december). Resultat havent been explained yet, though.

3

Raven Onthill 12.29.16 at 1:36 pm

Good work, and timely.

4

M Caswell 12.29.16 at 2:09 pm

“or by non-profits with a clear educational mission”

This is very interesting to me. Could this point be expanded? Why does this qualification solve the problem? Does any “mission” at all count? Or is it, the “clearer”, the better? What does “clear” mean?

5

Mike Huben 12.29.16 at 2:31 pm

“an increasing proportion of charters are being run on a for-profit basis, even in cases where formal structure is non-profit”

You may want to make clear that this can be done by buying services from for-profit companies owned by the management of the charter schools.

You may want to examine the Education index at my Critiques of Libertarianism wiki to see if there is something you can use. For example, you don’t mention the failures of MOOCs.

You might also mention the big picture idea that there is a lengthy history of educational policy entrepreneurs, whose ideas become fads and then fail. These are just the latest.

6

jdkbrown 12.29.16 at 3:38 pm

“In a modern society, education is the most important single factor determining a person’s life chances.”

Is this perhaps overstated? I’d have thought that the most important factor is the socioeconomic status of one’s parents.

7

MPAVictoria 12.29.16 at 3:57 pm

I think the “Duncan” in this sentence is a typo

“Charter schools have been, and remain, politically popular with Republicans and Democrats alike. Duncan. “

/I enjoyed this piece.

8

Olle J. 12.29.16 at 4:14 pm

As someone that reads the newspaper, the occasional report, and works with the “products” coming out of Swedish secondary education (i.e. what used to be called students), it might be worth noting that the introduction of vouchers and free choice are not the only thing that have been accused of causing the declining school results (and increased inequality).

Other purposed causes include the decentralization of schools from the state to the local municipalities; educational reforms that have introduced modern pedagogy (“flumpedagogik”, hippie pedagogy, is the derogatory term); teachers spending more and more time documenting things for different forms of evaluations instead of teaching or preparing classes; as well as the declining status, class room autonomy, and salaries of teachers (resulting in deskilling and that better students shuns from becoming teachers). The jury is still out on what, or rather which combination, caused the declining test results in Pisa (and Timms; although results both are up again this year).

9

Jake Gibson 12.29.16 at 6:43 pm

Don’t underestimate the political goal of the right to undermine teacher’s unions and to turn public goods into profit streams.

10

engels 12.29.16 at 6:53 pm

In a modern society, education is the most important single factor determining a person’s life chances.

Prince Charles seems to be doing a fair bit better than me and he’s only got a couple of O-levels (as well as being a certifiable fuckwit). I think Thomas Piketty had something to say about this atrange and hitherto unnoticed phenomenon…

11

engels 12.29.16 at 6:56 pm

(Also think I read somewhere that people with PhDs on average make less than people with BAs, and what jdkbrown said, but can’t check now.)

12

Alex K. 12.29.16 at 7:16 pm

Sorry, but this is a hack job.

The link leads to a piece that relies on a Slate article. The Slate article about the Swedish school system was criticized at the time:

http://www.nationalreview.com/agenda/383304/sweden-has-education-crisis-it-wasnt-caused-school-choice-tino-sanandaji

http://educationnext.org/sweden-school-choice/

Then you have cherry-picking of failures, but completely ignore private school successes, like say, Korea.

The theoretical criticism is silly: “The critical problem with this simple model is that students, by definition, cannot know in advance what they are going to learn, or make an informed judgement about what they are learning.”

This proves too much: it is something that would be true for for-profits as well as for non-profit private systems. Yet in the USA, the private universities are consistently the top universities. You don’t have to know Quantum Physics before judging if a university has a good or bad physics program.

The sentence is also a criticism of school choice in general, yet the middle classes in the US have no problem in figuring out where to buy houses to get away from failing schools.

There is a valid point to be made, namely that the institutional design of private-public partnerships needs to focus intensely on avoiding the gaming of the system. Bureaucrats with only vague interest in designing a successful system often don’t do that. But they only have to get it right once. Running a public system well means getting things right year after year — at some point, they’ll fail, and if success is somewhat sticky, failure is even stickier.

But the author of the chapter has no interest in expanding on the valid point, preferring to make overshooting and incorrect generalizations.

13

dbk 12.29.16 at 7:31 pm

It might be worth re-visiting the three excruciatingly long threads (Harry) posted on charters/vouchers a couple weeks ago.

In the home state of the nominee for Secretary of Education, 80% of charters are now for-profit. I suspect the statistics for all states are available if one looks by state. There has been a pretty full assessment of Detroit’s charter school results to date, and they’re not very encouraging overall.

@MPAVictoria:
re: Duncan, I suspect this was JQ’s note to himself to reference Arne Duncan, Obama’s Education Secretary and Former Chancellor of Chicago’s Public School System. Duncan was/is a proponent of charters – in this area, it’s very much a case of “both sides do it.”

One aspect of the interminable discussion on Harry’s threads was the inability of commenters to agree on “who’s the client” for public schooling. Commenters were divided between “the students” (the recipients) and “their parents” (i.e. the payers).

I never saw it that way. A public good has by definition one client: the public, the polity itself. To my mind, it behooves the polity to (a) establish standards and (b) ensure these are met to the greatest extent possible given limited resources.

For-profit charters and vouchers (used mostly for private religious schools) are not the ideal vectors for serving the polity’s education goals for its citizens.

The reasons are legion; again, Harry’s three threads say a lot about them.

14

Sebastian H 12.29.16 at 7:44 pm

Its been a long time since I read the first few chapters, so I apologize if I’m missing the thread about your point here (do you have an easy set of reference links so we can easily go back?).

Talking about education system in terms of market failures is going to strike as very tone deaf for US audiences because the very tiny experiments with charters came about in *response* to pervasive and long term failures of the already public education system. This has always been my frustration with the discussion–that the anti-market people want to criticize market failures, and the pro-market people want to criticize government failures, but they talk past each other.

No one really analyzes what makes for pervasive and long term government failure from the market critique position, and no one really analyzes what makes for government success from the government critique position. So outsiders to the academic world feel like no one is really analyzing it from a point of view where we can get useful non-dogmatic information about when government failures can be corrected with markets, and when market failures might need to be left alone anyway.

Anyway I might be asking that you write a book other than the one you’re writing which isn’t really fair.

15

J-D 12.29.16 at 9:34 pm

‘have driven the irsteducation debate’
I see what you did there.

‘for-profit enterprises proliferated with the University of Phoenix was the most notable example’
I don’t see what you did there. Either the ‘ with’ should be a ‘;’ or the ‘was’ should be an ‘as’.

16

Jonathan McNamee 12.29.16 at 10:33 pm

You state:
As is typically the case, voucher advocates ignored the implications of their proposals for the distribution of income. In large measure, vouchers represent a simply cash transfer, going predominantly from the poor to the rich. The biggest beneficiaries would be those, mostly well-off, who were already sending their children to private schools, for whom the voucher would be a simple cash transfer. Those whose children remained at the same public school as before would gain nothing.

Do well off parents get vouchers to send their kids to private schools? I’m not aware that they get vouchers in the US. Parents who send their children to private schools are subsiding the public school because they pay property taxes. Indirectly they also help to provide vouchers.

17

Maxwell Yurkofsky 12.30.16 at 12:15 am

A wrote an undergraduate thesis apply Chubb and Moe’s theory to Sweden, and am now pursuing a doctorate and study (among other things) how schools respond to competition.

I generally agree with your take, but I think your argument would be more interesting if you gave a little more credence to the charter school movement. In cities, they are better, on average, particularly for poor students and students of color, and even for ELL students (CREDO). More importantly, it is interesting, and relevant to your argument, that (to my knowledge) all the most successful charter management organizatinos are non-profit, and highly mission driven. It is worth it to unpack why they succeed, while for-profit ventures literally founded by the folks who developed the most persuasive theory of action for market principles (Chubb) fail.

It is also worth noting one major exception to even this trend—Bridge International Academies– which has impressively scaled across many countries, generally serves very poor students, and so far has promising results. (many news articles about them, below is one).
http://www.theatlantic.com/education/archive/2014/10/is-it-okay-to-make-teachers-read-scripted-lessons/381265/

A final point worth considering is the extent to which any of these organizaitons feel “competition”. Successful CMOs are buffered by large donations from venture philanthropists, and Bridge has received large investments from folks like Mark Zuckerberg. This certainly adds dimensions to the story.

18

Collin Street 12.30.16 at 1:14 am

You might also mention the big picture idea that there is a lengthy history of educational policy entrepreneurs, whose ideas become fads and then fail. These are just the latest.

But — again — there’s nothing special about education here. All sectors of the economy have these clouds of too-clever-by-half people, the vast majority of whom are deeply misguided. In established private-sector industries and in bureaucracies alike the bad ideas get largely excluded; it’s when things are broken down — nationalisations the same as privatisations — that the daft ideas can get in.

[which means: gradualism, I guess. And throwing the baby out with the bathwater is bad, but so’s leaving the baby in the bath until it dies of hypothermia because you’re so paralysed by the fear the baby will fall down the plughole.]

19

Shirley0401 12.30.16 at 1:38 am

Looking forward to the book. I work in education, and have a couple thoughts…
Unless you already address it elsewhere, you might want to spend at least a few paragraphs on the metrics of determining school effectiveness/success, and the ways individuals and schools have tried (in various cases, illegally and/or merely shadily/unethically) to figure out ways to juke the stats.
To the best of my knowledge, the frequency and scale of these incidents has risen dramatically as education “reform” became a movement in the 80s and 90s. In my experience, as education is increasingly treated as simply another business, it is attracting more and more non-educators whose experience is in “leadership” and “management” rather than education. Unsurprisingly, this has led to more educators focusing more on their end-of-year metrics, rather than their students’ best interests, educational or otherwise.
I know there’s already plenty out there about the ed “reform” movement in general, and your focus is specific, but I think some reference to these issues might be warranted and might connect to some of the other chapters. Frankly, a lot of people I talk to at both the school and district level feel like many of these reforms are solutions in search of problems. Not that there aren’t problems – educational outcomes’ strong correlation with parent income, for one – but that the solutions on offer seem to be unable/unwilling to engage them.
I also remember seeing on a previous post a recommendation that you explore who, in the case of schools, is even the “consumer,” in the first place, and whether their judgement of school effectiveness is the yardstick anyone should use when judging school quality. It’s an interesting question, and one not given enough space in the discussion, from what I’ve seen.

20

Frankie 12.30.16 at 3:17 am

I’m really enjoying this series, and would like to chime in on this installment as I work in higher ed. jdkbrown brings up something very important; college education is associated with better life outcomes, sure, but being able to complete college depends on family resources (and book smarts, which are associated with family resources.) This relationship is so predictable that UCLA’s Higher Education Research Institute has posted an interactive graduation rate calculator.
Also, the number of “good” jobs is not increasing. Expanding access to college hasn’t expanded career opportunities; in fact jobs from accounting to legal research to X-Ray reading are getting automated or offshored to low-wage countries.
Far from being happy to take anyone with a college degree, employers have become far more choosy, and less willing to invest in training. So the same few college people that used to get the good jobs still get the good jobs, and the rest settle for jobs that used to go to high school grads.
Expanding access to college without addressing poverty and job market realities is not going to increase social mobility.

21

Tabasco 12.30.16 at 7:24 am

Engels @10

You are exaggerating about Prince Charles. He got two A-levels, a B in History and a C in French.

And is really doing better than you? I don’t know how how your career has gone, but he is 68 years old and still an intern.

22

reason 12.30.16 at 10:40 am

One thing that is missing here is the clear case that the biggest problem with public education in the US is local financing. Sebastian H. has a valid point here. I don’t necessarily see the issue of public versus private as the dominant factor here. Why is Finland so consistently successful compared to almost everywhere else, at least in results for the typical student (and I’m not sure that I know of league tables for elite student performance). And as I pointed out in your previous thread, I think many of the main issues are orthogonal to this issue (issues that are regarded as important in Germany for historical reasons like furthering democratic values and social inclusiveness for instance).

23

reason 12.30.16 at 10:52 am

Mike Huben http://crookedtimber.org/2016/12/29/education-excerpt-from-economics-in-two-lessons/#comment-701282
re – Libertarianism and education – isn’t the more fundamental point here that Libertarianism doesn’t really cope with the case of children very well in the first place.

Children just don’t fit in the Libertarian world view, they have limited rights and limited responsibilities and are viewed simply as consumption goods rather than actors in their own right.

24

engels 12.30.16 at 12:43 pm

Just 35 percent of the Forbes 400 last year were raised poor or middle class, compared to 95 percent of the broader public, as (reasonably) defined by UFE. Twenty one percent inherited enough money to join the 400 without lifting a finger, what UFE calls being “born on home plate.” Another 7 percent inherited at least $50 million or a “large and prosperous company,” 12 percent inherited at least a million bucks or a decent-sized business or startup capital from a relative, and 22 percent were “born on first base,” into an upper class family or got a modest inheritance or startup capital…

25

harry b 12.30.16 at 2:32 pm

There’s a lot here, John, but for the moment some comments about for-profit universities in the US. First, I am not sure the numbers have declined in the way implied by your language — I’d need to check, but last I read they were still thriving in terms of numbers and income. And I expect them to expand with the new administration. Second, you might want to say something about their graduation rates — they are spectacularly low. Basically, they gobble up huge amounts of public resources without showing much at all return. Third, though, its worth remembering the the US lacks any kind of systematic vocational/job training/retraining system. Someone wants to retrain as a welder, they go to a community college or a for-profit university, usually taking a Pell Grant with them (the majority of Pell Grant recipients are not the 18-22 year old students it was designed for, but older workers seeking retraining). In fact it is really expensive to train a welder, so the institution (whether public, or for-profit) creates all sorts of additional requirements that are cheap to provide, but which cost the same for the student — and the student ends up taking lots of classes he’s not interested in and dealing with a labyrinth of requirements, with very little counseling. There’s a lot of bad behavior, from both for-profits and public institutions in the space in which they are serving (which is not traditional, start-of-adulthood, 4-year degrees). Worth reading Bowen and McPherson, Lesson Plan, which is a quick and informative read.

26

engels 12.30.16 at 2:59 pm

27

J-D 12.30.16 at 9:48 pm

Tabasco

You are exaggerating about Prince Charles. He got two A-levels, a B in History and a C in French.

And is really doing better than you? I don’t know how how your career has gone, but he is 68 years old and still an intern.

What say you then of the head of the firm?

28

harry b 12.30.16 at 11:04 pm

engels @11 — depends where you are. IN the US a PhD earns you more (over the life course) than a Bachelor’s, but less than a Master’s or a Professional degree. But that’s presumably because people taking Masters and Professional degreea do so for the purpose of getting a more lucrative job whereas presumably people doing PhDs do so for other reasons (my students choosing between a PhD and a Law degree know which is going to earn them more money).

29

engels 12.31.16 at 12:09 am

IN the US a PhD earns you more (over the life course) than a Bachelor’s, but less than a Master’s or a Professional degree

Thanks—that’s probably the fact I was trying to remember (and is consistent with the data on race and wealth effects I linked).

30

engels 12.31.16 at 12:12 am

31

John Quiggin 12.31.16 at 2:12 am

@Engels For the moment, the statement you are concerned about is true for the majority of the population – I don’t think the average reader would take it as referring to Prince Charles or Paris Hilton. But, as Piketty suggests, and as I’ve pointed out before, it’s ceasing to be true.

http://johnquiggin.com/2012/04/16/the-coming-boom-in-inherited-wealth/

I’ll put in a footnote on this.

32

Matt 12.31.16 at 2:15 am

IN the US a PhD earns you more (over the life course) than a Bachelor’s, but less than a Master’s or a Professional degree

Harry – is that limited to certain masters’ degrees that are either purely professional (MBA, MPA, some accounting degrees, some engineering degrees, etc.)? (Maybe also a JD, if that’s how you want to consider it.) I’d be very surprised if it applied to, say, someone with an MA in English or History or Philosophy or many other fields (Or even to MFAs). (I’d even be surprised if a masters in, say, social work or education, or educational psychology typically lead to earning more money than a Ph.D., but I’m not sure. Even with an MPA, I’d be a bit surprised.) I’m not sure if it makes that much difference to the over-all argument, but I suspect that the number of masters degrees that typically lead to making more than a PhD is pretty limited.

33

ZM 12.31.16 at 6:14 am

engels,

“In a modern society, education is the most important single factor determining a person’s life chances.”

This isn’t true depending on what you mean about life chances. If you define that as happiness and wellbeing, then family life and your mother’s mental health when you are growing up, and your own emotional wellbeing by age 16 are critical defining factors, more important than educational qualifications.

I wrote on John Quiggin’s blog recently I saw some interesting research on Facebook posted by the World Economic Forum, about the factors that influence whether someone is happy and has a high wellbeing score. Copying from that comment, this research says that inequality isn’t the most important thing and also that educational qualifications aren’t the major factor in deciding an adult’s life satisfaction, but Emotional Health at age 16 is the major factor. Family income contributes higher to someone’s Qualifications (0.16) , but the major contributor to Emotional Health is not family income (0.07), but their mother’s mental health (0.19). The conclusions are that family life and the quality of schools, and also physical and mental health, are more important for someone’s life satisfaction, than inequality is. Not that I am saying high levels of inequality isn’t a problem, but I think the research is interesting nonetheless.

Source: https://www.weforum.org/agenda/2016/12/the-origins-of-happiness

34

Frankie 12.31.16 at 6:43 am

reason@22,
Hawaii doesn’t have local financing for schools. We have a statewide DOE. In possibly related news, we have the highest rate of private school attendance in the nation.

35

engels 12.31.16 at 1:53 pm

36

harry b 12.31.16 at 2:12 pm

Matt — I’m sure you’re right — -the stat is for all people with Masters degrees (but not PhDs) compared with all who have only Bachelors degrees and all who have PhDs. Thing is the vast majority of people with Masters degrees do not hold them in traditional academic disciplines. But, also, in many professions, just having a Masters raises your salary (in those professions PhDs often do as well, but not by enough more to be worth the investment and risk of non-completion). Also we’re talking lifetime expected earnings here — someone with a PhD might earn more in a year than someone with a Masters, but they have foregone several more years of earnings.

37

engels 12.31.16 at 2:47 pm

The most important individual predictor of getting eaten by lions in first century Rome was being a Christian. However, with hindsight I don’t think improving everyone’s access to Pagan worship would have been the best way of helping those people…

38

engels 12.31.16 at 4:12 pm

Another stat I saw recently which I can’t now find is that the income boost from education varies massively across capitalist countries. The ‘return’ on a college degree (e.g.) is much higher in US iirc than it is anywhere else.

Anyway, I’d love to live in a world in which good public education and proper mental health care were provided to all as a universal right, and not because they improve their chances of not dying on the streets. That isn’t an objection to the main (pro-public-ed) thrust of the post, most of which I agreed with.

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Tristian 12.31.16 at 4:58 pm

I think you need to work on the last part. If we look at education as an market transaction it’s the parents who are the customers, not the children. Parents make the decisions and pay the costs, and it seems wrong to suppose they necessarily do this without access to information about the quality or worth of the ‘product’ they are ‘purchasing’. Ask any affluent parent about the best school districts in their county, or the best schools within their school districts, and you’ll get confident and well informed answers. And of course these parents act on this knowledge by spending money by buying houses in neighborhoods with good schools. Given local funding, in the US we get a nasty positive feedback loop that creates huge inequalities at the expense of less affluent parents—better schools mean higher real estate prices which means higher assessed values which means more tax revenues for funding the better schools which means they get even better. The less affluent are steadily priced out of this market, and their choices dwindle–they’re stuck with crappy schools.

In short, prime facie the market model actually works for primary and secondary education for the reasonably wealthy. What makes it work, however, guarantees it won’t work for the less wealthy. It’s easy to see the attraction of schemes promising ‘school choice’ to those who as things stand don’t have it.

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Harry 12.31.16 at 5:12 pm

“Another stat I saw recently which I can’t now find is that the income boost from education varies massively across capitalist countries”

Yes: roughly speaking, the flatter the income distribution, the smaller the return on additional years of education (in terms of income — not, though, access to positions, which still carry with them all sorts of non-pecuniary benefits, including better health and longer life though, again, in more egalitarian countries these benefits are less too, and because health and longevity are better at the lower end).

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Barry 12.31.16 at 5:39 pm

harry b 12.30.16 at 11:04 pm
“engels @11 — depends where you are. IN the US a PhD earns you more (over the life course) than a Bachelor’s, but less than a Master’s or a Professional degree. But that’s presumably because people taking Masters and Professional degreea do so for the purpose of getting a more lucrative job whereas presumably people doing PhDs do so for other reasons (my students choosing between a PhD and a Law degree know which is going to earn them more money).”

At the risk of thread derailment, they likely don’t, since they don’t know the salaries, and don’t know the odds.

BTW – for most, the Ph.D. would get them more.

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Matt 12.31.16 at 6:01 pm

Thanks, Harry – I hadn’t been considering the effect of extra years spent in school, but that’s surely relevant (and not just for more “professional” degrees, I assume. Someone who leaves a history/philosophy/english PhD program w/ an MA after two years and then gets a job will probably earn more than someone who spends 8+ years in the program and then several years w/ questionable employment, maybe w/o a TT job on the other side, and no more, perhaps less, qualified than the person w/ the MA.)

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Harry 12.31.16 at 6:22 pm

Ok — my students know which is more likely to earn them more money. And I am using ‘my’ more restrictively than I should — I try to ensure that students with whom I discuss their futures have at least the information I do about the prospects associated with the different trajectories. And for most of them who are actually choosing between a disciplinary PhD and Law degree, I am pretty sure the probabilities in terms of income favor the Law degree: why do you think the contrary?

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Kurt Schuler 12.31.16 at 11:37 pm

If India is enough of an English-speaking country for you, you may wish to consider the demand for private schooling there, even among the poor. The number of students involved dwarfs Swedwn or Chile or most anywhere else. A place to start is James Tooley’s book The Beautiful Tree.

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engels 01.01.17 at 5:27 pm

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Harry 01.01.17 at 6:08 pm

For anyone interested, College Board produces a nice report on how higher ed pays off in the US: last edition was 2013, and it here:

https://trends.collegeboard.org/education-pays

Its very compendious (can something be *very* compendious??)

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J-D 01.01.17 at 7:16 pm

Its very compendious (can something be *very* compendious??)

If it’s possible to be very concise, then it’s possible to be very compendious.

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Des Griffin 01.03.17 at 12:18 am

I have a number of comments on your always interesting contribution.

In response to your comment that “education is the single most important factor …”, can I refer you to the research which shows that young children learning self-control and gaining self-confidence have a greater chance in life. These two factors have greater predictive reliability than educational factors though they are related. The two factors develop from the environment experienced in early childhood and are enhanced by the parents’ educational attainment, location of housing, urban environment, whether or not they were read to – which leads to substantial differences in vocabulary at the time of joining school – and opportunities for experiencing other activities, events, attractions and so on, all characteristic of higher socioeconomic situations. I’m sure you would be aware of the recent research in the journal Labour Economics by colleagues at UQ showing factors associated with these features had far more prominence than type of school.

The two, I think critical, conclusions from this are that early childhood is the most important time for educational development because it is the time of greatest brain development and therefore cognition and secondly that it is the socioeconomic environment in which the child grows up which makes the difference. Provision of resources to less advantaged children early in life makes a significant difference.

Focusing later on school is not unimportant but takes more resources if early childhood has not been attended to. Most politicians, especially in the US, UK and Australia pay little to no attention to this. Privileging the work/employment workforce participation of parental leave ignores the gains to the community over the longer term of attention to early childhood and the benefits of relationships between the primary carer, usually the mother, and the young child.

Vouchers of course mainly benefit the well-off. There are two documents in particular dealing with Sweden and its changes in the 1990s to school education policy. A substantial study “Does School Privatization Improve Educational Achievement? Evidence from Sweden’s Voucher Reform” by Anders Böhlmark and Mikael Lindahl of Stockholm and Uppsala Universities respectively, published by the Institute for the Study of Labor in Bonn (IZA Discussion Paper No. 3691) in September 2008 found, “… that an increase in the private school share moderately improves short-term educational outcomes such as 9thgrade GPA and the fraction of students who choose an academic high school track. However, we do not find any impact on medium or long-term educational outcomes such as high school GPA, university attainment or years of schooling. We conclude that the first-order short-term effect is too small to yield lasting positive effects.”

The second more recent study by Professor Henry Levin, distinguished economist and director of the National Center for the Study of Privatization in Education at Teachers College, Columbia University in New York, was reported by Trevor Cobbold on his website, Save Our Schools (http://www.saveourschools.com.au/choice-and-competition/the-market-in-education-has-failed-in-sweden).

Levin used “the research evidence that had emerged on the Swedish voucher system.” He used four criteria used in evaluation of particular schemes by the National Center for the Study of Privatization. He found that choice had been increased but “On the criterion of productive efficiency, the research studies show virtually no difference in achievement between public and independent schools for comparable students. Measures of the extent of competition in local areas also show a trivial relation to achievement.” He also examined potential choices and their effects within a particular geographic area. He found socio-economic stratification had increased and thus decrease in equity across schools.

As I understand it, as with US data, offering vouchers in Sweden has produced no education gain.

A study of marketization in New Zealand a couple of decades ago (Lauder, Hugh et al 1999. “Trading in Futures Why Markets in education don’t Work.” Buckingham: Open University Press.. ) found that it reinforced existing socioeconomic inequity.

Can I suggest you may find much of value in the many posts by Trevor Cobbold whose writings on private schools, especially in the US, are very numerous and high quality.

There are and continue to be serious problems in the US and the UK in the attention to schools independent of the public school system. In the former this comes down largely to the way in which schools are funded and this was brought out by Brown vs the Board of Education in the 1955 judgement by the Supreme Court intended to end racial discrimination. The move to greater choice was, as I understand it, actually a strategy by well-off white folks to avoid having their kids attend schools with a large number of black kids. Super rich persons such as the Waltons fund campaigns for election to school boards to remove teacher union nominees. Their funding of certain schools distorts education policy through tax deductions as Diane Ravitch shows. When George W Bush introduced No Child Left Behind – now abandoned for the most part – he had a fellow from Texas who had “fixed” the test results from his schools by removing kids who didn’t achieve high scores appointed as Education Secretary. (We are seeing the same under Trump.)

You are correct in pointing out that students – actually parents – cannot really judge the quality of education at a school. In any event, as John Hattie and others have pointed out, the variation within schools is greater than that between schools. In his Jack Keating lecture last year he observes it is just as well that parents can’t chose the teacher their child is taught by. (Though in any school with good community relations, there is interaction with parents.)

With all the nonsense about the value of private schools the data which probably counts more significantly – eventual wage levels of graduates – is not commonly available except by gossip in some cases. That led James Heckman to point out that rewarding teachers on the basis of test scores distorted resource allocation. People get to have good jobs to a significant extent on the basis of what school they went to – in law, medicine, politics especially.

In the responses to your post there are some useful comments about MOOCS: there is far too much influence at play in this public policy field on issues of efficiency. Learning is a participative process in which the interaction of the teacher – the expert – with the student – novice- is critical. Despite the ongoing insistence in some quarters pedagogical skill and teacher expertise is more important than content knowledge and teacher cooperation and principal leadership are critical. I think that is no less so at the post-secondary level than at primary school and teacher ability at universities is not being addressed though Gillard tried but then wound it back.

I note with interest BTW that people who leave school before completion can later go on to outstanding jobs, witness the new Chief Justice.

Last, the debate about STEM in education is paying far too little attention to teacher skill and too much to content: the arguments about curriculum are for the most part a wasteful distraction: the much needed attention to creativity, lost over time, is ignored at our peril.

Good wishes in this astonishingly important area of public policy.

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ZM 01.03.17 at 7:01 am

dbk,

“I never saw it that way. A public good has by definition one client: the public, the polity itself. To my mind, it behooves the polity to (a) establish standards and (b) ensure these are met to the greatest extent possible given limited resources.

For-profit charters and vouchers (used mostly for private religious schools) are not the ideal vectors for serving the polity’s education goals for its citizens.
The reasons are legion; again, Harry’s three threads say a lot about them.”

The public is made up of lots of people, there isn’t just a collective hive brain called The Public that tells everyone what to do and knows best.

You can just go back to the founding documents of the American Republic and you see arguments about WHO decides what is in the public interest — is it the King? Is is the Parliament? Is it the People?

I don’t see there is anything necessarily wrong with Charter Schools, although in Australia what happens is we have a National Curriculum, and then I think there is State Curriculums as well, and all the schools, public or private, secular or religious, have to comply with the standards of the Curriculums. Although to a reasonable extent this is left to be interpreted by individual teachers and principals. This could be done to ensure standards are met in Charter Schools in America with hardly any difficulty.

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ZM 01.03.17 at 7:27 am

engels,

“ZM, that came up in UK media recently thanks to Blairite economist Richard Layard, and it drew some strong rebuttals from the psychology profession:”

The first link is interesting, it says mental health vs austerity as reasons “is a false dichotomy. Evidence suggests that austerity damages our collective health…. These are largely economic and political matters, requiring cultural, social and political solutions.”

But I don’t think the research I linked to was saying that income inequality was not a factor at all, it just measured inequality as a lesser factor than someone’s emotional health at age 16, where the biggest factor contributing to that was their mother’s mental health. The father’s mental health was hardly a factor at all. So I would guess other structural issues like gender discrimination also contribute to the mother’s mental health and so on.

I also think since I live in Australia my experience is a bit different, the UK and USA seem to have greater inequality than Australia from my observations.

In terms of the 2nd article about poverty being a cause of mental illness using the stress-vulnerability model, I think maybe services for people with mental illness might be better. I had a horrible authoritarian sort of Irish psychiatrist who didn’t follow the Victorian Mental Health Act, so if the government healthcare psychiatrists are routinely like that in the UK it might be a worse mental health system than in Australia.

This is sort of more on topic for the other thread on government services, but since you are arguing health and education and inequality are all linked, I’ll tell you another thing we have rolling out now in Australia is the National Disability Insurance Scheme. This means people with a disability are given an amount of funding each year to purchase services and goods for expenses relating to managing their disability and doing things other people can do. It might be $10,000 a year, or $20,000 a year, up to people who need higher level of supports and get greater funding.

So since in Australia we don’t really have Austerity to the degree that happens in the UK (their are noticeably higher levels of homelessness at the moment and the dole is significantly lower than the disability pension and would be hard for people who are long term unemployed to manage on, the disability pension is about $25,000 a year and the dole is probably not much more than half that), I don’t know that the UK articles you refer to are as important. The UK context is about cuts to services since Austerity, and over the same time in Australia we have had extensions to services with the NDIS rolling out, although it is transforming the service provision to one that is more like a market, so there have been restructures in the disability services.

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Howard Frant 01.04.17 at 4:14 am

This seems too short for the topic, which leads to some pretty sweeping assertions that you can’t back up.

I don’t have a dog in this fight, but as I tried (I think unsuccessfully) to convince people on a recent thread, there is convincing statistical evidence for Massachusetts that (nonprofit) charter schools are better. Specifically, inner-city students do better– by a lot– in math and English in charter schools than in public schools. There is no, or negative, effect for suburban schools. This may be partly because suburban public schools are better than inner-city schools, and partly because suburban charter schools tended to concentrate on things like arts. The people of Massachusetts, in their wisdom, recently defeated a proposal to raise the cap on number of charter schools.

Given your length constraints, I think you should forget about charter schools and focus on for-profit schools, which are a much clearer case both theoretically and empirically.

http://economics.mit.edu/files/6493

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Howard Frant 01.04.17 at 7:51 pm

JQ

I’m a bit behind the curve here; where do I find a statement of the First and Second Lessons?

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John Quiggin 01.04.17 at 11:53 pm

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John Quiggin 01.05.17 at 12:08 am

@51 The fact that people (including me) weren’t convinced by your MA case may be because of this point

https://xkcd.com/882/

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J-D 01.05.17 at 1:27 am

Howard Frant

Have you given any consideration to the possibility that an expansion of charter schooling produces better outcomes for the students who attend charter schools but worse outcomes for the students who don’t?

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Harry 01.05.17 at 3:00 am

“Have you given any consideration to the possibility that an expansion of charter schooling produces better outcomes for the students who attend charter schools but worse outcomes for the students who don’t?”

Howard probably has given some thought to this, since it is an obvious thing to think about. It is something about which we have very little evidence, mainly because i) people haven’t tried to find it out and ii) it’s really hard to find out. I would have sworn I read something by Brian Gill (author of the best studies of KIPP) recently arguing that there are reasons to think charter schools don’t have this effect, but googling produces nothing!

Even if it they do have a negative effect on the kids who don’t attend, that isn’t a conclusive argument against them. Charter schools which serve disadvantaged communities (like KIPP) might benefit the communities by improving the education of some kids even if they harm the education of others, if the benefit to some is sufficiently more than the harm to others, no?

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John Quiggin 01.05.17 at 5:06 am

To restate my view, charter schools as originally envisaged might well be a modestly positive innovation on balance, but clearly don’t make a substantial contribution to resolving the problems of school education in the US. My big objection is that they open the door to for-profits, which will be a disaster in the long run. I think this is clear in the extract presented in the OP, but if it reads more strongly, feel free to point this out.

I’ll probably expand the conclusion to spell out the importance of needs-based funding, that is more money for poor schools, and to make the point that education can’t fix the problems created by a highly unequal society, though it can mitigate them to some extent.

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