Stumbling and Mumbling

For private education

The other day I was toiling away when I heard a series of loud bangs. "What idiot is setting off fireworks in the middle of the afternoon?" I wondered. I went out to find out. It was Oakham School's army cadets having shooting practice.
Which set me thinking:  isn't private schooling so good? It's education in the sense of "educere" - drawing out whatever latent talents a student has. If someone doesn't have the aptitude for academe, they are given the chance to excel at something else: the military, or music (Oakham School has a thriving music department) or sport: the school's county-standard facilities has recently helped it produce some fine cricketers.
Contrast this to the Marxian view, which regards (state?) schools as means for moulding people to meet the requirements of capitalism - a view which New Labour, which regards the state as a human resources department, seems to regard not as a criticism but as a policy ideal.
Which raises my question. Might it be that the best private education embodies the liberal-left idea of education better than do centrally-managed state schools? I mean this in three senses:
1. It's child-centred, in the sense of trying to bring out the best in the student, even if this does not lie in a narrow academic curriculum.
2. It encourages the pursuit of excellence rather than effectiveness, to use MacIntyre's distinction. Classcial music, cricket and the army are no way to make great wealth, but they are practices which encourage accomplishment as a goal in itself. By contrast, the philistinic New Labour conception of "education" as mere preparation for making a living looks no higher than money-grubbing.
3. It entrusts professionals to know best how to teach, rather than strangling them in bureaucracy .
So, shouldn't the left, when it thinks about what an ideal education system would look like, take some cues from private schooling?

Pay-offs to humanities education

Norm asks: "does it even make sense in an economist's terms to write as if there are no significant benefits from education in, broadly, the humanities?"
One answer is in tables 7a and 7b of this paper. It shows that young men with degrees in arts and humanities earn 10% more than men without degrees, whilst women with such degrees earn 30% more than non-graduate women; the difference is partly because non-graduate women earn less than men.
In this sense, arts education pays even in the most philistine economistic sense.  Indeed, the chief executives of three of the UK's biggest banks - Stephen Green at HSBC, John Varley at Barclays and Andy Hornby at HBOS - all read humanities: PPE, history and English respectively. 
However, these returns to degrees come only if graduates can get graduate jobs. And the proportion that do so has fallen in recent years - to just two-fifths for men. And arts graduates - men and women- who don't get graduate jobs earn no more than non-graduates. Mind you, male science graduates who don't get graduate jobs do even worse.
So, if you can get a graduate-level job, there are financial pay-offs to humanities education, especially for women.

Education & inflation

Like several economists, I've been sceptical about the effect of better education upon macroeconomic performance. But could this be because  we've been looking in the wrong place? We've been looking for an impact upon GDP growth, when in fact education, in aggregate, pays off by reducing inflation.
That's the claim in this new paper. It claims there are four reasons why a better educated population should lead to lower inflation:
1. Smart people are better at shopping around, so firms are less able to raise prices.
2. Educated people are less likely to suffer from money illusion, so governments and central banks have less incentive and ability to boost growth in the short-term by springing inflationary surprises upon people.
3. Educated people are more likely to understand that inflation does no good, and thus to tolerate the short-run paid associated with anti-inflationary policies.
4. Educated people are more likely to be net creditors (either because of their higher wealth* or because they have longer time horizons and so save more), and creditors hate inflation more than debtors.
Granted, the empirical evidence isn't knock-out; the human capital stock (which is a bugger to measure) seems to Granger-cause lower inflation across a big sample of countries, and in poorer countries, but not in richer ones alone. But it doesn't disconfirm the theory.
And because inflation imposes serious welfare costs, this suggests increased schooling might have worthwhile macroeconomic effects after all.
Just one unworthy question, though: is it education that reduces inflation or IQ?
* This is quite consistent with education not increasing aggregate wealth, if education equips an individual to be a better rent-seeker rather than a genuinely productive citizen.

Does compulsory education pay?

Is the government right to raise the school (or training) leaving age to 18?
The dull functional utilitarian argument is that increasing education will increase earnings. But this new paper suggests this effect could be small.
It looked at the effect of the rise in the UK school leaving age from 14 to 15 in 1947. And it found that the impact this had upon wages was modest. it increased men's wages by 5-6%, and had no noticeable effect on women's wages.
The reason for this is simple. The sort of people who wanted to leave school at 14 were, in many cases, the sort who figured rightly that they wouldn't gain much from the extra year at school anyway. So forcing them to stay had low pay-offs.
So, why should things be different today? The argument that the returns to education generally are higher than they were a few decades ago doesn't wash. The problem is that students should be aware of this, and those for whom it is true should be staying on in school anyway. And if they are not doing so - say because of poor family finances - the solution is to raise EMAs, not introduce complusion.
Another argument is that 16-year-olds won't be compelled to stay in school, but merely some type of training.
The problem with this, though, is that returns to lower-level vocational qualifications - NVQ levels 1 and 2 - are actually negative (pdf) now.   A lot of training doesn't pay.
So, is there really hard empirical evidence to justify depriving teenagers of their liberty? This study  (pdf) doesn't convince me, as I argued here. So where is the evidence?

"Contacts, contacts, contacts"

Commenting on Blair's latest job - advising Zurich Insurance on climate change - Bryan Appleyard says:

I know more about climate change than Tony Blair; if I had a dog and had taken it on my last trip to see Jim Lovelock it would know more about climate change than Tony Blair.

He's right, but misses the point. What Blair's selling is not expertise but contacts - not human capital but network capital.
And there's tons of evidence that network capital matters. Knowing other researchers allows scientists to collaborate on generating ideas. Social capital is often crucial in helping scientists turn inventions into companies. Non-executive directors are often useful not so much for their expertise as their contacts with suppliers or customers. And it's a knowledge of other people that helps entrepreneurs make money; any good salesman will tell you that it's at least as important to know your customer as your product.
It's for reasons like this that the internet and mobile phones can boost economic growth, particularly in Africa, and this may be why the privately educated earn more than the state educated, even controlling for qualifications.
Indeed, it could be that network capital is actually more important in raising incomes than human capital. I mean four things:
1. What looks like a return to experience is in fact a return  to knowing more people. If you've done a job for a few years, you'll have met likely employers and your reputation will have grown. Beyond a certain point, it may be these that raise your earnings more than the technical skills you've acquired from an extra year of work. This, surely, accounts for Blair's high earnings now.
2.  Returns to human capital might be over-estimated, if a university education serves to signal ability rather than merely develop it.
3. This lovely paper (pdf) by Marcel Fafchamps estimates that, among agricultural traders, network capital gives a higher return than human capital.
4. Macroeconomic evidence for a strong link between human capital and subsequent growth is surprisingly weak; see, for example, the critiques here (pdf) here (pdf) and here (pdf). 
Which brings us to a nice irony. Blair famously said the key to economic success, for individuals and economies, was "education, education, education." But his subsequent career demonstrates that what might be more important are "contacts, contacts, contacts."

Selective education: some evidence

Does selective education work? The CMPO has gathered some evidence on this (it'll appear here shortly).
First, David Jesson claims that the 164 grammar schools that currently exist in England "do not offer a ladder of opportunity to any but a very small number of disadvantaged pupils". This is because they just don't go to such schools. Only 2% of grammar school pupils are eligible for free school meals. Seven times as many were at private school before entering the grammar.
Second, Damon Clark found a neat natural experiment to compare how grammar schools compared with non-grammar. He looked (pdf) at those pupils in the East Ridings of Yorkshire in the early 70s who had 11+ scores on the borderline for grammar school entry. Some attended grammars, and some didn't. And he found that those who attended grammars did no better on maths and English tests in their fourth year than those who attended other schools. Grammars did, however, enable their pupils to take more O levels - especially pupils from poorer backgrounds - which might have increased their chances of going to university.
A more positive take on grammar schools comes from Eric Maurin and Sandra McNally, who looked at the effect of expanding Northern Ireland's grammar school intake in 1989.  They found that this significantly improved GCSE scores, with the impact similar for both poorer and  wealthier students. Wider access to grammar schools, it seems, improves standards but not equality of opportunity. Or put less kindly, excluding pupils from grammar schools damages them.
These results seem rather inconclusive. As this paper (pdf) concludes, "we probably do not know very much about  the effect of comprehensive schooling."
Which makes one wonder why everyone thinks they know.

Compulsory education & diminishing returns

Mike Ion tries to defend government proposals to raise the education leaving age to 18:

A study in Canada cited by Alan Johnson when Education Secretary found that the introduction of tighter provincial restrictions on leaving school between 1920 and 1990 had helped in raising both average attainment and average incomes. The study found that students compelled to attend an extra year of school experienced an average increase in annual income of about 12%. It also found that compulsory schooling is closely associated with significant benefits.

Mike doesn't link to the study, but I suspect he means this pdf. And if he does, there's a problem, because it shows the exact opposite of what Mike and Alan Johnson would like. Here's page 17:

Average grade attainment is 0.24 points higher with a school-leaving age of 14 compared to a lower or no school leaving age...Raising the dropout age to 15 versus 14 exhibits an even larger increase in average grade attainment (0.63 points). However, the effect from increasing the limit age again to age 16 is negative. (emphasis added).

This is exactly what the law of diminishing returns predicts. If someone has little education, there's a decent gain from giving them more. But the more schooling they have, the smaller are the marginal gains from more of it. 
Worse still, the paper suggests there might be negative spillovers from higher school leaving ages. It finds (table 2) that raising the leaving age to 16 has a small but significant negative effect upon students' chances of getting degrees. This is consistent with the possibility that forcing people to stay at school disrupts the learning experience for those who want to learn.
There might be a case for raising the education leaving age to 18. But it's not to be found in the paper cited by Mike or Alan Johnson. I hope this isn't supposed to pass for evidence-based policy-making.

Choice in education

Megan McArdle asks: why is education so special that it should be provided by the state, rather than bought in the marketplace?
One answer could be that education is chosen by one person (the parent) but endured received by another (the child). And we know from the work of Joel Waldfogel that it's inefficient for one person to choose gifts for another; gift-giving at Christmas, he estimates (pdf), destroys up to one-third of the value of gifts. And if people are bad at choosing Christmas presents for each other, isn't it at least possible that they'll be bad at choosing education for others? Sure, the stakes are higher which should focus the mind. But equally, the quality of education is less easily observable.
So, it's possible that if parents can choose education, they'll choose badly.
Worse still, the parents most likely to choose badly are those who raise their kids badly anyway. Choice in education would then exacerbate inequality, by condemning children from bad homes to bad schooling too. The test of policy in this regard shouldn't merely be: what works for the  child from an average-to-good home? She'll do OK anyway. Rather, it should be: what works for the Chesney Browns who lack such support?
In this context, this recent paper (pdf) by Steve Bradley and Jim Taylor provides a pleasant surprise. The increased choice in UK education created by the 1988 Education Reform Act, they estimate, did raise standards.
Better still,  the effect was bigger upon schools with the largest proportion of poor kids - those eligible for free school meals.
This is good. But not great, for three reasons:
1. The mechanism through which schools with poor kids improved might have been a one-off effect; the threat of closure forced them to buck up their ideas. It's not clear that choice would lead to continuous improvements.
2. The improvement in standards is small. Bradley and Taylor estimate that competition, plus the Excellence in Cities programme and the introduction of specialist schools put together explain less than one-third of the improvement in GCSE scores between 1992 and 2006.
3. The boost to poor kids' grades from competition - a rise in the proportion getting five or more good GSCEs of  around five percentage points - is only a small fraction of their overall disadvantage. Only 28.7 % of boys eligible for free school meals got five good GSCEs in 2005, compared to 56.2% of boys not eligible.
Now, one might react to this by saying that competition and choice have not yet gone far enough. But isn't another possible response that school reform can only eliminate a small proportion of the disadvantage suffered by kids from poor homes? The idea that schools can create genuine equality of opportunity is a myth - and perhaps a dangerous myth.

Education spending and equality

This report (pdf) from The Primary Review claims that "£500m  was spent on the National Literacy Strategy with almost no impact on reading levels."
This isn't an isolated failure of New Labour. Spending on schools is often unproductive. In this paper (pdf), Erik Hanushek estimates that increased spending on schools around the world for years "have yielded little in the way of general improvement in student achievement."
One interpretation of this is that structures matter more than money; it's competition and autonomy that raises standards, not resources alone, as Ludger Woessman describes here.
But there's another issue here for the left: how best can we improve the life chances of children from the worst families?
It's not obvious that these will benefit from school choice alone, as bad parents  (by definition) won't make the best choices for their children.  And the data shows that throwing money at them isn't guaranteed to work.
So, could it be that there's a tight limit to what the state can do to increase equality of opportunity?

School productivity falls

Productivity in UK state education has fallen by 4.5% since 1999, according to this new report (pdf) from National Statistics.
This is because the output of the education system - GCSE passes per pupil - has not kept pace with rising inputs: more and better-paid teachers and support staff.
If you believe there's been grade inflation - so that rising GCSE scores aren't a sign of rising actual achievement - productivity will have fallen even more than this.
The glib response to this is that it's a sign of New Labour's mismanagement of the education system. But could it not be a sign of deeper problems?
First, it corroborates Erik Hanushek's claim (pdf), that increased education spending yields little result around the world. 
Second, it might be yet more evidence for Baumol's cost disease. Even if we try to adjust for quality improvements, productivity growth in services is slow with the result that their prices rise relative to the rest of the economy. And this in turn suggests it's hard to cut state spending by increasing efficiency; the way to do so, if at all, is to cut some functions.