All governments of the world assume a substantial role in providing education for their citizens. A variety of motivations lead societies to provide such strong support for schooling – some of which come from pure economics and others of which come from ideas of improved political participation, of social justice, and of general development of society. No matter what the motivation, the fundamental question remains of ‘how much should society invest?’ Public investment in education comes at the expense of other public and private uses of the funds.
Most people who read the headlines last February were stunned to learn that New York City schools were being shortchanged by $5.6 billion per year, or more than $5,000 per student. The 43 percent court-ordered budget increase, from around $13 billion in operating expenditures to something approaching $19 billion (not including some $9 billion over five years for building improvements), is the largest school finance “adequacy” judgment ever awarded. Of course, most people do not have a good grasp on either the economics or the performance of New York City schools.
It is difficult these days to ignore the message that education matters. Governments everywhere in the world have assumed a substantial role in educating their citizens, and "providing education for all" is a central pillar of the Millennium Development Goals. A variety of motivations lead societies to provide strong support for schooling. Some are purely economic, while others are driven by ideas of using education to improve political participation, social justice and, more generally, develop society.
The argument for federal involvement in accountability is clear-and falls directly in line with traditional places for centralized governmental policies. School quality is undeniably important for the nation with future economic success depending directly on the quality of our schools. Not only individual incomes but also the future growth of GDP are related directly to the knowledge and skills of the overall population. Moreover, the skills observed to count in the marketplace are the ones forming the basis for school accountability.
Experienced teachers are, on average,more effective at raising student performance than those in their early years of teaching. This gives rise to the concern that too many teachers leave the profession after less than a full career and that too many leave troubled inner-city schools for suburban ones. Until now, the roots of these problems have not been well understood.
Accountability has been a central feature of educational policy in a number of states since the 1990s. In part because of the perceived success of accountability in the states where it was initially tried, federal law introduced mandatory reporting and accountability through the No Child Left Behind Act of 2001. Yet not everybody is happy with school accountability. Its opponents continue to aggressively search for evidence that testing and accountability do not work—or, better, that they are actually harmful.
The report authored by Arizona State University researchers Audrey Amrein and David Berliner purported to examine student-performance trends on national exams in states where legislators have attached "high stakes" to test scores. The controversial nature of testing has led to the hurried release and dissemination of research that lacks scientific rigor, of which the Amrein and Berliner study is one of the more egregious examples.
Much of the research on the economic impact of education has properly concentrated on the role of school attainment—that is, the quantity of schooling.This focus is natural.The revolution in the United States during the 20th century was the universal provision of a basic education. Moreover, years of schooling are easily measured, and data on years attained, both over time and across individuals, are readily available. Yet today’s policy concerns revolve around issues of quality much more than of quantity.
The early 1990s saw the height of the east Asian miracle. The economies of Japan, South Korea, Thailand, Malaysia, and other countries of the region were expanding at rates that dwarfed those of the United States and the mostly European nations of the Organization for Economic Cooperation and Development (OECD). The so-called “Asian tigers” were projected to surpass the U.S.economy in the not-sodistant future. In the national soul-searching that ensued, new attention was focused on the U.S.education system.
The ideas ventured by A Nation at Risk, though prescient in many respects, have distorted the nation’s understanding of the relationship between education and the economy for two decades now. Written during a recession, A Nation at Risk implied that the general state of the economy could be directly traced to the current performance of a nation’s education system. The economic trends of the eighties and early nineties reinforced this interpretation.
School reform is a topic on many people’s minds today, and the air is full of advice and recommendations. Unlike many policy areas, the vast majority of people have strongly held opinions, mostly arising from their own personal experiences in school. As a result, much of policy making involves walking a line between research findings and popular views. Unfortunately, these popular views frequently are not the best guide for decision making. This discussion begins with some evidence about the importance of teacher quality and moves to ideas about how the quality of teachers can be improved.
Much is uncertain about the total effects of a broad voucher program on education. The United States has relatively limited experience with choice in general and vouchers in particular, and that experience has occurred in rather narrowly prescribed experiments. It is therefore difficult to project the results of a broader voucher program by simply expanding on past experience with such a program. On the other hand, considerable experience relates to various aspects of schools that have been highlighted as potentially important.
Although many states and districts are moving forward with accountability schemes, they are likely to run into real problems that compromise and distort these programs’ impact. Though it seems natural to measure outcomes and hold schools responsible for them, the mechanics of how to do that appropriately are complicated. Creating effective accountability schemes will require a deeper understanding of how these programs alter incentives in schools and in turn the dynamics of accountability.
In the summer of 2000, perfectly timed to shape the election debate over education reform, came a new RAND study that claimed to contradict the conventional research wisdom on the connection between school expenditures and class size on the one hand and student achievement on the other. “Our results certainly challenge the traditional view of public education as ‘unreformable,’” the study’s director, David Grissmer, said in an accompanying press release. “But the achievement of disadvantaged students is still substantially affected by inadequate resources.
Various important policy decisions, fund allocations, and contractual provisions rely on the calculation of price differences, implying that the estimation and use of different price adjustment mechanisms have serious repercussions. Accordingly, controversies about the best way to proceed also exist. A simple but powerful example is the recent debates about the accuracy of the Consumer Price Index (CPI). There are not only technical disagreements but also political disputes owing to the important uses of the CPI in both public programs and private contracts.
I begin with some overall observations and conclusions. The subsequent discussion will provide some of the relevant evidence and references to support my conclusions. As a starting point, educational investments are very important to the U.S. economy, a fact that suggests there is much value in an aggressive human capital investment strategy. The U.S. economy has been built up largely by using a skilled labor force and has capitalized on the presence of skills, making human capital investments very important to the success of the overall economy.
Economic analysis of education and schooling has progressed considerably over the past few decades, and this essay attempts to put a few key issues into perspective. I look at the field from the particular vantage point of an economist with an interest in how school resources are used and how student performance can be improved. This perspective at least as applied-may be a bit narrow, although I think it is central to much of the policy discussion in education.
The production of school reform reports is a big business in the United States. The current trend of reform was started by A Nation at Risk, the 1983 official government report that detailed the decline of America’s schools. Since then, new reports have been institution not to have its own report and position on reform. Yet, it is startling how little any of the reform reports, and the reform movement itself, draw upon economic principles in formulating new plans.
Part of the glue holding together the membership of the Association of Public Policy Analysis and Management is a concern about the character and path of public policies. Embedded in this is the professional opinion that analysis will improve the outcomes of policy deliberations. This issue-the relationship between policy analysis and policy development-has been the subject of a long-standing debate that has recently been revived.