Echo Chamber Post: Education and Growth
By Ian
Boy, do I wish Marginal Revolution had comments enabled. Since they don't, I'll just take advantage of the whole Trackback thingy -- ain't technology grand?
Tyler Cowen raises some points in service to a skeptic's take on whether or not education is actually a significant contributing factor to economic growth. Rightly, he focuses on the tenuous relationship inherent in the word "cause".
But what interested me enough here was the argument from the Spiked essay here. The article goes to great lengths to highlight the problems with the notion that education causes growth.
I see a general problem in the whole debate, however. Comparisons across education systems aren't entirely useful. The issue is more about who is being educated, rather than how much is being spent by the state on education. Highlighting South Korea as compared to Egypt doesn't account for the fact that the kind of spending was massively different.
Spending that simply increases the number of people in school (whatever grade it might be, though I think primary education like reading and writing a native language has been proven incredibly useful so this tends to focus on education beyond basic life functions) will invariably draw people for whom more education is useless. Making school cheaper (and more beneficial through the benefits of being in school, like meals or health care) pulls people out of pursuits they may have been more suited for, simply because school becomes the easier alternative.
Perhaps better would be a review of requirements to move on to each grade, entry requirements to higher education, or the amounts of "academic" versus trade schooling that is available. Naturally, some people will be better at economics, while others really ought to be mechanics. Massive spending by the state in an attempt to fatten the school rolls will obviously distort the distribution of abilities in school.
Spiked doesn't take its use of human capital theory far enough. The article mentions the "individual", but seems to skip by the implications it brings up. Yes, in simplification human capital is a measure of worker skill, but its also largely concerned with returns on various personal investments. There is a return on education that may increase skills, but this is certainly not uniform across all people. (Also, depreciation of capital is considered in human capital theory, so the fact that skills are lost is accounted for.)
You could put me in a chemistry class, with all the tutors I could ask for, access to the world's best laboratory equipment, and a stockpile of money to do what I like with it, and you'll never get a chemist walking out the door at the end of the day. I'm bad at it, and I don't particularly care for it. But a friend of mine went to bed at night dreaming of molecular chains and fluid dynamics. More power to her, I say. While we were free to pursue our own paths, indiscriminate state spending will have a hard time sorting the two of us out.
Which is precisely the problem with using Britain as an example. That country's high spending on education is in an effort to make sure native Britons don't face high tuition costs. Trouble is, it is those high costs that tend to weed out those people who will see a high enough return on the time and effort in education to mitigate them. Lower the entry costs a bit, and the marginal person is likely to be induced into attending University, rather than entering the work force right away. (NB: This effect tends also to have a negative impact on the population for whom higher costs would be no deterrent. Classes become overlarge, perhaps, or are changed to accomodate less competent students, making the experience less useful for those who would naturally get a higher return. Ironically, keeping tuition low or free has been a way to fight the flight of students to other countries, when in fact it may well be a factor causing those students to leave.) The number of years in schooling will the be inflated, since it makes more sense to stay in school than to leave it for that marginal person, despite the individual having gotten very little out of it.
There's another issue to be considered with more people in school: it dilutes the value of the signal attained in whatever education was completed. If more people are graduating from a program, the value of the diploma is that much decreased since it loses some prestige (the resource is far less scarce and thus less valuable). Then there's the negative reputational effect of having people with a certain degree underperforming as compared to someone else with the same degree. Since entry was easy, there will be much greater variance in skill level upon graduation. A company might like that you have a University of Chicago degree, but since they recently hired me, and I've performed barely above the level of a drunk monkey even with my very own University of Chicago degree, the value of your achievement is thus dragged down, no matter how well you might perform. More practically, the problem is this: it means nothing to have more people graduating from high school in Egypt if those people have little skill to show for it, and could have been better off in some other pursuit.
I suppose I have to agree that the causal link between education and growth is murky; but I do so because I think the question is over simplified. Mixtures of educational opportunities (vocational schools, competitive academic institutions, part time education, etc.) might indicate an ability for people to find the level of education that is most usefu to them. In the aggregate, then, higher levels of education may contribute to growth much as more efficient allocation of productive resources contributes to the health of a company.
UPDATE: Merits of pay schooling versus free schooling in Ireland is over at AtlanticBlog.
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