Arnold Kling  

Flat-of-the-curve in Education?

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Michael Graham writes,


Education reform activist Bill Costello points out that our annual "per-pupil spending in 2006 was 41 percent higher than the OECD average of $7,283, and yet American students still placed in the bottom quarter in math and in the bottom third in science among OECD countries."

This strikes me as similar to the international comparisons of health care spending and health care outcomes. Yet the conventional wisdom on education is that the problem is lack of spending, while the conventional wisdom on health care is that the problem is the inherent inefficiency of our system.

The common thread in the conventional wisdom is that we need more government involvement.

My own view is that these are two areas where outcomes depend largely on factors other than the services provided. Meanwhile, we have succumbed to the claims of suppliers that their services ought to be heavily subsidized. The subsidies lead to over-provision of education and health care services, well past the point where the marginal return from additional spending becomes negligible. In health care, this is known as the flat of the curve hypothesis. Perhaps the hypothesis also applies in education.


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COMMENTS (8 to date)
stephen writes:

Simpsons paradox. Break out performance by IQ buckets, and my money is on the US.

allen writes:
My own view is that these are two areas where outcomes depend largely on factors other than the services provided.

Yuppers. Like political factors, i.e. who's the biggest, baddest constituency with an interest.

But as an entity born of the political system, and bound by it, the nuances, oversights and vulnerabilities to interpretation in the laws that created either have a profound effect on performance, efficiency, choices and future direction.

Human nature being what it is short-term gain will be more vigorously pursued then long-term gain, accountability will be eroded at every opportunity and the appearance of progress - to the larger electorate - will be more attractive to those within the organization then its actuality.

There are, of course, some innate difference between medicine and education that moderate some results. Outcomes allow certain excesses in education, as an example, that aren't acceptable in medicine. Kids graduating high school as illiterates isn't a big problem but people dying is.

Overall though socializing medicine pushes medicine in the same direction it pushes education; less effectiveness, less efficiency and less accountability.

KLO writes:

Both education and health care see diminishing returns as you spend more and more money. For this reason, it is not surprising that the U.S. is both an outcome laggard and a high spender. Other countries demonstrate that better outcomes are possible. Partially in response to this, the U.S. spends ever more money in an attempt to produce those better outcomes. But, because of background conditions that are independent of the services provided and due to the diminishing returns of ever higher spending, the gap is never fully closed. Since you cannot easily change the background conditions (e.g. people stuffing their pie holes with junkfood and lazing about on their sectionals), people come to rely on the more centralized strategy of spending more money. Heck, if we didn't think that we could do better on education or health care, we probably would not spend so much money, notwithstanding the parochial interests involved.

KLO writes:

Graham does miss something significant, however. He writes:

"For example, the average 17-year-old’s NAEP score in reading back in 1971 was 285. In 2008 it was 286."

He then argues that this proves that doubling spending over the period did not produce any improvement. Hogwash. The demographic profile of the country changed enormously from 1971 to 2008. There are now many more low-scoring minorities in the student population. The fact that these scores did not get any worse is actually quite amazing when you think about it and offers some hope for the future. It also runs completely contrary to the common belief among even people supposedly well-versed in education policy that the schools in the U.S. have gotten much worse over the past three generations. The data that are available shows quite the opposite; schools are modestly better if judged by NAEP.

Shangwen writes:

@KLO: "Both education and health care see diminishing returns as you spend more and more money. For this reason, it is not surprising that the U.S. is both an outcome laggard and a high spender."

Absolutely. Politicians on the right say they want less spending; politicians on the left say they want optimal outcomes from public programs. Why then is no one rushing to cut spending back to its optimal point on the production frontier?

Shawn writes:

In the other OECD countries are not Heath care costs and educational cost up to higher education subsidized even more so than in the US. But the US spends more, how then are subsidies the the inherent problem?

The problem as I see it, is that the local, state, and federal government providing the subsidies does not really care much about the services provided. They care only that they spend more money not what they do with it.

With Heath care costs, in a single-payer system the government care more about the services provide with the respect to the cost to them, but not necessarily to the recipient.

Mark A. Sadowski writes:

"This strikes me as similar to the international comparisons of health care spending and health care outcomes. Yet the conventional wisdom on education is that the problem is lack of spending, while the conventional wisdom on health care is that the problem is the inherent inefficiency of our system."

Could it be that they are both right, and are completely reconcilable? Moreover, could it be the case that both relate to decreasing marginal returns, as you have argued?

According to utilitarianism, the right distribution of any resource is the one that maximizes the sum total of utility. One crucial factor is marginal utility. This is the increase in utility a person gets for each additional unit of whatever good it is being distributed. There is diminishing marginal utility for every good. Total utility is maximized when everybody gets an equal marginal utility for the resource.

Could it be that the real cause of American inefficiency in healthcare and education is a lack of spending where the marginal utilities are the highest?

Surely, the manner in which the US allocates spending on healthcare and education, which have resulted in a situation where a sixth of the population has no access to healthcare outside of an emergency room, and spending on elementary and secondary education is largely determined by the value of the homes in the school district where one lives, have played a role generating such inefficient outcomes.

"The common thread in the conventional wisdom is that we need more government involvement."

It would appear to me that the conventional wisdom is entirely correct.

Anthony writes:

The U.S. school system is as effective, or more so, than European school systems, given the inputs: http://super-economy.blogspot.com/2010/12/amazing-truth-about-pisa-scores-usa.html

Overall, it's only somewhat more expensive than the others, especially if you compare to cost of living. (Second graph - that could be a per-capita income graph.)

There's a lot of waste and inefficiency in public schools, but it doesn't seem like anyone (except maybe Finland) has beaten that to any significant degree.

There are some pointers to the inefficiencies: *within the U.S.*, overall spending (but not teacher compensation) is negatively correlated with outcomes, but the correlation isn't that strong. Texas does better than California among each demographic group, despite similar demographics and spending less money; despite the political strength of the creationists in Texas, their science results are still better than California's.

Health care comparisons also require a careful look - U.S. infant mortality is high because our definition of infant mortality is somewhat broader than most other countries' and compared to the differences between developed countries, there are a lot of babies in that definitional gap. There are also demographic differences between the U.S. and countries whose health care systems the U.S. is usually compared to, and there are cultural differences. The death rates due to violence and accidents - deaths which a health care system will find difficult to prevent - are much higher in the U.S. than in most European countries. Factoring all that out is hard. I don't doubt we're spending more than other countries even after all that sort of thing is factored out, but how much of the remainder is due to higher physician and nurse salaries.

Most of the time we're compared to another country to justify more government, the comparison is not an apples-to-apples comparison.

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