The Economics of Education

President Clinton, in this year's State of the Union address, laid out plans to spend big money on education. This is always a popular and easy path for politicians to take. They spend our money and that makes us happy. Ironically, if our spouse or children wanted to run around spending our money like the government, we'd be upset. Yet if the politicians promise to flood certain projects with our money, well then, that is okay.

This phenomenon is especially curious when it comes to the topic of education. Expenditures on education have increased steadily in the last twenty years or so (while enrollment has decreased by approximately 7%) and yet test scores and graduation rates have declined. Consider that the top ten ranked states in test scores and graduation spend some of the lowest amounts of money per pupil and on teacher salaries. New Jersey spends over $10,000 per pupil while Utah spends only $3,200. New Jersey ranks low on the list of test scores, while Utah is one of the highest.

Eric Hanushek, a leading expert in the field of economics as it relates to education, summarized a number of studies in "Assessing the Effects of School Resources on Student Performance: An Update," Educational Evaluation and Policy Anaysis(Summer 1997). Among the studies, on which Hanushek reports, only 9% of them show a "positive and statistically significant" result when the teacher's level of education is considered. Many studies have shown that when the number of teachers who have master's degrees increases, the student test scores do not increase by any significant number, as many would expect.

Many also feel that if student/teacher ratios are lowered, this will help solve the education problem. Again, this has not been shown to increase test scores or graduation rates by a significant amount. Hanushek reports that only 15% of the studies he examined showed a "positive and statistically significant" result when pupil/teacher ratios were lowered.

What is to be done? We have continued to throw good money after bad at public education and the system only seems to get worse. Fox News reported on a California school that had been intent on raising students' self-esteem. They held special classes and groups that instead of focusing on education focused on raising self-esteem, without actually doing anything that truly raised the students' self worth. It was a false sense of self-worth. Students weren't fooled. They somehow knew that a high self-worth comes from achievement, not an encounter group. Test scores in this school dropped into the basement. The school subsequently dropped the self-esteem program and once again focused on education. Lo and behold, the students were expected to work hard and those that did began to see their self-esteem building because it came from working hard and achieving. Not surprisingly, test scores began to increase as well.

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