March 25, 2009 5:38PM

Here’s A “Toxic Asset” for You…

The Obama administration seems obsessed with making American taxpayers eat toxic assets. And I’m not talking about bad paper, derivatives, or any other inscrutable financial stinkers. I’m talking about good ol’ American public schooling.

Truth be told, after listening to the president’s presser last night, even I started to think that the key to American economic success is “investing” in education. After all, once you’ve heard something for about the twentieth time, you start to believe it. I mean, that’s how propaganda works, right? But somehow my mind refused to give in, and it forced me to remember:

We’ve been “investing” in government schools for decades, and have been reaping nothing but AIG-like results!

I actually laid out the startlingly awful returns we’ve gotten for our education dollars in several blog entries last month, but thought I’d revisit the basic, revolting facts one more time. I want it to be absolutely clear that lavishing more money on education isn’t change, nor, given what we get for the money, could it possibly be the key to long-term economic success.

So what have we invested? Let’s start with total outlays for elementary through post-secondary education, taken from table 26 of the latest Digest of Education Statistics. In 1969 we spent a total of $347 billion in inflation-adjusted dollars. In 2007, we spent $981 billion, a 183 percent increase.

How about public k-12 spending on a per-pupil basis? Again using Digest data (table 181) – which understates total expenditures by excluding such things as “state administration expenditures” – we can see that we’ve been spending increasingly sizable amounts. After adjusting for inflation, in 1969 we spent $5,161 per child. By 2005, that number had more than doubled, hitting $11,643. And what has that “investment” yielded?

Other than massive bloat, bupkus! Looking at National Assessment of Educational Progress long-term trend scores for 17-year-olds – essentially, our schools’ final products – we see almost complete academic stagnation. In mathematics, the average scale score was 304 (out of 500) in 1973, and only a measly 3 points higher in 2004! That’s a one percent increase in math outcomes for a roughly 100 percent increase in funding! And that actually beats the “return” in reading, where 17-year-olds were at 285 in 1971 and, yup, 285 in 2004!

How about higher education? Here we don’t have very good outcome measures and it is difficult to break down overall per-pupil expenditures. What we do have, however, suggests another bad investment.

To get a feel for expenditures, we can examine the State Higher Education Executive Officers report (figure A) showing that total revenue collected per full-time-equivalent student at public institutions, adjusted for inflation, grew from $8,463 in 1983 to $11,037 in 2008, a 30 percent increase. We can also look at aid per student, most of which came through government. According to data from the College Board (table 3), in 1983 the average full-time-equivalent student received $3,769 in inflation-adjusted aid. In 2007 she got $10,392, a 176 percent increase.

What are the returns on these investments? Again, lots of bloat, but from what we can tell, relatively little of educational value. Graduation rates, for one thing, seem to be falling.

According to the Population Studies Center, within eight years of graduating high school, 51.1 percent of students in the high school class of 1972 had finished college degrees. In contrast, only 45.3 percent of 1992’s high school class had done the same. And grads seem to be getting less well educated; according to the National Assessment of Adult Literacy, between 1992 and 2003 literacy levels dropped for both Americans whose education maxed out at a bachelor’s degree and those with graduate degrees. Whether it was graduates’ ability to read prose, documents, or handle math, scores went down while costs went up.

So all told, what do we have to show for our education investment? Pretty much just empty bank accounts. And yet, some politicians just can’t seem to get enough of those toxic assets!

March 13, 2009 1:46PM

Ed. Feds to Reinvent Wheel, Ignoring Pi

Education secretary Arne Duncan testified before Congress today on the president's 2010 budget for the Department of Education. One of the first things he said was this:

We also plan to work very hard at scaling up success in our education system. Under our 2010 budget, the Department would continue to use the Innovation Fund created by the Recovery Act to identify and replicate successful models and strategies that raise student achievement. We know that there are many school systems and non-profit organizations across the country with demonstrated track records of success in raising student achievement, and our 2010 request would help bring their success to scale.

Duncan and President Obama are so, so right to focus on this challenge. Sadly, their efforts will so, so utterly fail, just as those of all their predecessors. Here's why:

For a long time, observers of U.S. public schooling have wrung their hands over a pernicious problem: there are many isolated and transitory examples of excellence within the system (think "Stand and Deliver"), but efforts to scale these models up on a lasting, nationwide basis have always failed.

One early and notorious example was the federal Follow Through experiment of the late 1960s and early '70s. At a cost of over a billion dollars, it demonstrated that one instruction method, "Distar," clearly outperformed 21 others. Distar was #1 not just overall, but in each of the subcategories of reading, arithmetic, spelling and language. It placed a close second in promoting advanced conceptual skills, and was even the most effective at boosting students’ self-esteem and responsibility toward their work. Nothing else came close.

So what happened? The public school system failed to follow through on Follow Through. Not only was Distar NOT widely adopted around the country, most of the schools that had used it during the experimental phase subsequently dropped it. Their performance dropped commensurately. End of story.

Then there was the billion-dollar Annenberg Challenge of the 1990s, which was meant to identify and replicate successful education models around the country. The project was funded by TV Guide mogul Walter H. Annenberg, launched by then-president Bill Clinton, and overseen, in its Chicago operations, by Barack Obama. And it was another utter failure. Some good schools were created here and there, but the lasting, system-wide improvements that Annenberg had been hoping for never materialized. Why?

The reason is simple: the incredible progress we've witnessed in virtually every aspect of life for the past two centuries is the product of freedoms and incentives that do not exist in public schooling.  After spending most of their adult lives writing an awe-inspiring 11 volume history of the world, Will and Ariel Durant remarked that:

The experience of the past leaves little doubt that every economic system must sooner or later rely upon some form of the profit motive to stir individuals and groups to productivity. Substitutes like slavery, police supervision or ideological enthusiasm prove too unproductive, too expensive or too transient. (The Lessons of History, 1968, p. 54-55).

And while the Durants learned this lesson from their study of history, others learned it from personal experience. Michael Manley, leader of the People’s National Party and Vice President of the Socialist International, looked back on his time as Prime Minister of Jamaica and observed in New Perspectives Quarterly:

The fact is we all seriously miscalculated the capacity of the state to intervene effectively. Despite the enormous sincerity we brought to the task, our nationalist and statist approach didn’t work... When one tries to use the state as a major instrument of production, one quickly exhausts the managerial talent that can be mobilized in the name of patriotism. Absent the profit motive, it was truly amazing how few managers one could find that were motivated solely by love of their country, and how quickly these noble souls burned out. I call this idea the “Guevarist myth.” (1992, p. 46-47).

The automatic process by which useful innovations are encouraged, identified, disseminated, perpetuated, and finally superseded relies on innovators being free to do whatever they think is best for their customers, and having powerful incentives to constantly improve on the state of the art. That is why dramatic progress has been the norm under the free-enterprise system over the past 40 years, while public school productivity has plummeted.

Great educators and great schools can and do appear within the public school system, but they do so in spite of that system, not because of it. They never scale up in the way that Google, iPods, or the Kumon tutoring chain have scaled up, because they lack the combination of freedoms and incentives essential to doing so. Trying to get a bureaucracy with a state-protected funding monopoly to reliably scale up excellence in the way that markets do is like trying to reinvent the wheel with an alternative value of pi. It simply cannot be done.

True education markets are the ONLY system that will do what Secretary Duncan, President Obama, and the American people wish.