Scotland must Finnish that myth

Just after the independence referendum was a momentous time to be in that exhausted Chamber of the Scottish Parliament. It marked the first debate not focussed on the constitution for as long as we could remember. And education was finally the centre of attention.

The attainment gap in Scottish state schools is something that the main parties in Scotland care about a lot. Oft-quoted statistics portraying state schools practically next to each other as performing at opposite ends of the attainment spectrum provide the impetus. 

It is true – Scotland’s ‘educational apartheid’ has been described as a ‘national disgrace’. Now Scotland’s First Minister is behind a dangerously vague and impossible Education Bill (pdf) that proposes to outlaw inequality if it receives cross-party support in Holyrood this year.

So closing this ‘gulf’ in performance, to most Scottish politicians, is a worthy goal. And perhaps this remains part of the appeal of the Finnish education system. Its schools are among the most uniform in the world. 

Certainly in 2001, when Finland came to be regarded as an education superpower, its results in the OECD’s Programme for International Assessment (PISA) made it the most desirable model in the world. 

Of the 41 nations that took part that year, Finland was impressively topping the tables in science, mathematics and reading and competing with the notoriously well-performing Asian nations. Ever since then we have been making the most myopic movements in education reform in order to emulate their achievements.

Indeed, Scotland’s controversial Curriculum for Excellence was largely inspired by the Finnish model. Created in 2004 and implemented in 2010, CfE has been one of these unimaginative, inside-the-box changes in the Scottish schooling sphere. 

To counteract the case made that more school choice and competition between schools is the answer to spreading quality and innovation, the Finnish argument is still made. The correlation between the reforms in Finland and the time of its exemplary PISA results has led to the common conclusion that the reforms caused the success.

In this very debate following the referendum, Kezia Dugdale, the deputy leader of the Scottish Labour Party, once more spoke of her visit to Finland and lessons we should still be learning from the country’s example.

Remarkably, until now, nobody has actually scratched beneath the surface of this spiel. The Centre for Policy Studies has just published Real Finnish Lessons (pdf) by Gabriel Heller Sahlgren of CMRE. It is the first paper of its kind to take a reasoned and thorough look at the Finnish schooling sensation. 

The first point of note is that performance began declining since those reforms were enacted. 

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What the new analysis tell us is that Finland’s rise accelerated primarily during the old system when the traditionalist, rote-learning pedagogy was at its core. 

While results increased by approximately the equivalent of 23 TIMSS points between 1965 and 1980, they rose a further 32 points in the 1980s. They also increased a further 34 points in the 1990s, but started to level off in the latter part of the decade, and ultimately started to decline in the mid-2000s.

Considering the age of the pupils when they were tested, the strongest gains took place when pupils mostly attended school before the old system was entirely abolished.

Other data, too, supports the general trajectory of rise and decline in international surveys. 

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Here we see that performance improved while male youngsters attended primary—and lower—secondary school before the old system was entirely abolished and began falling when they became exposed to the new one. 

Real Finnish Lessons convincingly shows how Finland’s outcomes are better explained by a detailed examination of its political, social and cultural underpinnings by looking beyond the fashionable explanations in the international media. It concludes that those popular policy-related reasons for its rise to prominence do not stand up to scrutiny and if anything coincide with its slippage.

The current Scottish Government continues to prioritise eliminating inequality while advocating the Finnish school-style characteristics. But it is clear, now, as we still send our education ministers to Finland each year, that we have been following a flawed interpretation of their system. 

In a competitive system schools adopt the methods that work—not fashionable educationalist fads—and the misinterpretation of Finnish data would be much less likely to happen. Choice would see the schools that work spread whatever the orthodoxy of the day says. Unlike in a government-controlled system where well-meaning Progressive ministers can effectively overturn everything without parental consent.

So with increasing evidence in our favour, it is time to consider that steps towards choice, competition and innovation are key.

An extra reason to dislike deficits and government debt

On Wednesday, in a piece trying to set out the reasonable case for austerity, I made one argument against government deficits—they crowd out the private investment that really raises our living standards over time. I think this is true outside of exceptional circumstances when the economy is in a slump and the central bank is unwilling (or perhaps unable) to rectify the situation.

But there is an important reason why raising taxes isn’t a simple solution to the problem. Except for lump-sum taxies levied on natural ability (impossible) or existence (unpopular and possibly unfair) the government doesn’t have access to any tools for raising money that don’t distort the economy. Higher taxes lead to lower economic activity; lower taxes lead to higher economic activity.

If you or I or a firm incurs a debt, we (usually) have to work hard to create wealth to pay it back. That is, increasing private debt does not reduce economic activity. If it’s used to fund consumption it’s likely to increase it a smidgeon—if it’s used to fund investment it’s likely to increase it somewhat.

This is different when the government incurs debt. It sells a bond, which on the margin must be slightly more attractive than all other existing investment products, thus creating a bit of extra value for investors/savers. It eventually must pay these back through raising taxes or monetisation. Monetisation is bad, creates inflation or even hyperinflation, and thankfully in developed countries governments do not do this.

A country can ‘grow its way out of debt’ but only in the sense that the taxes required to pay the debt off are smaller relative to the size of the economy. £10bn less debt is still £10bn less (plus interest) in taxes. Eventually all debts must be paid off with extra taxes, whether you do them now or later.

These taxes reduce economic activity through their deadweight losses (presuming we’re already levying efficiency-increasing optimal Pigovian taxes to fund normal expenditure). This means that extra government debt will lead to less activity than there otherwise would have been some time down the line, over and above its crowding-out effect on investment.

There’s an interesting side-point here comparing tax-funded or deficit-funded spending overall. Should we borrow now and tax later or run balanced budgets all the time? This is another question—but my point is that either way we fund spending it’s going to be costly.

Let the Mediterranean refugees come to work in Britain

There probably is no solution to the current Mediterranean refugee crisis, but letting more refugees come to Europe as economic migrants may be a viable way of at least making some people better off.

Last week at the European Students for Liberty Conference in Berlin I listened to Martin Xuereb, Director of the Migrant Offshore Aid Station, describe the situation. He emphasised that ‘push’ factors beyond our control, like civil wars in Syria, Libya and Somalia, and poverty in general were far more important in driving people to come across the sea than ‘pull’ factors like rescue boats.

These people are desperate, he said, and the possibility that they might be found by a search-and-rescue team if their boat sinks isn’t likely the main thing on their minds. Though no doubt that is a factor.

Given that these push factors are so strong, I suspect there isn’t anything humane we could do to stop the boats. It’s unclear how strong a pull factor the search-and-rescue boats are, but I’d weigh the certainty of stopping at least some people from drowning very highly against the indeterminate number of people incentivised to come because of them.

As Left Outside says, many of these people partially economic migrants as well as being straightforward refugees. Most of the evidence says that economic migration is positive overall and does little or no harm to the wellbeing of even low-skilled native workers. But refugees may be different – since they are mostly being ‘pushed’, they may go to countries where there are no jobs. (Economists would call this an ‘exogenous’ shock, because it’s being driven by factors beyond labour market supply and demand.)

I’ve looked at two papers that study the impact of refugees, rather than normal economic migrants, on native wages and employment.

The first, by David Card, looks at the impact of a very large number of Cuban refugees to Miami after the Mariel Boatlift in 1980 – around 125,000, which led to a 20% increase in the number of Cuban workers in Miami and boosted the city’s workforce by 7%. Card notes that the data available here is extremely comprehensive and detailed, making this a very good case study to look at.

Most refugees stayed in Miami, and comparing Miami to other Floridian cities over the same period after the boatlift Card finds no effect on the wages or employment prospects of native low-skilled workers, including black or other Cuban workers.

To be fair, Miami may be an exceptional case, because it was used to a steady stream of Cuban immigration, though at a much smaller rate, and so had a significant amount of industry that could absorb new low-skilled labour, and language problems may have been less of an issue (though language difficulties might not be such a problem, at least for men).

The second study might get around some of those problems. Mette Foged and Giovanni Peri looked at refugee influxes from Yugoslavia, Somalia, Iraq and Afghanistan to Denmark between 1985 and 1998.

These refugees were distributed evenly across the country’s municipalities without any regard to labour market conditions. This counts as an ‘exogenous shock’, like the Miami case and like an new influx of refugees to the UK would.

Forty to fifty percent of these immigrants had only secondary school education or lower and “were in large part concentrated in manual-intensive occupations”. By allowing for a deeper division of labour, the “refugee-country immigrants spurred significant occupational mobility and increased specialisation into complex jobs, using more intensively analytical and communication skills and less intensively manual skills.” That meant that native workers who might otherwise have done low-skilled jobs were able to move into more specialised, productive, highly-paid work.

As with the Miami study, Denmark may have some factors that make it special. Its labour market is very flexible and competitive, so it is easier for workers to move between industries and easier in general for people to find jobs. But that’s generally true of the UK too.

In both of these studies, the result is clear that quite large influxes of refugees driven by ‘push’ factors still did not have negative effects on natives, and in Denmark’s case had significantly positive effects.

Clearly this is not comprehensive and clearly there are other factors to consider (such as crime and, at least in the Syrian case, terrorism). But it does suggest that allowing more refugees into Britain should not be harmful to native Britons’ job prospects or wages, and may be beneficial to them.

Creating something like a guest worker programme for Syrian or Somali refugees would not stop the boats, but letting more come legally and safely would free at least some people from the nightmarish civil wars that they are now risking their lives to escape.

The terrible pollution from Chinese rare earth manufacturing

It’s entirely true that socialist and communist mineral extraction methods are not quite as interestingly clean as we might like. It’s also true that the technologies used in China for the disposal of the wastes from such processes are less clean or safe than we would accept in our own back yards. It is, however, possible to lose any sense of proportion about this. The BBC has a long piece about just that pollution:

You can see the lake on Google Maps, and that hints at the scale. Zoom in far enough and you can make out the dozens of pipes that line the shore. Unknown Fields’ Liam Young collected some samples of the waste and took it back to the UK to be tested. “The clay we collected from the toxic lake tested at around three times background radiation,” he later tells me.

Unknown Fields has an unusual plan for the stuff. “We are using this radioactive clay to make a series of ceramic vessels modelled on traditional Ming vases,” Young explains, “each proportioned based on the amount of toxic waste produced by the rare earth minerals used in a particular tech gadget.” The idea is to illustrate the impact our consumer goods have on the environment, even when that environment might be unseen and thousands of miles away.

We admit, we’ve never really understood why every hippie is so fascinated by home made pottery. But they are correct in that rare earth mining does mean radioactive substances. Almost all such pores have thorium in them. As no one uses thorium to do very much that thorium is left in the wastes rather than extracted. And do note that none is created: what is being done is that extant radioactive metals are being pulled out of the earth in one place then dumped back onto the earth a few kilometres away. However, there’s something rather more important here. What they’re saying is true, there’s radioactivity in that thar’ lake. But is it an important amount?

Three times background? The difference between London and Cornwall. No, it’s not an important amount.

Uber forms of governance

A few weeks ago Samuel Hammond posted some interesting thoughts on multi-sided platform (MSP) technologies like Uber and PayPal, and the role they play in providing forms of governance. You can read the whole thing here, but the outline is as follows:

Governance—that is, things like rational planning to solve co-ordination problems, the setting of rules and assigning of rights, etc—is done not just by states but by private companies, too. Platform technologies (essentially those which enable interaction between different groups of people) are a good example of this. Amazon and Ebay, for example, are virtual marketplaces which connect disparate buyers and vendors from across the world, whilst PayPal is not only a payments processor but an arbiter of commercial disputes, with procedures to file a complaint and rules on when compensation is entitled.

‘Good’ governance occurs when the rules set and rights assigned are reasonable to both sides of a transaction, and when the total societal cost of any regulation is kept to a minimum.

State governance schemes are well-intentioned, but can be rather crude and inefficient in their execution. Take taxi-regulation for example: licenses guarantee a certain level of quality and safety for consumers, whilst regulated fares remove the cost and risk of having to haggle for every journey. At the same time, though, these regulations result in high prices, inflated barriers to entry, a lack of competition and little reason for incumbents to innovate or improve their service. Whilst the state tries to efficiently balance the costs regulation imposes on each party it often falls short, both because of the grand Economic Calculation Problem, and things like capture of the regulatory process by special interest groups.

In contrast, Hammond argues, MSP technologies are very good at being governance institutions. For example, Uber has ruffled so many feathers because its popular service is arguably a superior system of taxi regulation, thanks to its use of participant rating systems, safety features, an algorithmic pricing structure and so on. And, by controlling a bottleneck to market access, Uber to some extent acts as a de facto private licensing authority.

These ‘market regulators’ tend to be good at governance for a couple of reasons. One is that they’re free to harness new technology and experiment with different setups, driving down transaction costs. Another is the fact that a rival platform may always come along an offer an alternative service— and, as Hammond notes, “the only way to supplant an incumbent platform is to adjust the governance structure in a way that social costs are better compensated by maximising the bargaining surplus”. This ensures that even when a market regulator looks like a natural monopoly, so long as there is the possibility of exit, the cost of regulation will tend towards the social minimum.

Hammond argues that this means that MSP technologies are not just a bit better at governance than state institutions, but that “they potentially meet the economic definition of an ideal ‘public interest’ regulator”. And, just as Uber challenges traditional taxi governance models, we can imagine a future where all property rentals are listed on something like Air BnB, with tenancy acts and local regulation displaced by market-set rules and regulations which efficiently balance the interests of renter and landlord.

Such a situation should perhaps not be understood as ‘deregulation’, but a shift in the act of governance from the state to the firm, resulting, we assume, in reduced costs to society as a whole.

I particularly liked this post because it complemented some thoughts (and assuaged some fears) I’d had about the state harnessing new technology and commercial consumer insights to better perform its functions. In November I wrote a rather gloomy piece on ‘algorithmic regulation‘ and the government’s use of things like ‘big data’ and behaviour prediction to create more efficient, streamlined, and reflexive regulation, which, like the google search algorithm, would be constantly reviewed and updated according to insights generated into ‘what works’.

Such algorithmic regulation, I thought, could make government regulation more efficient, less irrational and less intrusive—but it could also open the doors to forms of dystopic technocracy. Once governments have the ability to create, access, and utilise vast swathes of information on their citizens, they’re likely to want to expand their scope of operations. Perhaps they’ll be tempted to ‘connect the dots’ between different types of lifestyles and tax income, health outcomes and the like. The opportunities for Nudge-on-crack policies could be everywhere. In addition, behind the seemingly apolitical goal of ‘rule by algorithm’ it’s easy to smuggle in hidden political assumptions, and use questionable or untrue assumptions to dictate what our government supercomputers do. Nonetheless I felt I was being an unwarranted techno-pessimist, so I filed it away my wonderings before resurrecting them recently on my tumblr.

However, Hammond’s post sketches out an alternative governance system I’m much more of a fan of. Instead of harnessing private sector insights and using them to aid an intrusive and bloated state, he imagines a situation where government effectively outsources certain functions to private bodies (Uber as a private licensing authority, etc). And, because these bodies have to respond to market pressures, if they do a bad job or overstep the mark parties can vote with their feet. These alternative governance systems are less likely to cater to special interests, and don’t require the state to handle so many terabytes of personal data. We still have algorithmic regulation, but done more on the terms of the parties affected instead of the state.

To me, neither of these two futures of regulation seem implausible. But I certainly know which one I’d prefer.