Contact Communications Manager, Kate Andrews, for further comments or to arrange an interview: email@example.com / 07584 778207
- The UK’s average annual growth rate between 1960 and 2007 would have been almost 1 percentage point higher had it matched the Netherlands’ long-term level of independent school enrolment since 1960. This in turn means that UK GDP per capita would have been over £5,800 higher in 2007 than it was.
- Better education boosts economic growth; improving students’ international test scores by 10% raises a country’s average annual growth rate by 0.85 percentage points.
- UK GDP per capita would have been almost £5,300 higher in 2007 had it performed as well as Taiwan since the mid-twentieth century.
Britain could add billions of pounds to long-term economic growth if it increased access to private education, a new report released today (Tuesday July 29th) by the free-market Adam Smith Institute has found.
The report, “Incentive to Invest: How education affects economic growth”, illustrates how higher educational achievement boosts long-term economic growth, and the important role of private schooling in this process.
Through the use of existing research and new quantitative evidence, the author of the report, Gabriel Heller Sahlgren, establishes that test scores are closely related to growth. Lifting achievement by 10% hikes a country’s average annual growth by 0.85 percentage points.
Furthermore, the report illustrates how competition from independent schools has proven successful in generating higher international test scores, while also driving costs down. Sending 20 percentage points more 15 year olds to independent schools would raise growth by 0.4pp—or about a sixth—via its positive effect on educational achievement.
Based on his findings, Heller Sahlgren calls for the government to radically reform education policy by encouraging more privatisation and competition in the education sector.
Had the UK matched the Netherlands’ long-term level of independent school enrolment since 1960, its GDP per capita would be over £5,800 higher today, the report argues. At a time when policymakers are trying to cement and broaden the economic recovery, the report suggests that expansion of access to private schooling would be an attractive component of a long-term growth strategy.
Commenting on the report, its author Gabriel Heller Sahlgren said:
“My research shows that a focus on increasing the number of pupils taking higher qualifications is misguided. There’s in fact no robust impact of average schooling years in the population on economic growth on average.
“On the other hand, education quality, proxied by international test scores, has a consistent and strong effect on growth. According to my calculations, the UK’s real GDP per capita in 2007 would have been over £5,000 higher had we performed on par with Taiwan since the mid-20th century. So the dividend of improving children’s attainment is large indeed.
“Yet there are different ways to do achieve this. Unlike expensive resource-driven education reforms, which are rarely cost effective, a good option is to raise the level of independent school competition, which other research shows both increases international test scores as well as decreases costs.
“According to my calculations, the indirect economic benefit, via higher achievement, of increasing the number of pupils in independent schools to the Netherlands’ level would be a 0.92 percentage point higher long run GDP per capita growth rate. The government should therefore continue their market-based reforms on education and expand choice as widely as possible.”
Sam Bowman, Research Director of the Institute, said:
This report shows that we need greater access to private schooling for all pupils regardless of background, not just to improve the welfare of the children themselves but to boost the UK’s overall standard of living and long-term economic growth.
Expanded access to private education through school vouchers and a revival of the assisted places scheme may be an easy, low cost way for the government to boost growth by improving the human capital of British workers. The results may take some time to materialize but studies like this show just how valuable a long-term strategy for expanding access to private schools could be.
Click here to read “Incentive to Invest: How education affects economic growth”.
For further comments or to arrange an interview, contact Kate Andrews, Communications Manager, at firstname.lastname@example.org / 07584 778207.
This is also a rather clever observation. We’re told that both wealth and income inequality are rising strongly, that this is of course terrible, and that this leads to rioting in the streets and the stringing up of plutocrats from lamp posts. Yet when we look out our windows we see a distressing lack of the wealth swinging gently in the breeze, all the Occupy folk have gone home to polish their nose rings and there just doesn’t seem to be a mass frustration with matters at all.
How can this be? When the clerisy tell us that the world should be in flames and yet it remains resolutely unburning? The answer is, as Boudreaux points out, that wealth and income inequality are a lot less important than we’re told they are:
One reason, I’m sure, is that rising inequality in monetary incomes or wealth is NOT the same thing as rising inequality in economic welfare (extra emphasis intentional). It’s not even close – although rare is the “Progressive” who acknowledges the reality that changes in income (or wealth) are not identical to changes in consumption-ability (that is, to changes in real economic well-being). Inequality of monetarily reckoned income or wealth can rise while inequality of consumption opportunities can fall.
We might want to worry about consumption inequality, if that does indeed become too extreme.But we’ve not particularly got very much of that in our current society. Sure, the plutocrats can have hot and cold running yachts and £10,000 bottles of champagne. But no one thinks that it’s particularly important that they can and we don’t. We’ve not particularly got a shortage of even a serious limitation on what we do care about the consumption of. A roof over our heads, decent food, nice clothes and so on and on. The rich may have nicer pants but they still put them on one leg at a time and they’re still only wearing one pair at a time too.
The economically important form of inequality is that of consumption opportunities. And one good reason why we’ve not got those riots in the streets is simply that we’ve got a lot less of that than we do income or wealth inequality.
And that point may have been reached for one of them:
“Supersized” food and drinks should be banned by law in a bid to combat Britain’s obesity epidemic, the new head of the Commons health select committee has said.
What? We’re going to have a law now where a willing purchaser cannot negotiate with a willing supplier to gain 600 calories in return for folding money instead of 400 calories for a smaller amount?
Dr Sarah Wollaston, a Conservative MP and former GP, said the state had a “duty to intervene” to protect current and future generations from unhealthy habits threatening to shorten their lives.
This sort of proposed lawmaking does not bode well for the efficacy of open primaries, does it?
The former GP called for a direct ban on “supersized” foods and drinks, so that manufacturers would be restricted to producing chocolate bars, junk food meals and fizzy drinks in standard sizes.
She said: “Why aren’t we taking more direct steps around supersizing? You go into the cinema and someone will ask if you want to supersize for an extra 20p – we don’t need that.”
Here’s how things work in a free and liberal society: you don’t get to decide what we would like to have. We get to decide what we would like to have. And if we want more chopped gristle for a paltry extra sum of money then we are and should be perfectly at liberty to have that. As are people to be allowed to sell that to us.
That moral point being entirely aside from the practical issues of course. For we’re not all entirely stupid and if we want more than the Wollaston Burger we’ll order two.
And there’s an interesting legal point here as well. Clearly she thinks that we’re all too damn stupid to be allowed to decide what to put into our own bodies. Despite their being, you know, ours? OK, so she obviously does think that. But she’s an elected politician: one, clearly, elected by people too stupid to know what they’d like to eat. At which point she’s not really got all that much authority, does she?
Either she’s right and we’re all morons and thus she should have no power having been elected by said morons or we’re not morons and so she has a moral claim to power. But if we’re not morons then banning us from eating a handful of extra french fries isn’t necessary, is it?
Perhaps the best we can hope for is that Dr. Wollaston disappears in a puff of of her own self-contradictory logic as with some of Oolon Colluphid’s philosophical creations. but lord forbid that she ever gets to write the law for this country.
An excellent little spot by Noah Smith on who uses what sort of economic model to do their forecasting:
Suppose you’re a macro investor. If all you want to do is make unconditional forecasts — say, GDP next quarter – then you can go ahead and use an old-style SEM model, because you only care about correlation, not causation. But suppose you want to make a forecast of the effect of a government policy change — for example, suppose you want to know how the Fed’s taper will affect growth. In that case, you need to understand causation — you need to know whether quantitative easing is actually changing people’s behavior in a predictable way, and how.
This is what DSGE models are supposed to do. This is why academic macroeconomists use these models. So why doesn’t anyone in the finance industry use them? Maybe industry is just slow to catch on. But with so many billions upon billions of dollars on the line, and so many DSGE models to choose from, you would think someone at some big bank or macro hedge fund somewhere would be running a DSGE model. And yet after asking around pretty extensively, I can’t find anybody who is.
One unsettling possibility is that the academic macroeconomists of the ’70s and ’80s simply bit off more than they could chew. Modeling a big thing (like the economy) as the outcome of a bunch of little things (like the decisions of consumers and companies) is a difficult task. Maybe no DSGE is going to do the job. And maybe finance industry people simply realize this.
And at this point we might be able to work out what’s wrong with academic macroeconomics. It’s not quite economics to simply shout “Follow the money!” but we can adapt that very useful idea of revealed preferences to tell us what’s going on here. That useful idea being that we shouldn’t look at what people say they’ll do but rather at what they actually do. And we can argue that academic economists are trying to successfully predict what is going to happen as a result of changes in government policy if we should so wish to. But combine that with that follow the money idea and we’d expect the financial markets economists to have been subjecting their models to more rigorous testing. After all, real money is at stake, not just whether you manage to get published in one or another journal.
We should admit that this does rather play to our prejudices here. We’re not great fans of macroeonomics at all, agreeing with Keynes that in the long run we’re all dead but adapting that to insist that in the long run it’s all microeconomics. Get incentives and the price system right and pretty much all other economic problems will either solve themselves or shrink to their not being problems that we want or need to worry about.
This of course enrages macroeconomists but as we don’t get invited to their parties anyway we can shoulder this burden well enough.
Underneath that jollity though there is a much more serious point. Macroeconomics is really a very under developed approach of looking at the world. We rather take the Hayekian line that it always will be, given the dispersed nature of information and the impossibility of having enough of it in real time to be able to do anything useful with it. But that there’s pretty much no one macro theory that you could get all macroeconomists to sign up to is another indication that it’s really just not ready for prime time yet.
And if it’s not ready for prime time then we really shouldn’t be using it to try and guide our actions on the economy. We should, therefore, concentrate our efforts on those areas where we do know we’ve largely got the appropriate and necessary knowledge, about those incentives and that price structure.