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"Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism, but peace, easy taxes, and a tolerable administration of justice" - Adam Smith

This is rather the point of student loans though

Written by Tim Worstall | Sunday 23 March 2014

Hugh Muir gets all upset about what is happening over student loans. The repayment numbers are sinking through the floor so what's the point of the new system. And furthermore:

There is simple economics here; too many graduates chasing too few jobs in a labour market slimmed down by government austerity measures. Many who have taken out the loans can't find jobs, so they don't pay; but those who do find employment are paid so little in an over-supplied market that they don't reach the threshold at which they have to pay.

All of which is rather missing that this is part of the point of having people paying directly for their university educations.

We want them to think about whether spending three years of their life and also £27,000 is a good thing for them to be doing, And the more people realise that perhaps it isn't then the happier all should be.

Don't forget that the total cost of the system as a whole hasn't changed very much. All that is different is who is getting the sticker shock. And that's actually what we want to be happening: is a university education a good deal for those who go and get one? It's is now those who are thinking about getting one who face the prices: they can thus work out for themselves whether it's a good idea.

The answer is that sciences at a good place definitely are (assuming you finish) and arts and ologies at bad places almost certainly aren't. And the only way that anyone's ever going to be able to make a decision like this is by seeing the costs which they can compare to the benefits.

Which is, of course, why the system was changed in the first place.

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Yes Polly, training the untrained is indeed expensive

Written by Tim Worstall | Sunday 09 March 2014

Polly Toynbee tells of us of a marvellous scheme by which the young and untrained get trained and thus gain decent employment. However, the real message of this story is not quite what Polly thinks it is I fear:

The shadow work and pensions secretary, Rachel Reeves, and Stephen Timms, the shadow employment minister, were in Cardiff this week to study it, as they plan their own similar job guarantee scheme. They visited Sapiens, an international software company that has taken on 12 trainees from Jobs Growth Wales. All these young IT graduates were lost temping in part-time, low-level jobs. One had been stuck working part-time in a bingo hall for a year, others in shops and pubs, each applying for hundreds of jobs without getting interviews: "Everyone wanted people with experience. If you haven't any, you've no hope," said one. The company said it would never have hired these 12 without the programme, because training raw recruits costs so much more than taking on experienced staff. But with Jobs Growth Wales covering six months of intensive training, Sapiens ended up keeping 11 of them permanently.

You can indeed read it the way that Polly does, the Glorious State taking over and making things better where the market simply bumbles ineffectually.

Or one could try to look a little deeper. For example, all of these "young IT graduates" had been in compulsory education for 11 years of their lives, presumably an additional two to get into university and then three once there. So what the hell is our State run education system managing to do over those 16 years if it cannot prepare them for an entry level job opportunity?

The second and more major point is that yes indeed, it does cost money to train people. And the cost of that training can indeed mean that people would prefer to hire the already trained. Which is why it is so stupid to put a minimum price on untrained labour. For that pushes the total costs of untrained labour, wages and training costs, above the costs of hiring someone who already has their act together.

That is, a minimum wage will, if it is high enough to actually matter at all, will by definition be crippling to the employment prospects of the young and untrained.

As Britmouse so graphically points out here.

Perhaps instead of adding another layer of State interference we sould undo the cause of the original problem?

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Edapt in Education

Written by Charlotte Bowyer | Tuesday 04 February 2014

Michael Gove's battle against  "the blob" rumbles on. Not only is he in the firing line over Ofsted appointments, but the NUT is set to announce the date for more teaching strikes on Friday. Cue the cheers of solidarity from some sources, and lofty dismissals of leftist militarism from others.

Though the saint-sinner dichotomy makes for easy reporting, the real relationship between teachers, politics and the unions is more interesting. Despite falling membership across other sectors, teaching remains a highly unionized profession. Teachers also report high levels of satisfaction with their union experience. Despite this, turnout for voting on industrial action is often low, and 44% teachers told a LKMco study that the right to strike isn't important to them.

Instead, the most frequently-given reason by teachers for union membership is access to legal advice and support. With 1 in 4 teachers experiencing a false allegation at some point in their career, the expertise and advice a union offers in times of dispute is also cited as the most valuable service they provide.

Given the structure of employment law and the difficult nature of dealing with children, it is no wonder that teachers value this support. However, there's no reason why affordable expert advice should have to be bundled with a political agenda. Indeed, a quarter of teachers said that they'd rather not belong to a union if a good alternative existed. At a CMRE seminar last week John Roberts outlined the model of his company Edapt, a for-profit, teaching union alternative established in 2011. Edapt offers the legal advice and representation teachers seek, without engagement in political bargaining and lobbying. Instead of trading blows with governments they can focus on delivering quality employment support to their members. Many members approached Edpat with a pre-existing issue and unsatisfied with their union's response, whilst Roberts boasts of Edapt's 99% satisfaction rate.

Obvioulsly, this model would not be for everyone. Many teachers still consider collective bargaining an essential tool, and Edapt is small fry compared to the unions. Not all teachers are comfortable playing politics, however, and inter-union competition for members can encourage more politically aggressive strategies. Recent strikes have polarised teachers, with Edapt growing most quickly around times of industrial action. Further strike action could lead to another surge of teachers uncomfortable or simply exasperated with their union's actions.

No matter what causes people to join Edapt, political neutrality is crucial for its long-term success. It's ironic that eschewing sector politics can look ideological, but a 'non-union' is easily seen as an 'anti-union'. Gove might have made this mistake himself in inviting Edapt to reform discussions last year. And, tellingly, his endorsement of the Edapt as a ‘wonderful organization’ actively lost them members.

Time will tell just how successful union alternatives can be. If Edapt can prove that it isn't ideologically driven and its focus is right, the model might have relevance in other sectors and across countries. With only 25% UK workforce unionised, there might be scope to offer services to people who wouldn't have considered joining a union. Either way, with 48 hours of tube strikes starting tonight, I bet TfL wishes that there were more union alternatives within public transport. 

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In praise of those complaining economics students

Written by Tim Worstall | Tuesday 31 December 2013

I've rather changed my mind about those economics students up north revolting (no, they are having a revolt, they are not revolting in themselves) over the curriculum they are being forced to study. I don't in the least take seriously their complainty that they're not being taught Keynes for I've read their syllabus and they are. But in a more general view I think I am converted to their cause. As Peter Boettke points out:

This observation is nothing new. It can actually be found in Adam Smith’s The Wealth of Nations. Smith discusses the differences in approach to the teaching found in Glasgow and Oxford, respectively. Professors in Glasgow were paid through direct student fees, and thus they devoted more time to teaching their students, whereas the professors in Oxford were paid from an endowment, and so did not pay attention to the students in the least.

Given that the students are, through their loans, paying for their own education then yes, they should indeed be taught those parts of the subject that they desire to be taught in the manner that they wish. I do also have a feeling that exactly that paying for their own education is going to lead to their wanting ever more of that highly mathematical modelling as a result: for that is what will get them the jobs in hte merchant banks to pay off those loans. But it is indeed their money and they should not only be allowed, but encouraged, to spend it as they wish.

This is, after all, one of the things that we do try to encourage in the understanding of economics, that people spending their own money on their own desires works better, most of the time, than any other possible system.

One possible confusion though at the end of all of this. If they do get taught the economics they desire to be taught, in the manner they so desire, and then they cannot find jobs at the end of it all, will this be seen as a failure of market economics or a failure of the planned system of what students ought to be taught? And given that the students are demanding to be taught much more about alternatives to markets, about market failures, will they take their own market demands as having been the thing at fault?

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Introduce school vouchers and liberalise free school creation to improve UK education

Written by Blog Editor | Thursday 05 December 2013

As Britain faces dire PISA education rankings, the government should liberalise the free schools application process and give parents a voucher for a place in any approved school, state or private, says a new research report from the Adam Smith Institute and the Centre for Market Reform of Education. (School Vouchers for England: Harnessing choice and competition for greater quality and equality in education. Executive summary here.)

The move would abolish the restrictions that prevent poorer parents from accessing England’s best schools. Proximity-based admissions should be scrapped, being replaced by lotteries and subsidised transport in cases of oversubscribed schools.

At a time when many areas will face a 20% shortfall in places by 2015, urgent and cost-efficient action is required, the report says. Parents may be left without schools to choose from unless the government accelerates the development of new free schools.

The government therefore must simplify the school creation process, says the report, cutting through red tape and introducing a voucher system so that parents can signify where and how they require schools to be built.

Gabriel Heller Sahlgren, co-author of the report and Director of Research for the Centre for Market Reform of Education, said:

“Parents are currently restricted to choosing schools they can afford or the schools they can afford to buy a house near. Giving parents a voucher, redeemable to all state schools and participating private schools, would usher in a new era of social mobility and reverse the decline in the quality of English education.

“A voucher programme would expand the number of schools that parents could choose. Parents could choose participating private schools, which would be incentivised by the prospect of a more steady income. The resulting increased competition between schools to attract pupils would cause significant improvement in education.

“Good schools in sparsely populated areas would be incentivised to expand by receiving more pupils and money. Similarly, bad schools would be incentivised to improve by the threat of losing pupils, and therefore funding. A voucher programme would avoid the need to build more costly free schools, as well as the huge costs and regulations surrounding which have hampered the government’s education reforms."

Notes:

A copy of the paper is downloadable here: http://www.adamsmith.org/sites/default/files/research/files/Voucher%20pa.... An executive summary of the paper is downloadable here: http://cmre.org.uk/uploads/publications/Voucher%20exec%20summary.pdf.

Please contact Alexander Blackburn to arrange an interview with the paper’s authors by calling 020 7799 8903 or 07400 902 290, or emailing ablackburn@cmre.org.uk.

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It's amazing how Will Hutton misses the point again

Written by Tim Worstall | Monday 14 October 2013

It's entirely astonishing to find that Will Hutton has missed the point again. Here he's talking about education, the costs and returns to it. And he manages to use as examples the very facts that prove his argument wrong.

Although the proposition was that there would be a range of fees, few universities charge less than £9,000 a year. Indeed, average fees are about £8,400. Accommodation and living costs have to be paid for on top, so that almost whatever university a student attends or whatever the degree taken, he or she will end up with about £45,000 of debt.

OK, £45k of debt. It's a lot I agree. But is it worth it?

There are insufficient jobs that pay enough to allow even a fraction of each year's 340,000 students to escape the trap. The average salary is £26,500. Only about 10% of the population earn more than £41,000. Even allowing for the fact that wages usually rise faster than prices (though they have not since 2006), it follows that many, perhaps even the majority of, students will struggle to fully pay back their debt.

Will doesn't think that the extra earnings of those graduates, for most of them at least, make up for the debt costs they've got to pay back.

OK, let's agree so far. What is therefore the solution?

For Hutton it is that everyone should be taxed more so as to pay those fees on behalf of the students rather than making them borrow to pay them themselves.

Unfortunately, those facts that he's using lead us to entirely the opposite conclusion. If we've got a cost that is higher than the benefit then this is a signal that we should stop doing this thing. Hutton is indeed arguing that the cost of a university education is higher, for many to most people, than the benefit that comes from having one. This is true whoever is paying the bills. Therefore we would rather like to have fewer people going to university.

But that leaves us with another problem. For some people university is definitely worth it. For others not. So how do we select those for whom it is and those for whom it is not?

Well, actually, that's one of the things that a price structure does for us. We make clear the costs of something and people will decide themselves whether they're willing to pay that price. That is, whether it is worth it for them. Whether Media Studies from an ex-technical college is worth £45,000 isn't something that you, I or Hutton should be deciding. It's something that people considering doing Media Studies at an ex-tech should be deciding. So too with English at Cambridge or physics at King's.

Do also note that once we have prices clear we don't have to assume that people will then decide purely on the financial return: Everyone will ascribe some value to the 3 years of uni, some might even ascribe value to the intellectual stimulation, whatever the degree.

But the important point here is the basic one. Hutton is arguing that university does not make sense in terms of value added for most students. He therefore proposes subsidy for those students. Which is ridiculous. If the activity is not value adding we don't want more of it, we want less of it.

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If you've not got the skills then maybe it's the institutions?

Written by Tim Worstall | Saturday 12 October 2013

There's been much fussing about education and skills these past few days as a result of another information release showing that various countries have higher educational skills than others. And also that various countries have higher incomes than others. An example here:

The good news for Americans in a new international study of adult skills is that the U.S. ranks near the top in gross domestic product per capita, behind only Norway. The bad news is that Americans are so far behind in their skills that it’s hard to see how they can stay at the top for long. The figures are contained in a report by the Organization for Economic Cooperation & Development called OECD Skills Outlook 2013.

That's not quite the way that I would read it myself.

Think through this for a moment. Wealth, GDP, income, call it what you will, it's a function of two things, the endowment and the efficiency with which that endowment is used to produce the wealth, income, gilt and pelf. So, if we're got one nation full of dumb lardbutts which is still one of the richest in the world while we've others heaving with the highly educated and knowledgeable which are poorer then we've got to assume that the efficiency with which that endowment is exploited must be higher over there with the lardbutts. We could go to the PJ O'Rourke extreme at the other end of course and note Russia where chess is a spectator sport yet they're boiling stones for soup.

This is important: that education, that human capital, yes, it is indeed an addition to the endowment off which that GDP is created. But then so also are the various institutions through which it is exploited. So these figures do not quite show what everyone has been saying: that everyone had better get their education act together. Desirable though that is of course. For we are also able to note people with lots of that human capital which do not exploit it efficiently. To these countries we should be saying that you too need to get your act together: change those institutions.

And here's the thing. Just casting an eye along those whose income position is markedly higher than their human capital one, they do seem to be the places running some variant of that Anglo Saxon capitalism and free market racket. Perhaps those places do need to sort out their education: but the greater efficiency also shows that everyone else needs to sort out their institutions.

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Free school meals aren't as tasty as they sound

Written by Sam Bowman | Wednesday 18 September 2013

All children at infant schools will be given free school meals from 2014, Nick Clegg has announced, at a cost to the taxpayer of £600m.

On the face of it, the policy is extremely bad. Children of parents earning less than £16,190 and/or receiving income support or other kinds of welfare are already entitled to free school meals, so, other than children whose parents are unaware that they are eligible, the main beneficiaries of this policy will be the children of middle-income families.

That’s the wrong kind of redistribution. There is a decent case for helping the children of poor families who simply cannot afford to give their kids a decent packed lunch, but extending that to all children requires pretty big (and probably wrong) assumptions about parental fecklessness and state effectiveness.

But there is a complication. Trials that tested universal free school meals in schools across three local authorities between 2009 and 2011 found that extending meals to some students didn’t do much, but making them universal correlated with 1.9% and 4% improvements in literacy at Key Stages 1 and 2 respectively and 2.2% and 5.5% improvements in maths at Key Stages 1 and 2. (pp 143-144)

If those numbers really were caused by making free school meals universally available (and they were more cost-effective than alternative ways of spending that money), there would seem to be a strong case for the policy. However, the authors of the government’s impact report point out that, basically, they don’t understand why this relationship exists. Neither attendance nor behaviour were affected, so they assume that free school meals led to greater classroom ‘productivity’.

What if they’re missing something and the free school meals aren’t the causal factor? Or what if nationwide implementation has bad unintended consequences we can’t foresee?

That’s exactly what happened when California rolled out a state-wide class-size reduction programme, an example given by Nancy Cartwright. Despite doing well in randomized controlled trials in Tennessee, in California the programme had no real effect on outcomes. The sudden need for lots of new teachers meant that more bad teachers were hired; and not all of the factors that made smaller classes helpful in Tennessee were present in California. Evidence isn’t always as transferrable as we’d like it to be.

That’s not really a good reason to think the policy will fail, but it should temper our enthusiasm for rolling it out nationwide. What works in Wolverhampton might not work in West Sussex. Indeed, what works in a particular school in Durham might not work in another school across the county. In some schools, universal free school meals might be just what the doctor ordered. In others, headmasters might think that fixing their school’s dodgy central heating would be a much better use of the money.

Ultimately, it boils down to the principle we go on about again and again here at the ASI: devolving choice down to the most basic units possible. The available evidence does suggest that “universal free school meals” are a good policy, but that evidence is quite limited. The complexity of these things means that rolling it out nationwide might not achieve what we’d hope.

Better to give schools the money and the information and let them decide what to do with it. That way, instead of basing a national policy on the results of a few randomized controlled trials, the process of experimentation and discovery can be ongoing across the country.

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Of course we should stop subsidising arts degrees

Written by Tim Worstall | Sunday 04 August 2013

Not that we particularly do subsidise arts degrees, not in England we don't. Students now borrow to pay the course fees for the subjects they study which is as it should be. But some interesting research about why we shouldn't ever go back to subsidising arts degrees whatever else we do with tertiary education. The basic point being that hard and social science degrees contribute to economic growth. Arts degrees do not. The full paper is here but this is probably an easier summary.

Cristiano Antonelli and Claudio Fassio decided to open this Pandora box and concentrate on one impact: economic growth. They perform a cross-country study and take the number of graduates in each field as an indicator of academic output, and see where that leads us in terms of economic achievement. They make the distinction between engineering, hard, social, medical sciences, and humanities in a 11-year panel of 16 OECD countries. The horse race ends with two clear winners, engineering and social sciences, and two big losers, medical sciences and humanities, the latter having a significant negative contribution to growth.

The argument generally deployed is that having a better educated population increases economic growth: thus there should be subsidy to that education. Which is fine of course, but as this paper shows it does rather depend upon what sort of education produces the economic growth. And as we see, the social sciences and hard ones do indeed produce that growth and so there's an argument for subsidy. That the arts degrees do not produce that growth means that this particular argument for their subsidy fails.

But do note that last little part of it: arts degrees reduce economic growth. Quite why: well, have you ever actually looked at an arts degree syllabus these days? They might well instruct well on the importance of feminism to Jane Austen, say, but they do seem to misinform about everything else political and economic. Or it could be of course that it's just the opportunity costs: having intelligent people spending years arguing over the importance of feminism in Jane Austen is a drag on the economy when they could have been out designing bridges instead. Or even serving the coffees that their graduate degree will prepare them for.

But such gross cynicism aside this economic result does indeed lead to an interesting policy idea.

We're all familiar with the idea that there are externalities, that such externalities need to be corrected with the addition of a Pigou Tax. This is simply the flip side of the argument that positive externalities (like, say, the public good of economic growth coming from science education) should be subsidised. Those science and social science degrees produce that increase in economic growth which is indeed a public good worthy of subsidy. Those arts degrees produce a negative externality which must be corrected by a Pigou Tax.

At which point the correct policy is obvious: we should charge the arts students twice the normal fees in order to subsidise the science students. It's a win/ win situation I feel.

 

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Schools don't need a new curriculum, they need freedom

Written by Teddy Baker | Tuesday 09 July 2013

Today’s announcement of the reforms to the national curriculum have been met with both praise and displeasure from varying sides of the debate, with Anthony Seldon, head master of Wellington College, heralding the new curriculum as giving essential “building blocks” to allow children to progress with more complex ideas, whilst Brian Lightman, general secretary of the Association of School and College Leaders reacted more critically, suggesting that, “unlike previous versions of the national curriculum, which were drafted with a heavy involvement of teachers and school leaders, these proposals have been driven and closely directed by politicians without that professional input."

However, it is not the allegedly more demanding content of the curriculum which is concerning, nor the way in which many regard it as too heavily under the control of politicians rather than teachers themselves, rather, the continued way in which the government forces what it feels is right upon parents and school children, instead of giving them influence over what their own child learns. Not only does this exemplify the overarching nature of government in the UK, but the emphasis this new curriculum puts on force feeding facts to pupils, under the pretence of providing them with “core knowledge”, besides removing any individuality or element of choice, also is likely to reduce interest in the subjects amongst the pupils, as its less independent nature prevents the students from taking the initiative and developing their study into areas which interest them.

Furthermore, this “one size fits all” approach to the curriculum does not take into account those children with special educational needs, who are approximately 20% of the student body in the UK. This only highlights the problems with the inflexibility of the government and this new curriculum, and shows the need for more choice within schools and for parents to allow them to ensure that all children can receive an education appropriate to them.

Fortunately, this new curriculum is not being enforced on the country’s academies, whose independence allows them to better provide for children individually. However, it must not be forgotten that in fact, although the government has less direct control over academies (e.g. they are not subject to the new curriculum) this may be replaced by the influence of the academy’s main sponsor, rather than parents, so they may not be ideal for providing a more independent education.

Whilst academies are not necessarily the only or ideal solution, currently they appear to be the best available option, due to their relative independence. In addition the way in which they specialise in one area of study allows parents to find a school more closely in line with their children’s strengths and weaknesses. On the other hand they have been criticised as being too selective, meaning that schools choose pupils, rather than the other way round, removing their key justification. Therefore, although they are a step in the right direction, more needs to be done to create both a more flexible curriculum and school system, as while they make up over 50% of English secondary schools, they represent only 13% of the overall maintained sector, which badly needs an injection of freedom.

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