Explaining the success of the Finnish education system

It's a standard enough trope: the Finnish education system does very well so our education system should be just like the Finnish one. Meaning comprehensives for all and put the private education system to death. That is, of course, attractive to those who have been arguing for decades that we should put the private sector education system to death and have comprehensives for all. There's an interesting new paper arguing that it really might not be all that simple:

Finland has been noted to perform consistently very well in the international PISA assessments for many years, but it also has a relatively low per capita number of Nobel Prize winners. We draw upon a large body of proxy data and direct evidence, including the first ever use of RTs to calculate the Finnish IQ and the first ever use of the WAIS IV and PISA scores in the same capacity. Based on these data, we hypothesize that Finns perform so consistently well in PISA because they have a higher IQ overall than other European countries and exhibit a specialized slow life history strategy characterized by high Agreeableness and Conscientiousness, and low Psychoticism and Extraversion. Most of these traits predict educational success but all would suppress genius and creativity amongst this population.

If Finnish children are both brighter than those in other countries and also the culture itself supports conscientious hard work then yes, we might well think that that has an impact upon the success of the education system.

Spotting the effect of the minimum wage

  The first place we'd expect to see the effects on unemployment of a minimum wage that was too high is of course in the unemployment rate among teenagers and the young. For these are the people with little to no training, no job skills, and thus those that a minimum wage is going to be binding on. So, what do we see in the UK?

Centre-left think tank the Institute for Public Policy Research (IPPR) says that a full-blown economic recovery will not resolve the UK's youth unemployment problem.

Its latest report says despite steady falls in unemployment, there are still 868,000 out-of-work 16 to 24-year-olds.

Later on Wednesday, the latest official UK unemployment figures will be revealed.

They have been falling steadily for the last year. Gap

The IPPR highlights a striking mismatch between what young people are training for and the types of jobs available.

For example, it says, 94,000 people were trained in beauty and hair for just 18,000 jobs, while only 123,000 were trained in the construction and engineering sectors for an advertised 275,000 jobs.

The IPPR says youth unemployment is lower in countries where the vocational route into employment through formal education and training is as clear as the academic route.

It says this helps, as it puts the two on a higher perceived footing.

We're certainly willing to believe that more vocational training would be a good idea. We could have institutions of higher learning that specifically existed to teach people how to do real world jobs rather than providing a more theoretical education as at a university. Perhaps we could call them Polytechnics of Technical Schools?

But that the IPPR insists that even a full economic recovery will lead to there still being a large amount of teenage unemployment means that we really do have a minimum wage that is too high. Yes, even that special, lower, minimum wage for the young is too high: all we need as proof perfect of this contention is that statement that there will still be heavy youth unemployment even at the top of the economic cycle.

Switching mobile networks is easier than switching governments

Unlike lots of people on the right, I like Owen Jones. He’s good natured and often challenges orthodoxy on his own side, and he’s a thought-provoking writer. 

Having said that, I usually disagree with what he writes on economics. His Guardian piece this week, which called for the nationalisation of the UK's mobile network operators, was a good example. It’s tempting to dismiss it as clickbait, but it represents a train of thought that is increasing in popularity. And if nothing else it may shift the Overton Window.

Jones starts by pointing out that nationalisation of big industries is very popular among the public at large. “While our political overlords are besotted with Milton Friedman, the public seem to be lodged somewhere between John Maynard Keynes and Karl Marx.” 

A fair point. He might also have noted that the public disagrees with him about lots of other things: the obvious example is hanging, where the public is somewhere between Roger Helmer and Oswald Mosley, but there’s also immigration, which 55% of people want reduced ‘a lot’ (and another 21% want reduced ‘a little’). The Great British public thinks the benefits system is too generous by a 2-to-1 margin, and think that ‘politicians need to do more to reduce the amount of money paid out in benefits’ by a 3-to-1 margin. And so on. On these issues, and presumably many others, I assume Jones thinks the public needs further persuasion.

It isn’t necessarily that the public really is bloodthirsty or xenophobic or anti-poor or quasi-Marxist; it’s that the public is extremely uninformed about most things. How could you judge whether we needed more or less immigration if you thought we had more than twice as much immigration as we actually do? How could you judge whether the railroads should be nationalised or not if you did not know that passenger numbers had doubled since privatization, after decades of decline under the state?

Jones claims that mobile phone networks are an inefficient natural monopoly, without any real reasons given. This claim is untrue. The UK has four competing mobile networks (Vodafone, O2, Three and EE, which was formed by a merger by T-Mobile and Orange) and dozens of aftermarket “mobile virtual network operators” that lease wireless spectrum from those four networks (GiffGaff and Tesco Mobile are two popular examples). None of these networks are unusually profitable and all spend enormous amounts on marketing. Try spending a day in a city without seeing at least one advert for each company. This is not the behaviour of monopolistic industry!

(There are a couple of other frustrating errors in the piece. For instance, a typical £32-a-month 24-month contract can get you an iPhone worth £550, not a device worth £200 as Jones claims.)

Yes, signal blackspots are annoying. (Take it from someone who spent his teenage life having to walk into the garden to send a text message.) And mobile networks’ customer service really does suck sometimes! But Jones is comparing reality with an ideal where resources are infinite. Since resources are not infinite, we have to have some way of deciding what imperfections are tolerable. 

For example, as annoying as blackspots are, the optimal amount of coverage is obviously less than 100%. The phone networks reckon they cover around 99% of the population, and as frustrating as it is when you’re in that last 1%, the marginal costs rise dramatically when you try to cover that last 1%. We could cover them at great cost, meaning that we have less money to spend on other important things elsewhere. The question is one of priorities.

Ultimately, the important question that Jones does not answer (or ask) is, compared to what? Private sector firms might be irritating sometimes. Unless you can show that nationalised firms would be less irritating and better overall, that doesn’t tell us anything about what we should do. 

There are lots of examples of nationalised firms that were absolutely terrible. Tim remembers waiting three months for a landline when the GPO ran the phones; and then there is the huge drop-off in rail passenger numbers under British Rail, followed by an equally huge recovery after privatisation:

The fact that the state funded some of the scientific research that led to the iPhone doesn’t mean that we’d have better phones if we nationalised Apple. (It might be a case for state funding for scientific research that is released into the public domain, though.) As Tim says, “The State can be just as good as the market at invention, the creation of really cool new technologies. But it’s terrible compared to the market at innovation, the getting of that new technology into peoples’ hands so that they can do cool and interesting new things with it.” 

Economies of scale exist, as Jones suggests, but so do diseconomies of scale. Firms can be too big. And when you have a single network (whether it’s privately or publicly owned), customers lose all ability to ‘exit’ a firm that is giving them a bad service, so the only recourse they have is at the ballot box. 

Which brings us back to the first problem with Jones’s piece: politics is a complicated business about which we know little. If we don’t like what we’ve got, we have to hope that a majority of other voters agrees with us – and even if we’re right, they may not be informed enough to agree with us. 

It’s a lot easier to switch mobile phone providers than it is to switch governments. Ultimately, it’s that pluralism and freedom of exit that drives improvements in markets, and tends to make governments relatively bad at doing things. For all the mobile network industry’s problems, the question is: compared to what?

Boris's BOGOF

Boris Johnson’s putative return to the Commons overwhelmed any publicity for his, or rather Gerard Lyons’s, strategic analysis of the UK’s in/out EU options: The Europe Report: A Win-Win Situation, released 6^th August.  Four possible outcomes are envisaged: staying in either a largely unreformed EU or one reformed to the UK’s liking.  The two departure options are seen as (a) good EU relations and pro-growth UK reforms and (b) poor EU relations and an inward-looking UK. Lyons makes the good point that “the UK can only achieve serious reform if it is serious about leaving, and it can only be serious about leaving if it believed that is better than an unreformed EU.”  The title would have you believe both staying in a reformed EU and leaving are “Win Situations” that we can either choose one or use it to achieve the other, i.e. Buy One and Get One Free.

Lyons has produced an important review of the issues facing each sector but, at the end of the day, his conclusions are based on simple assumptions of the economic outcomes from each option.  We do not need 108 pages of report, and 130 pages of appendices, to be told that the two high growth scenarios are more attractive than the two low growth ones.  Furthermore, the conclusion that the two high growth scenarios are economically equivalent is similarly based on heroic assumptions. Lyons’s Panglossian vision of the UK outside the EU and reforming itself begs a great number of questions.  The world is not ordered according to the way we order ourselves: trading with the EU will still be governed by EU regulations, likewise the US.

The paper has a number of failings: in particular it is not specific about the EU and UK reforms that would be needed, still less how they could be achieved and how likely that would be.  For example, the only hope of securing the EU reform the UK seeks is for the UK to show benefit for EU as a whole, not just the UK.  UK proposals to improve the EU market for financial services looks, to the rest of the EU, like UK self interest.  We know that the rest of the EU does not accept the UK arguments because it is outvoted every time.

How would, as Lyons suggests, the UK leave the EU whilst at the same time improving the UK’s EU relationships?  The chilling legal issue is EU Article 50 under which the remaining members decide the terms of the separation with no involvement of the departing member.  Obviously there would be negotiation so that may not be as ugly as it seems.  Trade would continue and we import more from the rest of the EU than we sell them but that is beside the point: could the UK protect its EU exports better than it could reduce its EU imports?  De Gaulle reckoned that the UK needed continental Europe more than vice versa and the 1960s proved him right.

We should welcome this report for its discussion of many of the issues but we cannot rely on its findings.  The City really does need to come up with a plan to protect its future but this is not it.

Roger also trusts the state more than I do

There's another subject that Roger and I disagree about profoundly.  He trusts the state more than I do.  Whenever he sees anything not going the way he'd like it to go, he calls for state action to "put it right."  This applies to big things, such as instances of what he calls "market failure," and it applies to little things such as people consuming foods or drinks he disapproves of.  In both cases he wants the state to stop it. There are undoubtedly cases of market failure.  Left to themselves, business people would probably, like many of us, go for the easy way out, protecting their market share by monopolies or cartels, rather than by trying to keep their quality up and their prices keen.  Certainly we need laws to stop them doing this.  Where I part company with Roger is that he seems to think of politicians and civil servants as dispassionate guardians of the public good.  I see them as being rather like other people in pursuing their own advantage where they can.  Politicians want to be re-elected, and bureaucrats want to be promoted.  Both will, at times, act in their own interests, just as others do, even in some cases where this is against the public good.

When Roger talks of "society," he doesn't use it to refer to communities working together for common purposes, he uses it to mean the state, the political body that has monopoly control of the laws and of the powers to enforce them.  The problem is that when those powers are concentrated, people try to use them to impose their agenda on others.  Because some people drink unwisely, Roger supports minimum alcohol pricing.  Because some people become obese, Roger wants 'fat taxes' on sugars and fats.  In these cases he claims to be acting in people's best interests, but when he votes to ban fox-hunting, it's simply that he doesn't want them doing it.

Roger is happy to give the state more power, confident it will be used appropriately, whereas I rather suspect that whenever the state gains extra powers, it will use them for whatever purpose it wants.  Surveillance powers granted to thwart terrorists will probably end up being used to prosecute people for not sorting their garbage into the right bins.  In short, Roger sees the state as a means of making people live as he thinks they should, whereas I see it as a source of power waiting to be abused by anyone who can grab control of its levers.

Roger and I live in parallel universes

The friend Roger I wrote about, who opposes every single policy that might achieve his declared objectives, lives on the same planet as I do. We share physical space, but we live in very different parallel mental universes. His world is dominated by sinister dark conspiratorial forces which leave ordinary humans as helpless victims of their oppression. Big Pharma, as he calls the pharmaceutical companies, is in cahoots with Big Tobacco, and they have allied themselves with Big Bankers to create cartels that acts against the interests of the public by overcharging for goods, by denying the public access to life-saving treatments, and by forcing them into buying harmful products and detrimental services. Big business, which includes fast food providers and major brand retailers, have bought legislators, think tanks and the media, and contrive to ensure that their misdeeds are never adequately uncovered and exposed by a servile media and legislature. We are all their helpless victims, and Roger campaigns against them by eagerly buying each new book that highlights their nefarious influence.

In my parallel universe people buy stuff they like, and their choices influence businesses into tailoring their output so that they can sell more. Individuals exercise the power of their feet; they walk away from stuff they don't value, and every year big household names go under as they fail to match up with changing tastes. People make choices, and they allocate their resources to where they think they'll bring most satisfaction. Sometimes they buy things whose value others might question, things such as carbonated beverages, salty crisps, tobacco, alcohol and fatty foods. But others who dispute the value of these things are free not to buy them.

In Roger's universe the dark forces control our lives, and in the parallel universe we mostly control our own through our decisions. Roger's world is full of pessimists who see individuals as helpless pawns, constantly manipulated; the other world is inhabited by many cheerful optimists, confident that human resources can be applied to achieve worthwhile objectives. In the cheerful world people watch out for rent-seeking, for the desire to use government restrictions to limit choices and secure greater returns than people's free choices would have bought them. The optimists campaign constantly against this crony capitalism and in favour of free choices, open entry to markets, and against using legislation to thwart competitors. They often win, and they know that eternal vigilance is needed if individuals are to keep a world they can control, rather than succumb to one in which they are controlled.

It has to be said that the cheerful world is a lot more fun to live in than the one controlled by shadowy, sinister forces.

They're lying again about the gender pay gap you know

Oh dear, oh dearie me. We find ourselves with a politician trying to feed us all porkies again. This time it's Gloria De Piero announcing loudly that the gender pay gap is near 20% (along with the usual this is disgusting, must stop, Labour will do something about it and so on). She's making the same claim that Harriet Harman did a few years ago: and she seems to have forgotten that the UK Statistics Authority said that Mrs. Dromey was in fact a very naughty politician indeed for making the claim in the manner she did. And as Del Piero is making the same claim in the same manner that also makes Ms. Del Piero a very naughty politician indeed. And we tend to think that it's worth calling out politicians when they attempt to mislead us all by being so naughty.

You can see the actual claims being made all laid out in charts here at the Mail. Full time male employees make more than full time female employees. Part time female employees make more than part time male employees. There are many more female part timers than male: and the average part time wage for either gender is lower than the full time wage for either or both.

And what Del Piero has done to get to her 20% or so figure (the actual numbers coming from the correct source, ASHE) is to include the part time and full time female numbers into one, the part time and full time male numbers into one, and then compare the two. This is not acceptable. As Sir Michael Scholar pointed out to Harriet Harman when she did the same those years ago:

 GOVERNMENT EQUALITIES OFFICE PRESS RELEASE: 27 APRIL 2009 I am writing to you about the Government Equalities Office (GEO) Press Release on the Equality Bill, issued on 27 April, which states that women are paid on average 23 per cent less per hour than men. GEO’s headline estimate of the difference between the earnings of women compared with men (generally referred to as the gender pay gap) is some 10 percentage points higher than the 12.8 per cent figure quoted by the Office for National Statistics (ONS). Yet both estimates are derived from the same source, the 2008 Annual Survey of Hours and Earnings (ASHE). Such a difference in headline estimates is likely to confuse the general public. The Statistics Authority is concerned that this may undermine public trust in official statistics. I understand that there has been a dialogue between ONS and GEO on the presentation of women’s earnings figures in the context of Equality issues and that the National Statistician has agreed to look at the way the gender pay gap is presented in ONS statistical bulletins. Work on this is planned for later this year and will be used to inform the content of ONS’s statistical bulletin on the results of the 2009 ASHE, due in November 2009. In the meantime, I enclose a copy of a note that the Statistics Authority will shortly publish on its website. This clarifies why figures as different as 12.8 per cent and 23 per cent have been used and explores different options for presenting the gender pay gap in an impartial and objective way. The note explains that the figure of 23 per cent quoted in the GEO press release relates to the median hourly earnings of all employees (full-time and part-time combined) whereas ONS's figure of 12.8 per cent is based on the difference in the median hourly earnings of full-time employees only. Neither measure is entirely satisfactory as an impartial and objective headline estimate. The former rolls together the quite different levels of hourly earnings for part-time and full-time employees; while the latter excludes the earnings of around one quarter of all employees. These considerations suggest the need for a more extensive set of measures to present the differences between the earnings of men and women. Indeed, it is the Statistics Authority’s view that use of the 23% on its own, without qualification, risks giving a misleading quantification of the gender pay gap. I trust that you will find this note of value pending the further work that ONS is planning on this issue later this year.

That does indeed make Ms. Del Piero a very naught politician indeed and as she does the rounds of the talk and news shows to promote this old Labour mistake perhaps someone would like to pick her up on it?

As to the reality of the gender pay gap it's made up of two things. The first is that there really was, historically, direct discrimination against women in education and career opportunities. That is something almost entirely solved for today's younger generation and we see the effects still only in the older age cohorts, in the inequality of wages of people in their 40s and older. There is no such inequality among the young.

The second is that women tend to take career breaks in order to have and to raise their children in a manner that the fathers of those same children do not. We might rail against that sexist notion that this should be so but it's hardly an unusual gender division of labour in a viviparous, mammalian, species.

The part of the gender pay gap that comes from direct discrimination has already been dealt with, the part that comes from how people decide to live their lives and raise their children, well, that will be with us for as long as that's how people decide that they want to live their lives and raise their children.

And adding together part and full time wages to describe the gender pay gap is a naughty thing to do. As the Statistics Authority has already told one Labour politician when they did it.

The Puritans still don't understand the meaning of the word "waste"

Apparently households are "wasting" as much as £18 a year by continuing to use tumble driers even in the summer months. We're told that we should all be out there hanging the stuff up from a washing line instead. Quite apart from the fact that a British summer is not a period of guaranteed dryness this is showing a depressing ignorance of the meaning of the word "waste" in an economic sense. There is one indication of how much richer we all are now though:

Official statistics show that more than 16.5m UK households own either a washer-dryer or a tumble dryer.

Sales of tumble dryers in particular have soared in the past decade. Almost 12.5m households in the UK owned a tumble dryer as of 2013, an increase of 3m since 2003. By contrast, in 1970 just 138,000 homes owned one.

This is all part of that great economic emancipation of women that has been the signal change of the past two generations. As running a household becomes ever more mechanised then both the gender division of labour and the restriction of women to largely household duties simply fade away. But about that waste:

The declining popularity of the traditional washing line is costing British families at least £120m a year, as tumble dryers are routinely used throughout warm summer months.

More than half of all households who own a tumble dryer use it at least once a week during the summer, according to the Energy Saving Trust.

The organisation, a charitable foundation which offers advice on cutting energy bills, said that a typical household could save £18 from their annual electricity bills “by line drying clothes instead of tumble drying” during June, July and August.

It would be rare to find a household that had a budget constraint that bit harshly on £18. And as to whether the spending of that £18 is waste or not is really up to those spending it rather than some bunch of puritan prodnoses. The actual budget constraint that none of us is ever free from is that on our time. And so the question becomes whether, in the minds of those doing it, the time spent with a tumble drier is worth the £18 as against the longer period of time used with the washing line. We've good authority as to how to measure this in a theoretical sense too. The Sarkozy Commission (including the laureates Stiglitz and Sen) pointed out that such household labour should be valued at the rate for "undifferentiated labour" or, in more understandable terms, minimum wage. That £18 is 3 hours of minimum wage labour. If using a tumble drier saves three hours over an entire summer as opposed to the alternative washing line then it's an entirely rational allocation of time and money. It's simply not waste at all.

Yes, planning regulations really have driven up house prices

Not that we ever suspected differently of course. But there are those who do insist that it's not planning regulations, who may build what and where, that increases the cost of housing in the UK. It's just some combination of rising population and perhaps not enough council houses or summat. Definitely not, it couldn't be, State restrictions on housing that make housing so expensive. So it's nice to see news of a paper that addresses exactly this question. What actually is it that has contributed to the sky high house prices of today?

What about the physical restrictions? In a hypothetical world where they could be magicked away, prices would be 15pc today lower than they would otherwise have been. The majority of these constraints can be felt in highly urbanised areas, for obvious reasons: there is not as much space available in city centres and lots in the countryside. Some parts of the country are easier to build on than others.

Everyone wanting to live in the South East, where all the jobs and money are, obviously has some effect. Housing is, at least in part, a positional good in that we can't all actually live in Central London. But that's not the only effect:

They find that house prices in England would have risen by about 100 percentage points fewer, after adjusting for consumer price inflation, from 1974 to 2008, in the absence of regulatory constraints to housebuilding. In other words, they would have shot up from £79,000 to £147,000, instead of £226,000. Another way of putting this is that prices would have been 35pc cheaper.

Had the south-east of England, in practice the most regulated English region, been as liberal as the North East, the least regulated over the past 40 years, house prices would still have been roughly 25pc lower. As it happens, the authors aren’t necessarily advocating deregulation: they are trying to calculate, using sophisticated econometric techniques and a wealth of detailed data, the effect of constraints.

The authors aren't advocating deregulation but of course we are. For example, those greenbelts where it's almost impossible to build houses cover rather more land than we have actually already covered with houses. Relax those restrictions and housing will become cheaper. To put the blame where it really lies, the reason British housing is so expensive is because the Town and Country Planning Act exists.

An African American high school dropout is more likely to be in jail than employment

Quite the most horrific number to come out of Paul Ryan's poverty plan was the point that for young African American men, those who have dropped out of high school, they're more likely to be in jail than they are in employment. John Cochrane has picked up on this and so subsequently has Mark Perry, from whom I've borrowed that chart above. The cause, of course, is the horrible confluence of the appalling inner city education system in the US plus the effects of the near entirely insane "War on Drugs". And do read Cochrane's piece where we find this:

And really, that's just the surface. Neal and Rick's numbers don't count the numbers on parole or otherwise under the supervision of the criminal justice system. And their numbers miss one of the biggest effects: In America, once you have a criminal record -- often even just an arrest record -- getting a job becomes next to impossible. So the flow through the criminal justice system, as much as the numbers currently in jail, is an important measure of its effect.

Becky Petit's Invisible Men: Mass Incarceration and the Myth of Black Progress calculates the cumulative risk of imprisonment, which gives a sense of how many people are in this quandary.

The less than high school black number rose from 14.7% in 1979 to an astounding 68% in the latest numbers. Nearly 70 percent of black high school dropouts will spend time in jail. And pretty much end their hopes for conventional employment as a result. (Things aren't great for white high school dropouts either, and 21% for black high school graduates is pretty shocking too.)

The UK's not this bad, not yet, but we do have a large racial imbalance in the prison system. And again it's largely due to those two activities on the State: the inner city education system and that War on Drugs.

We here support the legalisation (or at the very least, the decriminalisation) of drugs on the entirely liberal grounds that they're out bodies and self-ownership means that we as individuals get to decide what goes into them. But if that's not enough for you those numbers above might, or at least we hope they would, sway you over to our side of this argument. For the War on Drugs is having a great deal too much collateral damage, isn't it?