Analyzing a Politically Correct Education/Economic Study

John Taylor’s blog Economics One points to an interesting OECD paperThe High Cost of Low Educational Performance, by Prof. Rick Hanushek and Prof. Ludger Woessmann.  They make projections based on the relationship between performance on international math and science PISA tests and economic growth.

The estimated coefficient on cognitive skills implies that an increase of one standard deviation in performance (i.e., 100 on the PISA scale) would yield an annual growth rate that is 1.74 percentage points higher.              

Their analysis leads to the following politically correct chart:

Except in the case of the lowest performing countries, this approach is very misguided.  While allowing a sizable fraction to achieve basic literacy is necessary, the marginal worker in an advanced economy isn’t going to help much once the network effect of a literate society is established.  By aiming to put a minimum under the PISA scores, they are changing the distribution of the variable that was found to be significant in the past. Scientific and technological progress will more often come from the inventions created by the high achievers on the far right of the distribution than the more sizable group on the left side, so just cutting off the leftward distribution changes the nature of what the PISA test scores were measuring in the first place.  Even if the share of literate population was more significant in their regression than the share of high achieving students*, the relationship between literate students and high achievers can be assumed to be relatively constant up until programs such as No Child Left Behind in the US encourage schools to favor creating the former over the latter.

The following charts from a BOE speech on Inflation and the Service Sector by Timothy Besley highlights what is wrong with trying to increase only the minimum PISA performance to raise economic growth. 

This is a chart of components of the UK service sector.  While the UK’s economy is geared more towards high end services than high end manufacturing, the principle remains the same. The low end services remain a sizable part of the economy. 

The employees at the bottom rung of the service sector are low productivity due to the nature of their industry. More investment in education the left side of the distribution might cut off some of the really bad results, but it will not result in a vastly more productive economy.  Focusing on manipulating the education scores upwards by targeting what looks like the lowest hanging fruit changes the nature of the underlying relationship.  Considering that in the US there is already an order of magnitude more money spent on special needs programs than on gifted programs, the low hanging fruit in education might just be on helping skew the educational score distribution further to the right.



* These regressions can be skewed by some cultures that excel at test scores at the expense of creativity or by looking at too broad a measure of high achieving students to accurately identify the countries with the highest proportion of superstar students. The really high achieving may also be more likely to change their country of residence, benefiting the countries that attract their human capital instead of the countries that produce them in the first place.