This doesn't help

The OECD came out the other day with its latest PISA results - "the Programme for International Student Assessment (PISA) examines what students know in reading, mathematics and science, and what they can do with what they know. It provides the most comprehensive and rigorous international assessment of student learning outcomes to date". Here's how New Zealand students have been doing over the history of the PISA tests. We used to be clearly better than the OECD average across reading, maths and science, but the results have been deteriorating in all three areas.

We're not alone in this. Here are Australia's PISA results. Almost exactly the same.

You could, I suppose, take some comfort from the fact that our performance levels (even if steadily declining) are still not that shabby by international standards. Here are the top 30 countries (I'm using countries loosely here to include for example the consolidated results from four regions in China producing quality-meeting PISA scores), when ranked by reading scores. We're still 12th, Australia's 16th. But self-evidently we'll get eaten if, for example, the rapidly developing economies of eastern Europe up their game and we continue to slide.

I'll leave the bunfight over the reasons for our (and Australia's) recent PISA declines to others. What bothers me about these trends is the contribution they may be making to our long-standing productivity problems, where for any given degree of effort and resources we seem to produce less than the higher-income OECD countries. Australia's also hit a productivity wall: its latest official estimates showed that "market sector multifactor productivity (MFP) fell 0.4% in 2018–19, the first decline since 2010–11 ... Labour productivity fell 0.2% in 2018–19, the first recorded negative for the sixteen industry market sector aggregate (since the beginning of the time series in 1994–95)".

A wee while back I wrote a column for the Australia and New Zealand accountants' magazine Acuity, documenting New Zealand's and Australia's productivity problems and canvassing some of the usual suspects ('Is there any scope for multifactor productivity growth?'). I didn't include falling skill levels for new entrants to the workforce - a fall of some 4.7% across all three areas since 2000 - but maybe I should have. Normally you'd expect each entrant cohort to the labour force to be bringing higher, not lower, levels of skills to the productivity party: it gets a lot harder to make progress when your starting point is going backwards. In the context of productivity growth, where small changes matter a lot over the longer term, a drop in entrant skills of approaching 5% in two decades is a big thing. This is a ball and chain we don't need.

Those who don't know history...

Richard Grossman's book, Wrong: Nine Economic Policy Disasters and What We Can Learn From Them*, is a worthwhile read.

The nine disasters are Britain's loss of the American colonies, the Irish Famine, America's lack of a permanent central bank pre 1913, German reparations after World War One, inter-war protectionism, Britain's return to the gold standard in 1925, Japan's 'lost decade' in the 1990s, the GFC, and the euro. Grossman's take is that they were typically the result of "commitment to outdated or fundamentally flawed economic ideologies", "the outsized influence of private interests", and "efforts to shift costs onto foreigners", and were also "frequently compounded by excessive delay".

We've got better at some of these - reparations are probably a permanent goner (though you could say Trump's Mexican wall is a variant), and trade barriers are much lower than they used to be despite the best efforts of the nutters and the rent-seekers - but some of the underlying drivers of big mistakes are still alive and well. Grossman has a range of suggestions to counter them, and particularly the groupthink that can set in around an ideological (or indeed any) settled way of doing things. While it's never going to be easy to know "when changes in circumstances render a previously sound economic ideology obsolete", he says that

Theoretical and empirical models combine current understanding about the relationships between various elements in the economy and can help predict the consequences of proposed policies. Cost-benefit analysis weighs the hypothesized expenditures associated with a policy against its anticipated payoff. And historical and comparative studies can provide useful analogies adopted at other times and in other places. These tools have proven their worth, although none is perfect...Using these tools to subject proposed initiatives to vigorous testing is far more likely to yield sensible policy prescriptions than blind adherence to ideology or precedent (p183)

All very sensible. But the reference to the value of "historical and comparative studies" reminded me that I've had a vague feeling for a while that economic history isn't in fact being taught to New Zealand economics students. So I went and had a fossick around the websites of all the universities to see what's being offered or required as part of an economics major bachelor degree. My vague feeling was completely right. Here are the results, in alphabetical order (the links go to the source info I used).

Auckland - nothing specific though ECON232, 'Development of the International Economy', has some, mostly focussed on the 20th century
AUT - nothing specific**
Canterbury - aha! The good news is that 300-level ECON342, 'Economic History', is bang on the money and says "We study the causes and consequences of the Three Great Transformations: language, agriculture, and the commercial and industrial revolutions that began in the 16th century". The bad news is it was last offered in 2014, and is not currently on the menu
Lincoln - doesn't seem to offer a straight-up economics major
Massey - nothing specific. You get some local political history in 148.205, 'New Zealand Politics Since 1890'
Otago - nothing specific
Victoria - nothing specific
Waikato - nothing specific. There might be a bit in ECON336-17A, 'Comparative Economics in Global Perspective', but the paper summary is blank, so you can't tell

Not that my own alma mater is any better. I took my degree in economics and political science at Trinity College Dublin in 1969-73: from memory, economic history was compulsory at the time but in any event was well attended (our lecturer was Prof Louis Cullen). The same degree has morphed over the years into today's 'Philosophy, Political Science, Economics and Sociology' (PPES): the good news is you can drop Sociology after the first year, but the bad news is that Trinity has also dropped economic history from the economics options (though there are still 'history of thought' options in both philosophy and politics).

This is a shame from many perspectives. Economics is part of the wider humanities, and any humanities course should involve some commitment to being a well-informed citizen of the world. It's not right that it should implode into a self-absorbed cult of its own. And even if today's students don't give a toss about the history of the world around them and are only after vocational skills and a credentialed meal ticket, economic history has its own utilitarian value. You never know when something like the history of currency unions won't suddenly be the hottest skill in demand when a Grexit comes along. Ask Ben Bernanke: his academic study of the Depression made him an excellent choice to chair the post-GFC Fed.

If I was John McDermott at our own Reserve Bank, and I was looking to hire a new staff economist, given the ceteris paribus choice between someone who'd taken a personal intellectual interest in the history of bank crises and another automaton off the assembly line who can crank the handle on a DSGE model, I know who I'd pick.

*Oxford University Press 2013, ISBN 978-0-19-932219-0

** Happy postscript August 3: AUT's Geoff Brooke tells me that "we will be offering an advanced undergraduate paper in global economic history at AUT from next year (it is currently timetabled for semester 2). The paper descriptor reads: An introduction to the history of long-run economic growth and related changes in population, social and economic institutions. Theories of economic and social organisation, economic growth, and business cycles are examined and evaluated against the historical record. Methodological debates around the relationship between economic history and economics and history are explored". 

Decile funding - pros and cons

There's been quite a bit of reaction in the social media to the news that 'Poorly targeted' school decile funding may be dropped. It's not easy to make much of a case for anything in 140 character bursts, so I thought I'd take a bit more space to wonder if the case against decile funding isn't being oversold.

Here's some data, from the same article, which shows the percentage of students in different decile schools who are well below the national standard for maths (I gather you'd get the same picture if you looked at other subjects). What would you conclude from this chart?

You'd have to say that there is some at least rough and ready correlation between decile level and school performance. Performance worsens as you move down from decile 10 to decile 1 (other analyses have found the same pattern). You'd be inclined to keep a school's decile status in play as an explanatory factor, rather than junking it.

Since this is the picture after schools have had decile-related resourcing, you'd have to suspect that the relationship would have been even more pronounced pre-resourcing. You could, I suppose, make the argument that decile funding has been completely ineffective, and the relationship in the chart is the same pre and post decile-related funding, but that seems to me to be a big stretch to the rather unlikely counterfactual that funding levels make no difference at all to educational outcomes. There's an even more unlikely possibility, that decile funding was counterproductive, and that the decile/performance relationship would have been less pronounced without greater funding to lower decile schools, but I can't see how that would work, certainly not at any systemic national level. So you'd be inclined to believe decile funding has had some positive impact.

But self-evidently, the decile-related funding has not completely equalled out school performance. One part of the answer is that the link between a school's socio-economic profile as summarised by its decile classification and a school's performance isn't 100%, and it's unlikely that it ever could have been. So you'd be sympathetic to arguments that would tweak or supplement the decile funding system, though not to wholesale junking of the approach.

Another part of the answer, though, is likely variation in teaching quality at different schools. In the chart, there's a clear pattern of poorly performing outliers at every decile level. It's unlikely that all of that pattern is down to slippage in the relationship between decile level and educational outcomes, though some of it will be. For example, that outlier decile 2 school, the worst in the chart, could well be facing tougher challenges than most of the decile 1 schools, either because it got mismeasured in the decile process or because the things that matter outside the decile criteria weigh especially heavily on it (equally there could be schools that have been coasting, and their performance reflected an easier catchment challenge in reality than the decile ranking suggested). But some of it, as in most endeavours in life, is likely to be down to variations in the quality of the provider.

Either way, you'd be inclined to hone in on those outliers from two perspectives. One is that, if there is indeed something missing from the decile approach, and there seems to be, then these outlier schools are the most likely place to find it. And the other is that if they're just bad schools, you'd want to sort them out.

Good news from charter schools

Radio New Zealand told me this morning that, according to copies of Education Review Office reports RNZ had been shown, two of the early group of charter schools have been found to be doing well ('Big ticks for charter schools').

I'm delighted to hear it. Charter schools have the potential to address what is one of our main educational challenges: the long tail of underachievers in our public schools. To be clear: our educational performance on average is pretty good, and we score well on international comparisons like the PISA ones. But there's a large group at the bottom who struggle. For one reason or another, the standard state school isn't working for them.

What's encouraging about the experience overseas is that the main positive impact of charter schools tends to be the improved performance of precisely those groups who struggle most in the traditional schools. Here's what the big (many would say definitive) study of charter schools in the US had to say (executive summary here, pdf):

Looking back to the demographics of the charter school sector in the 27 states, charter school enrollment has expanded among students in poverty, black students, and Hispanic students. These are precisely the students that, on average, find better outcomes in charter schools. These findings lend support to the education and social policies that focus on education as the mechanism to improve life chances for historically underserved students. Charter schools are especially beneficial learning environments for these students (p18)

Enrollment and persistence in charter schools is especially helpful for some students, particularly students in poverty, black students, and English language learners all of whom post significantly higher learning gains in both reading and math. Hispanic students are on par with their TPS [traditional public school] peers in both reading and math. For students with multiple designations (such as being black and in poverty), the impacts of charter schooling are especially positive and noteworthy (pp23-4)

It's interesting to see that on these early ERO findings the same thing is happening here. RNZ quoted the ERO report on Vanguard Military School as finding that "A significant proportion of students have not experienced success in their previous schools. At this school they are responding positively to adults' high expectations".

Just what you'd expect when you get a variety of options, where students have more opportunity to match up what they want with a school that provides it. As usual, greater choice, more competition and more innovation work, and they work most for those who had least choice previously - typically those on the outer, for one reason or another.

Neither of these two schools, by the way, would have worked for me or my wife or our kids - Vanguard, according to an earlier report by RNZ, has gone for "the ethos and training methodology of the military", and South Auckland Middle School for "project-based learning based on Christian philosophy and values". But then there are lots of people who'd have hated the school I did well at (and others did well there too, if they were either academic or rugby-playing - the rest, not so much).

And that's the whole point. Students need to be able to access the approach that best suits them. Vanguard and South Auckland are just the ticket for some kids who would otherwise have floundered.
More choice is an excellent idea: we shouldn't be lumbered with markets in important areas like education and health, where there are limited "one size fits all" options on offer, and especially when the losers from limited choice are towards the bottom of the social and economic ladder.

An inequality story in four graphs

Inequality isn't one of my core research interests, but over the last few days I've found myself absorbed in lots of interesting bits of research on inequality all arriving at once (I wrote up one of them yesterday).

Here's the latest one, which I've extracted from the OECD's mammoth Education at A Glance 2014, which appeared last week. The four graphs are quite large, which would make for an over-long post, so I've put them "over the fold", as they say. The gist of it is that we've got a developing problem in equitable access to good educational outcomes: right, on to the graphs.

"When the facts change, I change my mind. What do you do?"

The relevance of the title will become apparent, but first some context.

I've been researching a book, which has largely been on the benefits that increased competition and greater operation of market forces can bring to sectors such as health and education, which tend to use largely non-market methods to commission and distribute their services.

Along the way I've been looking at the literature on new private schools competing with the traditional public system schools - Sweden is often credited with giving this initiative its start, and it has been spreading elsewhere, notably in the UK ('academies') and the US ('charter schools'). And it's reached here, too, with the proposed launch of our version of the idea ('partnership schools').

So I've had to wade into the politicised jungle of quantitative research on how these schools have been performing.

With that as background, here's the news.

For a long time one of the key pieces of evidence on US charter schools was a 2009 study from the Center for Research on Education Outcomes at Stanford University, a body with the snappy acronym, CREDO. It was a big piece of work - the authors called it "the first time a sufficiently large body of student‐level data has been compiled to create findings that could be considered "national" in scope" (here and later, I'm quoting from the 2009 report's Executive Summary). It covered the learning gains in English and maths of 70% of the total student body then in charter schools, and compared them with demographically matched comparator students ('virtual twins') in the public school system.

One of the headline CREDO results was seized on by opponents and critics of charter schools: overall, 17% of charter schools were better than the public schools, 46% were much the same, but 37% were worse. The differences in actual outcomes were not large, but they were statistically significant. It was a widely quoted result and the study received broad coverage in educational circles everywhere: our own PPTA, for example, had a link on their website directly to it.

There was a range of other interesting findings, too, notably the differences in quality across charter schools ("tremendous variation in academic quality among charters is the norm, not the exception. The problem of quality is the most pressing issue that charter schools and their supporters face") and the fact that charters seemed to do better with students from more difficult backgrounds ("two subgroups fare better in charters than in the traditional system: students in poverty and ELL [English Language Learner] students"). As the report said, though, some charter success with sub-groups shouldn't be allowed to dominate the big picture finding: "greater attention should be paid to the large number of students not being well served in charter schools".

For people (like me) who believe that greater competition and better consumer choice are the first-best path to improved outcomes in many areas, this was, frankly, a disappointing though credible result.
CREDO said at the time that a follow-up research project was in the works, but then they went off the air, and over the years and from a distance I'd rather assumed they'd run into funding or other problems.

Fast forward to June 25 this year: CREDO reappeared with the second, even bigger report covering not just the 16 states of 2009 but another 10 states and New York City (looked at on its own for reasons we needn't bother with here), and using the school records of over 1.5 million charter school students.

Charter schools now outperform the traditional public schools (TPSs), mainly on the English side, with no real difference on the maths side. For English, charters are ahead 25% of the time, the same 56% of the time, and behind 19% of the time. For maths, it's technically a  small win for the TPSs though effectively a draw (charters ahead 29% of the time, behind 31% of the time, 40% no difference).

The 2009 result that charters were doing better with some disadvantaged groups came through again. As the 2013 Executive Summary puts it (p23), "Enrollment and persistence in charter schools is especially helpful for some students, particularly students in poverty, black students, and English language learners all of whom post significantly higher learning gains in both reading and math. Hispanic students are on par with their TPS peers in both reading and math. For students with multiple designations (such as being black and in poverty), the impacts of charter schooling are especially positive and noteworthy".

This, by the way, as I've posted before, is exactly what you'd expect from first principles: the people most likely to benefit from greater choice are those with the least opportunities now.

The report argues that one of the reasons for the better performance of charters is holding them to proper accountability and quality standards (8% of the original 2009 sample have closed), a conclusion I endorse, though I can't say I see the same principle of 'perform or get shut down' being invoked to the same degree to deal with the worst of the US public schools.

In any event, while it's hardly a knock-out win for proponents of greater choice and competition in education, it's a clear improvement on where we were four years ago. On the latest data and analysis, charter schools have a slight edge.

Hence the heading for this post: virtually every man and his dog in the educational establishment were keen to wave the first CREDO report around when it was critical of charters.

What are they doing now?

The incomparable Economist

I've been reading The Economist since the late 1950s, when my father used to bring it home from his job with Ireland's Revenue Commissioners (the Irish IRD). In those days it was printed on a strange greyish paper - whether this was some legacy of British wartime austerity, or a considered design choice in the way the Financial Times was printed on pink paper, or an early eco-friendly use of some recycled pulp, I still don't know - and it looked in general a rather dull affair (though, even then, its graphs were outstandingly clear and useful), and of possible interest only to folks like my father, people who we might today call policy wonks.

I didn't appreciate it at the time, but its editorial message also had little mass appeal back then, as the Sixties and Seventies were the high point of active government macro and micro management of the economy. The Economist's message of free (or at least freer) markets didn't get much of a look-in.

Perhaps because it was so steadfastly rigorous, disciplined, intelligent and professional, and unwilling to tack to the fads of the day or aim to the lowest common denominator (although it has glammed up its paper stock and its overall look), it has gone from strength to strength. Even today, when in many markets any good idea is quickly copied (if not outright plagiarised or reverse engineered) and quickly improved on, there's still nothing like it for the breadth and depth of its coverage of global current affairs. It makes you  feel like a citizen of the world to read it.

In a way, it's a drawback that it's called The Economist. I've wished it onto all sorts of folks, and a surprising number of them had always resisted picking it off the magazine rack, because they assumed it would be only about economics. If you're one of them, here's the news: it covers current affairs of all kinds, science and technology, books, business, finance, and, of course, a dose of economics (notably the 'Schumpeter' column). Go and look for yourself here.

I generally read it backwards, starting with the obituary of the week at the back, and then the book reviews, also at the back, before heading for the Letters page towards the front, and in particular the last letter printed, which is normally something witty. And after that I start out from the front and read the whole thing, though I have to confess to moving fairly rapidly through the Latin America and Africa sections.

It's not perfect - there is something between a harmless joke and an ingrained bias in its negative treatment of  France (even accepting that there is currently much to criticise France about), and it gives surprisingly little coverage to its Irish neighbour, though again that may be understandable in a magazine aiming at global reach  - but overall it continues to be highly impressive.

As time has gone by, and I'm sure you're the same, I've been migrating from hard copy to online publications, and not just because so much online is free: I'm happy to pay my subscription to get through the paywall to good content. But The Economist is different: if I end up with only one hard copy magazine in my hot little hand, the Economist will be it. And that's even after allowing for NZ Post's steadily deteriorating level of service in getting it to me on time.

Two things of particular local interest in the latest print issue (June 15th).

We've been having a debate about the introduction of national standards in schools. On p36 of the print edition, or here online, the Economist notes that (referring to the equivalent policy debate in the US), "The most important question, naturally, is whether tougher standards will lead to better results. In rich countries, school systems with exams based on robust national standards (ie, similar to Common Core [proposed US ones]) perform 16 points better on the PISA test (an international benchmark) than school systems without them, says Andreas Schleicher, an education expert at the OECD, a rich-country think-tank. This puts them half a school year ahead. The effect is larger than almost any other national variable". If correct, why are the teaching unions so opposed to national standards here?

The other thing I noted was in the piece on the retirement of Sir Melvyn King from governing the Bank of England (p45 of the print edition, here online). As I've noted in other posts, there have been various initiatives from opposition parties to change our existing monetary policy, in my opinion for the worse. One of the arguments for change is that what we are doing is passé, and that 'modern' monetary policy has moved on to other, better ways of arranging affairs. As the article points out, however, we did indeed pioneer 'inflation  targetting', but far from our regime being an oddity (at the beginning) or a backwater (now), the reality is that today there are 30 inflation targetting central banks. Our approach doesn't look, on that evidence, to be in any way unusual or backward. Quite the reverse: we adopted the right thing early, and stuck with it, and others have seen that it works.

A thought experiment about charter schools and competition

Charter schools are, obviously, in the news. The latest development is an open letter sent to all MPs arguing against them, and saying, among other things, that they haven't worked overseas.

In future posts I'll come back to the points raised in the letter, and talk about some empirical, real world evidence. But let's just suppose for a moment you knew nothing at all about the practical outcomes of charter schools overseas. Let's go back to first principles for a minute.

Who would you expect to benefit from greater choice in education? Or indeed from greater choice across a wide variety of public services - charter schools are only one example of a strong and growing trend in the developed world towards offering greater choice in areas such as education and health. Self-evidently, you'd expect the people who would benefit most are those who have least choice now.

And who would they be, I wonder?

It's not the well-off: they can, and do, pay for private schooling and private health.

It's not the moderately well-off: they can, and do, change the health or education zones they live in. They aim to buy a house in a good school zone: you'll have seen for yourself that the estate agents signs regularly advertise 'In zone' for a well-regarded local school. And there's nothing unusual in that, by the way - it's internationally well-documented that one of the main effects of zoning-style school allocation is that house prices rise in the better locations.

The main beneficiaries of choice, in short, can only be those who currently have little or no choice at all. And in New Zealand conditions (and in many other countries), that means poorer people in poorer areas.

And it's not like you can escape the poor areas without money. Bright kids in poor areas can't, in general, get scholarships to good private schools elsewhere: that was one of the first things the incoming Labour government of 1999, unforgivably, banged on the head. So poor kids, bright or less bright, are trapped. The only choice they have, at the moment, is the school they're in zone for. It might be an awful sinkhole school, but that's all that is on the menu.

So: a charter school arrives. And your current  local school is dire.

Take a wild punt on the outcome: your current dire school, plus the chance (not the certainty) of a better school, versus your current option, the dire school.

How likely is it that you will be worse off?