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Monday, April 26, 2010

Schooling and Economic Growth

Dr. Douglas O. Walker
Robertson School of Government

Received an e-mail the other day from Dr. Larry Willmore, an economist with an interest in education and the economy at the International Institute for Applied Systems Analysis in Vienna, bringing to my attention a recent paper by Harvard economist Lant Pritchett on the relationship between schooling and economic growth. Professor Pritchett is famous for holding the view that there is no evidence whatsoever for a connection between schooling and economic growth. Here are three excerpts from the paper ("Does Schooling Help Explain Any of the Big Facts about Growth?" (24 January 2009)), which can be found at his Harvard web site,

"If what I have said is interpreted as saying "education does not have any impact on growth" then this is automatically rejected by every audience of academics and policy makers, for several reasons. First, claiming "education has no impact" is completely at odds with their own lived experience: people who have PhDs are relatively rich and/or powerful and know that this is because they have high schooling. So to deny that schooling has an economic impact is not scientifically wrong, it is just silly, it contradicts their own internal narrative of not just economic causation but their own life. And of course they have huge amounts of evidence that their own experience—education leads to more earnings/utility—is generalized. There are, by now, thousands and thousands of Mincer regressions from countries all over the world which show that people with more education have higher earnings. An upward sloping earnings/education profile rivals Engel's law as the most consistently and robustly demonstrated fact in economics. In fact , there are many who would wonder why, if we are interested in the returns to education, we are even bothering with all of this messy aggregate data like GDP, why not stick to the micro evidence, which is solid and secure and be done with it? The reason is that there is no way to infer the macro-economic impact of increases in schooling from the micro-economic earnings profile. (pp. 27-28)"
"Bad, corrupt, autocratic governments that had terrible economic policies and crappy institutions—e.g. Haiti— expanded schooling. Good pro-growth, strong institution countries also expanded schooling a ton. The OECD countries already leading the pack also, in absolute terms expanded schooling a ton. (p. 38)"
"The way forward is to figure out what there is inside of education policy that does make a difference for growth (and for other benefits of education as well) and get out of a simple-minded ‘expand the number of little bottoms in seats and the economy will grow’ mentality. Part of the answer is ... an emphasis on actual learning achievement (ideas in heads rather than butts in seats), part of the answer is ... the composition of education across levels at various stages of economic growth, part of the answer is the labor market conditions in which schooled people are able to work. But we are only to get to these more sophisticated, complex, and interactive theoretical and empirical research once we are able to leave the conventional platitudes behind. (p. 42)"
 I must say that like Pritchett I am skeptical of the idea that many years of formal education does much to enhance the overall process of economic growth. While education at the primary level is critically important for a modern economy, once the basics of reading, writing, math, history and so forth are mastered the foundation necessary for the demands of most jobs are met for most people. Needless to say, professions such as medicine, the law, and science- and specialized-knowledge occupations require more formal training than provided by secondary schools but the percentage of the work force engaged in these activities is relatively small. And it is also true to say that on-the-job training and apprenticeships in a wide variety of skills, from plumbing and welding through bricklaying and bookkeeping to general business management and office administration, are needed to carry out needed tasks in the economy, but not necessarily in formal educational settings and again not for a high percentage of the population.

In any event, acquiring the broad liberal arts kind of education many students receive in college may be valuable to them in terms of personal enrichment but I for one am not sure it raises the economic productivity of the nation as a whole very much. I would go as far as to say that given the weak curriculum of the public schools (and, let me admit, higher education) much of the population is over-schooled but under-educated. I have the impression that many schools today place far to much emphasis on "socialization skills" and far too little on what education should really be about, namely, reading, writing, mathematics, science and history.

As Professor Pritchett maintains, general purpose higher education may be overrated as a source of overall economic growth and rising living standards. In fact, at a time when the working age population is shrinking in relation to the very young and the elderly, we may have too many young adults in college or university and not enough in the work force.

Thanks to Larry for bringing this paper to my attention.

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