My debate with Bryan Caplan on education

Bryan writes:

The other day, Tyler Cowen challenged me to name any country that I consider under-educated.  None came to mind.  While there may be a country on earth where government doesn't on net subsidize education, I don't know of any.

…This analysis holds in the Third World as well as the First.  The fact that Nigerians and Bolivians don't spend more of their hard-earned money on education is a solid free-market reason to conclude that additional education would be a waste of their money.

I would first note that many parts of many poor countries, today, receive de facto zero government subsidies for education.  Or put aside the issue of government provision and ask if you were a missionary and could inculcate a few norms what would they be?  Many regions – in particular Latin America — are undereducated for their levels of per capita income.  I view this as a serious cultural failing, most of all in terms of its collective social impact.  In contrast, Kerala, India is very intensely educated for its income level and that brings some well-known benefits in terms of social indicators and quality of life.

If I think of the Mexican village where I have done field work, the education sector "works" as follows.  No one in the village is capable of teaching writing, reading, and arithmetic.  A paid outsider is supposed to man the school, but very often that person never appears, even though he continues to be paid.  Children do have enough leisure time to take in schooling, when it is available.  I am told that most of the teachers are bad, when they do appear.  You can get your children (somewhat) educated by leaving the village altogether, and of course some people do this.  In the last ten years, satellite television suddenly has become the major educator in the village, helping the villagers learn Spanish (Nahuatl is the indigenous language), history, world affairs, some science from nature shows, and telenovela customs.  The villagers seem eager to learn, now that it is possible.

That scenario is only one data point but it is very different than the "demonstrated preference" model which Bryan is suggesting.  Bolivia and Nigeria are much poorer countries yet and they have dysfunctional educational sectors as well, especially in rural areas.  Bad roads are a major problem for "school choice" in these regions, just as they are a major problem for the importation of teachers. 

A simple model is that underinvestment in infrastructure results in a high shadow value for marginal increments of education.  Model = high fixed costs, liquidity constraints if you wish, high shadow values for lots of goods and services, toss in social externalities to raise the size of the distortion.  I read Bryan as focusing on "the fixity of the fixed costs" and claiming it is too costly to get the service through, relative to return. 

Of course Bryan favors rising wealth and falling fixed costs, as do I.  But in the meantime he also should admit that a) education "parachuted" in from outside can have a high marginal return, b) collectively stronger pro-education norms raise demand and can alleviate the high fixed costs problem, c) there are big external benefits, some operating through the education channel, to lowering the fixed costs, d) stronger pro-education norms put a region closer to a "big breakthrough" and weaker education norms do the opposite, and e) a-d still impliy "too little education" is the correct judgment.  On b), some evangelical groups in Latin America do seem to have stronger pro-education norms in their converts and it appears to be much better for the children of these families and no I'm not going to buy any response which ascribes the whole effect to selection.

I believe that Bryan's own work on voting suggests significant positive social external benefits from education, although he is not happy with how I characterize his view here.  I also believe his views on children suggest strong peer effects across children (parental effort doesn't matter so much in his model and the rest of the influence has to come from somewhere), though in conversation I am again not sure he accepts this characterization.

I consider most countries in today's world to be undereducated. 

Signaling models are important but they are not the only effect and of course a lot of signaling is welfare-improving for reasons of screening and sorting and character reenforcement.  The traditional story of high social returns to education is supported by evidence from a wide variety of different fields and methods, including cross-sectional growth models, labor economics, political science, public opinion research, anthropology, education research, and much more.  You can knock some of this down by stressing the endogeneity of education, but at the end of the day the pile of evidence, and the diversity of its directions, is simply too overwhelming.

Comments

"The fact that Nigerians and Bolivians don't spend more of their hard-earned money on education is a solid free-market reason to conclude that additional education would be a waste of their money."

How is this not tautological?

Do we even have a working definition of what "undereducated" means? Less educated than you want to be? Less educated than necessary to take advantage of available opportunities? Not educated enough to compete in a global economy? in the local economy? Something else?

India is a really good example of a place that thrived via government involvement in establishing education that was geared towards current and easily anticipatable future economic opportunities. They poured dough into modern 21st-century tech schools, and look what happened.

I think there is a LOT to be said for nations having a narrow and prosaic focus on subsidizing the development of a really good modern skill set. Not metal shop and woodworking and printing and auto repair. But software and databases and servers and networks and communication and customer service and so on.

Here in America the primary place you can find that is in crappy private fly by night schools with little accountability. whose main goal is to capture job training funds by targeting the most desperate and the least skills. They invest their resources in salespeople. Their first care is to attract students, not really train them.

If we targeted such training to folks who could really take advantage of it, what might happen?

Take South Africa, because I happen to be here at the moment. I agree that "undereducated" is a muddled term, but this could be a country that both spends way, way too much on education and still is undereducated. Effectiveness is an important factor to keep in mind--it's not just money spent. For example, we just finished a public sector strike (for higher wages) that shut down the schools lasting nearly four weeks. The whole term is basically shot.

Rwanda spends a fraction of what we do and has been crushing us on standardized tests recently. I would say education is critical especially in a highly unequal country like South Africa as it's much more difficult to spin up the unskilled labour market like in South Korea. Without a functioning system producing skilled workers, we're going to stay horribly unequal with all the associated crime and corruption.

Well, if education costs more than all the money it is possible for someone to make during their life time (because, say, it would require immigrating to a place where teachers exist), it's not a matter of preference. You can want education more than anything (and in fact, some girls in Islamic countries risk being murdered or mutilated with acid on a daily basis in order to get an education), but that doesn't mean it is possible to get.

Economics might be more useful if more economists lives were harder.

Why do we always talk about 'education' as an aggregate value? It doesn't seem very useful to me to talk about 'education' as a single quantity. Two countries can spend the same amount on education, but if one educates its population in science and engineering and economics and carpentry and medicine, and the other educates its population in gender studies and literary deconstructionism, they are going to have very different outcomes.

The problem with education in America seems to me to be more about structure of the education, rather than the quantity or cost of it.

Social pressure, rent-seeking, monopoly and government policy have thoroughly distorted education. Ivy League schools have been elevated above their true value, student loans and social pressure have caused an increase in demand while various educational/social norms and regulations have restricted supply.

To the point of the OP, I would consider a country to be under-educated if its population's education does not match the needs of the economy. I don't really care if the entire country has a Ph.D in navel gazing if there aren't enough engineers to keep the infrastructure running, or if the country is full of engineers if there aren't enough doctors to meet the medical demands of the people.

In that sense, I think a lot of countries are under-educated, including the U.S.

@ Barkley Rosser

There has been some improvement in Biharin the past few years.
http://knowledge.wharton.upenn.edu/india/article.cfm?articleid=4446

I consider most countries in today's world to be undereducated.

At what margin, is the important question that Bryan has missed. The United States (by which I mean "some of the people of the...") is undereducated in terms of basic reading, writing, and arithmetic, but vastly overeducated in terms of college attendance. I expect much of the first world is similarly overeducated at the college margin, and though many do better than the US at the primary school margin the problem still exists.

We also need to differentiate between "the provision of educational services i.e. schooling" and "educational attainment". I am sure that much of what Bryan is thinking when he says "overeducated", particularly in light of his focus on state subsidies, is that too much schooling is being produced. This is very different from too much education (or knowledge or skills or however you'd like to phrase it) being attained. Whether in the first or third world, and at whatever margin, it's possible, even easy, to expend real resources producing schooling without anyone actually learning anything.

First, don't confuse education and schooling. "I have never let my schooling interfere with my education." — Mark Twain. People don't buy schooling because schooling is bad education.

Second, there is certainly an opportunity to educate people. But schooling is a bad solution, and government schooling only makes things worse.

@Fare-
Government schooling like public universities? They seem to be the best spot for performance/dollar. I spent a ton on private universities, and I wouldn't exchange it for no college loans now, but it came with a very heavy premium. Oddly enough my girlfriend for most of that time was attending a for-profit institute where the vast majority of people clearly had never grasped high school level concepts (and they certainly weren't learning them there), making it a poor choice for educational dollars. I suppose the tilde might mean you're not American, but I'd be surprised to learn that this situation is different elsewhere.

The fact that Nigerians and Bolivians don't spend more of their hard-earned money on education is a solid free-market reason to conclude that additional education would be a waste of their money.

Why is that? I mean, if you believe, as Caplan seems to, that failure to spend money on something proves that the expense would be unwise then it's tautologically true, as Skip Intro says. But where's the argument? Whatever it is, the issues Cowen raises pretty much demolish it.

Even Hayek said, in The Constitution Of Liberty, that Education was a special case, for many reasons, but in large part because how can one know what to learn, or the value of learning, beforehand and without wise guidance?

What we need is "Meta-Education". That is, early on, there should indeed be free universal public education *about* education itself - what it costs, what it might be worth in the job market, in terms of general cultural knowledge, and self-fulfillment and satisfaction and personal growth. Maybe a suggested "canon" of the best books for certain growth-patterns, etc...

Meta-Education would allow very low-level consumers in very impoverished countries to make intelligent choices about educations. It might do wonders for us too, since, it seems to me, a lot of our most talented people just leap before they look because "that's just what you do".

@Dan -not to bust on public universities, but remember that the price paid by students there understates the cost of providing it, due to significant subsidies from the state. In other words, it is a bargain to the buyer but less of a bargain to society as a whole.

How does this fit in with Caplan's arguments about voter ignorance? Does Caplan think that education has absolutely no impact on creating better voters?

Here's some evidence for Tyler's position from the 2006 PISA international test on Science:

http://nces.ed.gov/pubs2008/2008016.pdf

Mexicans in Mexico scored considerably below Hispanics in the U.S.

I don't think this difference can be wholly explained away by selection effect. Mexican immigrants to the U.S. are generally not from the intellectual elite. They probably aren't from the very bottom, either, because it costs money to immigrate, but they seem pretty representative.

Now, the effect of vastly higher educational spending in the U.S. doesn't appear to be huge: the gap between Hispanics in the U.S. and Mexicans in Mexico is smaller than the gap between whites or Asians in the U.S. and Hispanics in the U.S.

But, it does exist, suggesting that Mexico in 2006 was undereducated relative to the potential of its residents.

@ Bernard Yomtov

". . . there are people who more or less believe this . . . ." Well, *I* more or less believe it; there *is* a tendency for capital to be made available for profitable employments.

Of course, I don't believe it *simpliciter*; but then, nobody does.

If you teach the Nigerian quantum physics and he leaves for the United States, how would that make you feel?

I think you guys don't understand Caplan's point (and Tyler is arguing a different point too, but that's cool because everyone's opinion can be right). So, the government subsidizes education because people are clamoring for government education? Sort of, I guess. There is a coordination problem. There are externalities. there are reasons education might be underinvested in. I believe you can distinguish nefarious government action from public services that actually are demanded by the public because the public aren't libertarians and the public doesn't see any problem with government provision of services like we do. So, if the mail comes, most people are happy. However, these are things Bryan is saying doctrinaire libertarians discount because everything has coordination problems and externalities to varying degrees, but the government chooses to subsidize education. And of course, there is no free lunch, therefore government subsidies come at the expense of other activities. Many of these other activities are things that might raise the demand for education.

You guys do bring up a good point behind some of the numbers often cited by lefties. The rich own most of the wealth because the poor don't have jack squat. But it's not because the rich stole it all (sure, they did steal some, that's life). But if you split the top 1%'s wealth to the bottom 99% they still wouldn't have enough to get master's degrees in political science and sociology, mainly because factors of production aren't really fungible.

If education were a profitable investement then surely the capital markets would finance it for you in exchange for some share of your future earnings.

Too risky. If you're living on a dollar a day you could drop dead at any minute, and on top of that, you have no collateral. And since you own nothing, there's nothing to stop you from moving somewhere with favorable bankruptcy laws after you finish your education.

In order for this arrangement to actually be potentially profitable to the lender, you would have to be able to secure it with state-enforced indenture (or better yet, only educate slaves you already outright own, which actually did happen in some slave-owning societies), but in actual modern societies that's considered a violation of human rights.

And doesn't Caplan's argument also implicitly depend on an uneducated Nigerian being perfectly informed about what the returns on his education would be if he had it (so that you can be confident his decision is correct)? That sounds like quite a stretch.

Andrew,

Right Bernard, the world is undereducated because all the libertarians have the power.

Not sure what your point is. Since you missed mine, it was that for poor individuals to make profitable investments in their own education requires external financing, and that private financial market financing of education is not a practical approach, in large part for reasons given by Chris.

Chris,

I did not intend the argument you quote to be taken seriously.

from Caplan: "Of course, if Third World countries improved their policies and opened up to the outside world, workers might suddenly notice a higher return to education and crack open the books."

The fact that Nigerians and Bolivians don't spend more of their scarce time working to change those policies is a solid free-market reason to conclude that additional policy change would be a waste of their time.

I am flummoxed (flummoxed!) by the astonishing variety of ways in which Caplan is wrong. I want to reply, but he's wrong on so many levels it's hard to know where to start. My head hurts. How can someone so well educated come to believe something so mind-bogglingly and self-evidently false?

I guess I would start with Tyler's conclusion: "at the end of the day the pile of evidence, and the diversity of its directions, is simply too overwhelming." Note that Caplan's argument doesn't need any evidence, and indeed is impervious to it. It's a priori. If government provides it, it's over-supplied. Full stop.

Wow. Just wow.

If Bryan's argument had been written as a satirical criticism of free-market thinking, people would deride it as a strawman.

Oops! I meant Mr. Caplan, of course. Sorry.

I think the concept Caplan is missing out on is the lower-bound of zero income in developing countries that limits consumption. Much like interest rates at zero, poverty has certain implications that most other people in the world realize.

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