School & District Management

Economic Growth

By Bess Keller — October 25, 2000 15 min read
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Economists are taking a greater interest in education in recent years, resulting in a boom in school-related research.

If he didn’t tell them right off, the college students in a basement classroom here might be surprised to learn that their polo-shirted professor used to run a money-losing cotton farm in west Texas.

Certainly, the college professor himself, John H. Tyler, doesn’t take lightly his 15-year journey from family farmer to Ivy League public-policy and education professor. But no less unexpected is this: In hiring Tyler, Brown University’s education department has embraced a scholar whose approach and methods are those of an economist.

Immediately before Tyler, the well- regarded department included educators, psychologists, and historians, but no one with his degree of quantitative training in social science.

The ex- farmer’s appointment three years ago signaled a recognition of the growing role that economics plays in education research. It was also a nod to the rising influence of economic thinking in the most heated policy debates involving schools—over school choice, for starters, as well as such issues as teacher quality, school finance, accountability, and the impact of spending on achievement.

With their tool kit of measurements and models, and their grounding in marketplace behavior, economists have opened new vistas on education. Their findings have challenged propositions that educators often take for granted. And many of their proposed solutions—consider, for example, Nobel laureate Milton Friedman’s 1955 suggestion of publicly funded vouchers to pay for private education—have moved from the fringes to the center of public discussion.

Does Money Matter?

For those reasons, John Tyler has a berth at Brown. And for those reasons, too, Tyler wasn’t letting students off the hook one recent day in Education 113, Analyzing Education Policy: Lessons From Economics.

At Tyler’s behest, four students had summarized Eric A. Hanushek’s 1997 paper “Assessing the Effects of School Resources on Student Performance: An Update.” It is one of many articles that Hanushek has written over the past 20 years questioning the proposition that more money plowed into schools makes a measurable difference in learning.

The problem, asserts Hanushek, a senior fellow on education policy at Stanford University’s Hoover Institution, is not that resources never make a difference or can’t make a difference. Rather, it is that on average they have not, for instance, improved test scores or graduation rates in systematic ways.

The undergraduates’ assignment also included comparing Hanushek’s statistical analyses with a qualitative study of resource use by the equally prominent economists Richard J. Murnane of Harvard University’s graduate school of education and Frank Levy of the Massachusetts Institute of Technology.

‘I’ve always been surprised that until recently, not many economists have looked at schools.’

Eric A. Hanushek,
Senior Fellow,
Stanford University

Murnane and Levy looked at 15 elementary schools in Austin, Texas, all but two of which showed no significant improvement despite greatly increased spending for four years. While two of 15 schools is too small a proportion to say money consistently matters, the high correlations between spending and improvements at the two successful schools suggest the change didn’t happen by mere chance, the researchers say.

In the class discussion at Brown, it’s clear the students favor Murnane and Levy’s more optimistic conclusion. They are impatient with the idea that more research is needed to show a link between spending and performance, and with the view that the current organization of schools fundamentally militates against much improvement in student achievement, as Hanushek and others believe.

But Tyler, though he worked with Murnane and even borrowed this course from him, gently reminds the students that Hanushek’s research is a force to be reckoned with. It fired a shot across the bow of American precollegiate education that anti-tax activists, education reformers, and free-market proponents, among others, have turned into a battle royal over the future of public education. And the issue continues to be debated by economists.

Tyler knows all that, but for the moment settles for a reiteration. “If Eric Hanushek were here, I think he’d say: ‘I know there’s lots of variation, but on average, across the U.S., if schools worked well, we’d see that resources made a systematic difference.’”

Constraints and Incentives

Throughout most of the 20th century, researchers increasingly made use of quantitative approaches as they attempted to understand human behavior and judge public policies. And economics is the most quantitative of the social sciences—a characteristic that its partisans say makes it preeminent among those academic disciplines.

Whatever its ranking in the social science hierarchy, economics has expanded both its sphere of influence and its scope of inquiry during the past several decades, as the Stanford economist Edward P. Lazear points out in an article published last February in The Quarterly Journal of Economics. Not surprisingly, economists began taking a greater interest in education, resulting in a kind of boom in school-related research and analysis within economics in recent years.

“I think some of the best young people from economics are now going into labor economics and the economics of education and public finance,” says Henry M. Levin, a veteran of the field now at Teachers College, Columbia University.

Certainly, interest has broadened from the more traditional inquiries focusing on educational “productivity” and the economic payoffs of schooling to include questions about how education systems, teacher labor markets, and individual schools function.

“I’ve always been surprised that until recently, not many economists have looked at schools,” remarks Hanushek.

Used with care, many economists say, the models developed to analyze the workings of a business can help throw light on schools and school districts. Schools, like businesses, embody an incentive structure, face some forms of competition, and require management.

‘Economists are making people take more seriously competition and markets as mechanisms for holding schools more accountable.’

Dale Ballou,
University of Massachusetts

Moreover, there’s something bracing about the underlying perspective of economics when applied to schools. Economists see human beings as trying to maximize desirable ends—student achievement, for instance, or job security—in a world of limited resources. For every choice made, some choice is forgone, they say, because a budget can only stretch so far.

That is, economists typically spend time thinking about trade- offs. They don’t ask whether smaller classes, for example, are good, so much as they ask whether they can be shown to be so good for student achievement that the money wouldn’t better be spent for some other improvement.

Likewise, many economists are unimpressed by master’s degrees as a credential for teachers because most studies don’t show a link between such credentials and higher student achievement. Perhaps the salary increment that goes to teachers who get those degrees, they reason, would be better spent on higher pay for beginning teachers or high-quality professional development.

Economists also live in a world of constraints and incentives, especially incentives.

“One of the hard-wired perspectives of economists is that incentives matter and are important to identify,” says Harvard’s Murnane. “I think that’s a very valuable lesson from microeconomics, and a tool from economics that can help professional educators pursue their goals more effectively.”

Respect for market forces comes naturally to people whose professional body of knowledge includes information about the workings of the free market—which on a more abstract level represents decisionmaking decentralized to the individual.

"[The] contribution I think economists are making is to get people to take more seriously competition and markets as mechanisms for holding schools more accountable,” says Dale Ballou, an economist at the University of Massachusetts at Amherst, who has done extensive work on teacher quality and recruitment.

A Lack of Consensus

But that shouldn’t suggest that economists agree about the hot education issues of the day. Ballou cautions: “There’s hardly any area of research where there are unambiguous findings, uncontradicted by other serious research.”

Take voucher plans and class-size reduction. Some economists are proponents, some detractors, depending on the outcomes of their investigations. With vouchers, many researchers say the shape of the plan makes all the difference.

The influence of economists in education may be at an all-time high, but with the influence comes a problem that plagues any researcher whose work attracts public attention. The spotlight leads not only to recognition, but also to misunderstanding and distortion.

In the case of economists, their preoccupations tend to make them the darlings of those who love free markets, loathe bureaucratic decisionmaking, or believe that financial incentives are a guarantee against mediocrity. Their work is often hailed by conservative- leaning groups and pitted against that of researchers said to represent the educational “establishment.”

Out of Obscurity

The young economist Caroline M. Hoxby is a case in point. A professor in the economics department at Harvard, in 1999 she was named a visiting scholar at the Hoover Institution, the conservative think tank affiliated with Stanford that is also home to Milton Friedman and Eric Hanushek. Her work and her views appear in a wide variety of contexts, but among them is the Web site of the Heartland Institute, (, a conservative Chicago-based think tank.

Last year, a piece profiling Hoxby in The New Yorker magazine noted that while most of her fellow economists toil in “richly deserved obscurity,” her work on school choice, for instance—showing that competition makes public schools perform better—has made her a sought-after figure. The profile questioned whether Hoxby understood the ideological purposes to which her research was put.

Hoxby recalls the article with modulated irritation.

‘Educators don’t even trust you, they look at economists as dangerous people who don’t know schools.’

Martin Carnoy,
Stanford University

“It’s not a very balanced representation of what I do,” the scholar complains about the magazine piece. “A lot of my work is on traditional school choice—parents choosing a school by choosing where to live— and higher education is about half of what I do.”

Whatever others want to make of her associations, Hoxby stoutly asserts her neutrality. She goes on to say that the hallmark of the best economists is their indifference to ideology.

“The best people are not very interested in ideology,” Hoxby says. “They are not that easy to predict. Their interest is in understanding what’s going on.”

Hanushek says he gets discouraged sometimes by “policymakers who are much more interested in the politics of issues than the substance of the evidence. They look to economists to bolster their position; a lot of that goes on.”

Even with the dangers of moving into the public eye, economists don’t always get the floor when they want it.

“I feel there’s been a fair amount of attention paid to what we’ve been doing,” says Ballou of the University of Massachusetts. “But the public debate is still dominated by education professionals. For every time anybody asks economists what they think, there must be 30 inquiries put to Linda Darling- Hammond.”

Ballou doesn’t cite Darling-Hammond, a prominent education professor at Stanford and the executive director of the National Commission on Teaching & America’s Future, at random. Much of his work, and that of his collaborator, Michael Podgursky at the University of Missouri-Columbia, has focused on the teacher labor market, and the two have criticized Darling- Hammond’s ideas about “professionalizing” teaching as little more than regulation that will worsen teacher shortages without guaranteeing better teachers.

Perhaps ironically, one place economists are nearly invisible is in schools and with teachers. Brown University undergraduates in Tyler’s class, with their exposure to economic thinking about schools, will be an exception if they become teachers.

For the most part, only the most elite schools of education employ economists. And it is also true that economists have usually addressed policy questions that are not decided at individual schools or even by individual districts.

Still, the contrast between policymakers and education practitioners in this regard is striking.

“Educators don’t even trust you, they look at economists as dangerous people who don’t know schools,” says Martin Carnoy, an economist in the education school at Stanford. “There’s kind of a disjuncture between this very important influence on education policy— being taken very seriously by governors and state legislatures—and being unknown to practitioners.”

Getting the Big Picture

Economists acknowledge that there’s at least some basis for that mistrust. Even its greatest fans admit that economic research has its limitations.

Along with the increased precision of mathematical models—and the assumptions they must necessarily rely on—comes the potential for tunnel vision.

Patricia Albjerg Graham, a professor of education history at Harvard, calls the contributions of economics to education “immense, terrific.”

She qualifies that assessment, however. “I think economics is not holistic; the danger is in suggesting it is the whole picture, when in fact it is partial,” Graham says. “Some models are not as comprehensive or as universal or as accurate as the model-builders have told us.”

Dale Ballou shares Graham’s concern. “What economists are really good at and trained to do is analyze an aspect of a problem with a great deal of rigor, using rather sophisticated techniques compared with other social sciences,” he says. “But in order to do that, we often have to make a lot of simplifying assumptions about other features of an institution or a market. The weakness is in the simplifying assumptions.”

One simplification that troubles Ballou and others, one called on again and again, is the practice of reducing student achievement to test scores.

Economists say the same models developed to analyze the workings of a business can help throw light on schools and school districts.

“Are we too willing to take these test scores at face value?” Ballou says. “Personally, I am very unhappy about the way public schools are responding to all this testing.”

Some of economist John Bishop’s recent work has centered on the use of tests, and he says the right kind of tests—curriculum-based exams required to pass courses or graduate from high school, for instance—probably increase achievement.

But Bishop, the chairman of the department of human resources at Cornell University in Ithaca, N.Y., goes beyond tests to think about the sources of what is widely seen as American students’ lackluster school performance.

Like Theodore R. Sizer, a professor emeritus at Brown and the qualitative education researcher par excellence, Bishop sees teachers and students negotiating lower standards in the interests of mutual comfort. And he decries the way grading “on the curve” pits students against one another and thus plays into a peer culture that denigrates serious academic study.

“Economics is moving into these areas,” Bishop says, by looking not just at the usual incentives but at the dynamics of group decisionmaking and the systems groups devise for signaling values.

The broad view is at the heart of Henry Levin’s recent work on publicly financed vouchers to pay for private schooling. Levin, who is best known for taking the idea of remediation and turning it on its head in the form of “accelerated schools” serving poor children, now directs the National Center for the Study of Privatization in Education at Teachers College. An economist by training, Levin’s work on vouchers goes back more than 30 years.

He is skeptical of some of the political enthusiasm for vouchers, especially when it is based on what he takes as a naive and limited view that the economic aspects of life are— and should be—controlling.

“My own view is that some choice is very, very important, but to base everything on choice is to sacrifice goals of social cohesion, citizenship, and perhaps equity,” he says. “It’s about getting balancebalancing the market with social good.”

Beyond the voucher issue, Levin says that those hoping to influence education policy ignore market analyses at their peril.

“If you don’t buy into that discussion, you’ll be disenfranchised,” he says.

Mutual Benefit

John Tyler delivers a similar message in his classroom at Brown. For the past decade, he has been immersed in exploring the connections between learning, earning, and economic change.

“In 1990, I started thinking about education and the economy,” he says. “It looked like the economy was changing and schools were getting more students of color, immigrants, children who were poorer kids labeled as not college-bound, and yet there seemed to be a lot more need for trained people in the economy.”

At the time, Tyler was studying for a master’s degree in education at the University of Texas at Austin, where he had enrolled after taking a job teaching math in a Lubbock, Texas, private school to supplement his income from the family’s farm. His professors encouraged him to pursue a doctorate.

Meeting Richard Murnane at Harvard, Tyler discovered his future as a labor economist. The veteran scholar advised him that holding his own as a researcher in the field of “human capital"—the knowledge and skills that individuals bring to the marketplace—required training in economics. And more particularly, it required training in econometrics, the mathematical language economists use to develop and test theories.

Tyler, now 51, took courses at MIT as well as Harvard, and in 1998 received his doctorate from Harvard’s graduate school of education.

Carl F. Kaestle, an education and history professor at Brown who led the search for a new member of the education department, says Tyler fit the bill beautifully.

“We wanted someone trained in policy from the get-go,” he explains, and while an economist was not necessarily required, the committee did seek someone trained in econometrics, because of what Kaestle calls the surge in that approach to policy studies.

For his part, Tyler believes he will get at least as much intellectually as he gives.

“As an economist, I think I am trained to ask some different questions than people trained in other disciplines,” he says. “But by being here I hope to keep my feet firmly grounded in the practicalities of teaching, and the other work of education. What I’m bringing goes hand in hand with what I’m getting out of being here.”

The Research section is underwritten by a grant from the Spencer Foundation.


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