New Center Applies Cost-Benefit Analysis to Education Policies

By Debra Viadero — April 08, 2008 7 min read

Reducing the number of students in a classroom is a popular strategy for raising test scores, and it’s one that has some evidence of success. But states trying out the idea have learned the hard way that the price tag can be hefty, leaving some policymakers to wonder, “Was it really worth the expense?”

That’s where the Center for Benefit-Cost Studies of Education, at Teachers College, Columbia University, comes in.

Launched last year by a pair of economists, the center specializes in calculating and comparing the long- and short-term costs—and probable payoffs—of different educational strategies that promise to improve students’ lives.

“Educators never really connect the effects of education with the costs,” said Henry M. Levin, the Teachers College professor who co-directs the center with Clive R. Belfield, an assistant professor of economics at Queens College at the City University of New York. “Educators look at costs as constraints on spending and then they ask, ‘What do we know about what seems to work?’ They never seem to connect the two.”

Studies conducted by the center so far have examined the costs and benefits of preschool and dropout-prevention programs, the payoffs from state-specific investments in education in Minnesota and California, and the public savings that might result nationwide from strategies that bring the high school graduation rate for black males up to that of white males. (The answer to the last question, the economists say, is $3.98 billion a year.)

Discomfort Level

Under center supervision, researchers are investigating the fiscal pluses and minuses of Advanced Placement programs, which allow students to earn college credit for undertaking advanced coursework in high school. The center also enlists a network of economists specializing in areas such as health and labor to help with some projects.

The center’s funding, for the most part, comes from organizations that hire it to conduct analyses. Funders so far have included private philanthropists, state governments, and nonprofit advocacy groups, such as Growth and Justice, a St. Paul, Minn., think tank that is arguing for a more progressive tax system in that state. The New York City-based College Board, which sponsors the AP program, is another client.

While cost-benefit analyses have long been a staple of research in business, health care, environmental studies, national defense, and other fields, such studies are undertaken less often in education, according to experts.

One exception is in the area of preschool, where researchers have long relied on such projections to help justify program costs. One reason the broader field of education has been slow to catch on: Such analyses require good studies on program effectiveness. And experts agree that such studies, while growing in number, are hard to find.

Another reason, Mr. Levin noted, is that “educators don’t feel all that comfortable talking about costs.” Thinkers from among the field’s more progressive camps, for instance, question whether anyone can put a price on such intangible benefits of good schooling as a more civil society or a more fulfilling life. Mr. Levin said critics in the field have also seen cost-benefit researchers as bean counters who know little about what goes on in real classrooms.

The creation of the Teachers College center, however, comes at a time when such attitudes are in flux, budgets are tightening, and many national decisionmakers are demanding measurable outcomes of schooling, such as test scores.

“Many more people are more comfortable talking about grade 3-8 test scores or graduation rates than was the case before,” said Frederick M. Hess, the director of education policy studies at the American Enterprise Institute, a Washington think tank.

More Data

Partly due to the federal No Child Left Behind Act, which requires states to keep better track of students’ academic progress, states are also building the large-scale databases that make cost-benefit analyses more doable, Mr. Hess added.

“This method has resonated with a lot of people,” said Angie Eilers, the research and policy director for Growth and Justice, the Minnesota advocacy group that worked with the center.

Raising Graduation Rates

For a 2007 book they edited titled The Price We Pay, education researchers Clive R. Belfield and Henry M. Levin analyzed evaluations of five educational “interventions” linked to improved high school graduation rates to gauge their full costs and the long-term cost savings they generated in such areas as incarceration and welfare expenses.


Source: The Price We Pay

The organization last year commissioned seven economists, including Mr. Levin, to answer two questions: What are the most effective strategies, from birth to college, for raising postsecondary attainment? What is the cost of those strategies in public dollars?

“Cost-based analyses help us make this argument, as opposed to just asking for more money,” Ms. Eilers said.

If educators were inclined to pay more attention to costs, the savings could be considerable, Mr. Levin and Mr. Belfield argue.

Take an experiment on computer-aided instruction from the 1960s, a time when such technology was still new and far more costly than it is today.

In this case study, which Mr. Levin uses with his graduate students at Teachers College, researchers found that seven minutes a day of computer-assisted mathematics drills led to test-score gains for students in some schools in one district.

The results prompted the scholars to urge educators to buy more computers and software programs and expand access to the program districtwide—an expense that would have increased the average annual budget for participating schools by 25 percent.

What the researchers failed to notice, though, was that one of the control schools provided the same sort of drill-and-practice instruction and got the same results by hiring more teachers’ aides and using worksheets. That cost the school only 6 percent more a year.

“Is that important?” asked Mr. Levin. “We think it is.”

“There’s also a common assumption among educators that unused resources don’t cost you anything, but they do,” said Mr. Levin, a professor of economics and education at Teachers College. An empty classroom, for instance, could be leased out for dance classes or used to house computers.

“If you assume there’s no costs,” he said, “then you’re not considering alternative uses.”

In The Price We Pay, for instance, a new book that Mr. Belfield and Mr. Levin edited, the two researchers analyze five promising education improvement approaches and their long-term costs to society.

They are: raising teachers’ salaries by 10 percent a year in grades K-12; reducing class sizes in grades K-3 from an average of 25 pupils to 15; a high school dropout-prevention program known as First Things First; and two well-known preschool initiatives—the Perry Preschool Program and the Chicago Child-Parent Center Program.

Besides figuring the actual costs of those programs, Mr. Levin calculates how many additional graduates each one is expected to yield, the added expense of keeping students in high school two years longer, and any public subsidies for community college or other college costs that the additional graduates might receive.

On the benefit side, Mr. Levin looks at the added tax revenue each additional high school graduate is expected to generate and the public savings from lower health, crime, and welfare costs for high school graduates.

Calculated that way, Mr. Levin finds, even raising teacher salaries, an approach that falls in the middle range in cost, would generate public savings that are two to three times greater than the expense.

And any effort that could halve the number of dropouts nationwide, Mr. Levin figures, could save the nation $45 billion a year in lost revenues and opportunities.

“When you add it all, it comes to a huge amount of money that we’re essentially leaving on the table by not investing in education,” said Mr. Belfield.

What Is Reasonable?

What can make cost-benefit analyses controversial is deciding which costs and benefits to account for and what estimates to use. The scholars contend their estimates are not out of the ordinary, but concede that no hard-and-fast rules exist in education for determining when an expense is or is not reasonable.

“You’re baking in a lot of assumptions,” said Mr. Hess of the AEI, who favors more such studies in education. “They’re not ridiculous assumptions but, depending upon what you look at, you can push the numbers in an enormous variety of directions.”

“We don’t need one center doing these estimates,” he added, “but a variety of centers [that] are challenging each others’ assumptions.”

For now, the Teachers College center is in its early stages, with just a handful of analyses on its shelves.

“Just putting this whole policy agency out there is important,” though, said Eric A. Hanushek, a Stanford University economist who also focuses on education issues. “Over time, the success of this center will ride on what gets done.”

Coverage of education research is supported in part by a grant from the Spencer Foundation.

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A version of this article appeared in the April 09, 2008 edition of Education Week as New Center Applies Cost-Benefit Analysis To Education Policies


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