There goes the summer

UK  education secretary Michael Gove has introduced new powers enabling headmasters in state schools to set their own schools’ term times from 2015 onwards. The move could effectively extend school hours and reduce the long summer holidays currently enjoyed by pupils and teachers. Gove’s initiative is apparently designed to improve the academic attainment of pupils and boost the UK education system after years of it being outperformed by those of the UK’s economic rivals.

The connection between spending on education and economic output is one of those governmental myths that has long done the rounds in education-policymaking circles. Quite why countries that spend less on education than we do attain far greater levels of economic productivity is never properly explained by UK ministers. Equally, if longer term times really were the key to improved exam results, how come expensive private schools, which tend to have much longer holidays than comprehensives, achieve better results? Again, it seems, the government’s rationale is more than a little flimsy.

Then again, maybe the desire to keep children longer in schools has less to do with the economy or exam results and more to do with parents. After all, Gove has already expressed contempt for the biological rights of parents. He would surely love to see schools act in loco parentis on a bigger scale. By pushing schools to extend the teaching day, and by reducing the length of school holidays, the education department no doubt hopes that the ‘toxic’ out-of-school influence of parents can be kept to a minimum.

Gove’s proposals will also allow schools to keep tabs on whether parents are following officialdom’s guidelines on ‘correct’ parenting. Indeed, long school holidays are recipes for all kinds of risks, injuries and accidents ‘waiting’ to happen. Far better, then, to keep allegedly vulnerable children indoors, in classrooms and away from playing fields, beaches, woods and their parents’ homes. Gove may be a free marketeer, but, like New Labour, he seems to believe in the nationalisation of parents and families.

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Higher ed: Bubble, toil, and trouble

Interest rates have been in the news again so for this week’s column I thought I’d do a little back-of-the-envelope economic analysis.

What Does this Sound Like to You?

The government artificially lowers interest rates for borrowers who want to invest in a particular sector of the economy. Other things equal, that will increase the demand for assets in that sector as borrowers are misled into believing they will be worth more in the future than they actually will be. The current price of those assets will climb as will the quantity supplied (i.e., the demand curve slides up the supply curve). Borrowers will then clamor to keep borrowing rates low (or even lower) so they can afford to complete their investments, although that would also attract new borrowers. So pressure on demand continues and investment costs soar as asset prices and output keep rising.

Now, because government has kept interest rates artificially low—below the rate that would accurately reflect the actual supply and demand in the loan market—there is too much investment in those assets in relation to the actual demand for it. That means when investors try to sell their assets they will find no market for them. At that point the bubble bursts, bringing complementary sectors down with it.

If the Shoe Fits …

If you think this describes the housing market from 2001 to 2006, you’d be right. Just substitute housing/houses for asset/assets and “financial sector” for “complementary sectors” in the above narrative and you would get an accurate (though incomplete) summary of the recent housing boom and bust. (For an excellent discussion of this episode, see Peter Boettke and Steven Horwitz’s essay.)

But you could substitute “higher education” into the story as well.

As an author of the Economix blog over at The New York Times reports, data from the Bureau of Labor Statistics show that “college tuition and fees today are 559 percent of their cost in 1985. In other words, they have nearly sextupled (while consumer prices have roughly doubled).” There’s a nice diagram in the post illustrating this. Tuition has been far outpacing price increases over time for consumer items, medical care, and gasoline.

Author Catherine Rampell argues, however, that “the main cause of tuition growth has been huge state funding cuts.” As an employee of a state university I can confirm that these cutbacks have indeed been taking place over the past couple of decades. The author offers some evidence to support her claim, but if you look closely, the dramatic rise in tuition still seems to outstrip the relative fall in state subsidies.

More importantly, if what she argues is true, why is it that college enrollment over the same period has been rising? 

In basic economic terms, she is arguing that because the colleges are bearing more of the actual costs, the supply curve for college education has been shifting upward and to the left—causing tuition to rise and enrollment to fall. But the evidence points to a rightward shifting demand curve (like the narrative I sketched at the outset), which accounts for both the higher tuition and higher enrollment.

According to the National Center for Education Statistics:  "Enrollment in degree-granting institutions increased by 11 percent between 1990 and 2000. Between 2000 and 2010, enrollment increased 37 percent, from 15.3 million to 21.0 million.  Between 2000 and 2010, the number of 18- to 24-year-olds increased from 27.3 million to 30.7 million, an increase of 12 percent, and the percentage of 18- to 24-year-olds enrolled in college rose from 35 percent in 2000 to 41 percent in 2010."

The Stafford loan program, which subsidizes student loans, began in 1988.

If Rampell is right, then shouldn’t enrollment be falling? Instead it is rising disproportionately. Just as the housing bust left tracts of houses unused, a higher-education bust would create a small army of unemployed young people.

An Act of Independence?

But just as overbuilt housing can be used for some lower-valued purpose than it was intended for, investment in education—which is sometimes more accurately described as “spending on a credential”—often goes “underemployed.”  So growing underemployment of college grads is something we should keep an eye out for.

According to The Huffington Post, “half of recent grads are working jobs that don't require a degree, according to research from the Center for College Affordability and Productivity, released in January.”

The same article notes, “In 2000, before the economy fell into a recession, the share of recent college graduates who were either jobless or underemployed hit an 11 year low of 41 percent, according to the Associated Press.”

Now, as an article from The Washington Post makes clear, that’s not necessarily a bad thing: Some jobs don’t require a specific degree. Also, it’s unrealistic in a dynamic economy to expect the major you choose when you’re 20 to match what your comparative advantage will be later in life.

Still, it’s probably true that many young people who would otherwise get the training they need for productive jobs from trade schools and community colleges are applying to and getting into four-year colleges, as the lower rates tend to offer a higher subsidy to the latter. (Example: The savings from a lower rate on a $50,000 liberal arts college loan is greater than the savings on a $10,000 loan for community college.)

This week Congress takes a holiday to celebrate Independence Day. One of the things they’re leaving undone is negotiating a measure to keep the rates on Stafford loans from rising from 3.4 percent to 6.8 percent. Given the very real possibility of a bubble in higher education, that may actually be a blessing.

The first step to avoiding a huge bust, though some kind of correction seems to be inevitable, would be to let the Stafford-loan rates rise to reflect the realities of the loan market. That could mean a significant break in the vicious boom-bust cycle in higher education.  The question is, does Congress have the will to do nothing?

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Lessons on Churchill: Winston back on the curriculum as British schools are told to teach history properly

Winston Churchill will be restored to the national curriculum as schools are ordered to teach children about Britain’s history.

The national curriculum for history, to be published by Education Secretary Michael Gove next week, will give all children aged seven to 14 a clear narrative of the major events between the Bronze Age and the present day.

The document, seen by the Mail, will state clearly that every pupil must ‘know and understand the history of these islands as a coherent, chronological narrative, from the earliest times to the present day’.

Mr Gove is insisting that pupils learn about leading historical figures such as Henry VIII, Elizabeth I, Oliver Cromwell and Queen Victoria.

Pupils aged 11 to 14 will also be expected to study ‘the Second World War and the wartime leadership of Winston Churchill’, the only modern politician who is mentioned.  He was banished from the curriculum in 1999.

The current national curriculum, last updated by Labour in 2007, leaves big gaps in pupils’ knowledge and ditched the learning of significant dates and events in favour of focusing on historical themes.

But the new curriculum makes British history the centrepiece of the curriculum, rather than, for example, the heavy emphasis on the Nazis.

It also calls for pupils to study ‘how people’s lives have shaped this nation and how Britain has influenced and been influenced by the wider world’.

That will involve study of non-European subjects such as ancient China, India and Islamic civilisation, rather than the primary focus being on European history as at present.

Earlier this year, Mr Gove said he was worried that the curriculum and exams system ‘mean that children thirsting to know more about our past leave school woefully undernourished’.

A senior Whitehall source said: ‘Children will learn a coherent chronological story of British history instead of Labour’s dumbed-down curriculum that leaves pupils with big gaps in basic knowledge.

They will learn about major global phenomena such as classical Greece, the Renaissance, and the Enlightenment, and about non-European civilisations such as China.’

The Education Secretary’s first attempt to rewrite the curriculum in February was condemned as too prescriptive by Left-wing academics.

He has compromised by leaving teachers some freedom to decide precisely what to teach. But he has stuck to his guns by ordering them to follow clear chronology.

Professor Jeremy Black, the senior history professor at Exeter University, who helped draw up the curriculum, said: ‘It is very important that we understand our national history as part of being an active citizen.

‘You can’t debate our sense of national identity and our national interest unless you understand our national history. This curriculum puts British history first as well, which I think is right.

‘It kicks out the woolly empathy in favour of giving children more of a sense of where we are at that moment between the past and the future.’

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