Fixing Public Schools: New Strategies and Old Hopes

Julian Betts,UC-San Diego and Public Policy

Institute of CaliforniaPrepared for Human Development

Program lecture, UCSD

Do Public Schools Really Need to be Improved?n Public schools: one of most important types

of government spending.n Are taxpayers, parents and students getting

quality schools?n Traditionally, policymakers measured school

quality by level of school funding.n To economists, seems like irrational

approach. Spending is an input, not an output.

Economic Analysis of Schoolsn Production function analogy:

n For analysis of firms economists study output Y as a function of capital K and labor L: Y=f(K,L)

n For schools, we can “re-label the axes”: Y=student achievement, L=purchased inputs (teachers, length of school year), K=physical capital used in schools (school building, computer equipment etc.)

Does the Test-Score:School Spending Relation Look like a Production Function? Inputs have Soared:

0

5

10

15

20

25

30

60 63 66 69 72 75 78 81 84 87 90YEAR

PU

PIL

-TE

AC

HE

R (

P-T

)

0500100015002000250030003500400045005000

SP

EN

DIN

G P

ER

PU

PIL

Pupil-Teacher Spending/Pupil

…but Test Scores Have Not Risen Much:

380

400

420

440

460

480

500

1967 1970 1975 1980 1985 1989 1990 1991Year

SAT Verbal SAT Math

What’s Wrong with Our “Education Production Function”?!!

n Mismeasurement of the output of education.n Incomplete measurement of the input(s):

n Students learn from each othern Family background affects “readiness to learn”n It’s not just total spending, it’s how you spendn Can crude measures of spending, teacher prep,

class size, really measure what happens inside the classroom?

n Is our analogy between schools and profit-maximizing firms valid?n What, if anything, do schools maximize?

Mismeasurement of the Output of Education

n SAT scores only one component of student outcomes.n Also subject to “selectivity bias”

n But tests given to entire school populations, in wide variety of subject areas, tend to show similar patterns: spending has only small effect on achievement

Fuller Measure of the Inputs

n Replace n Test Score=f(spending per pupil) with n Test Score=f(spending per pupil, peer

traits, family background)n Further, most recent studies drop spending

per pupil and instead measure HOW schools spend for overall spending per pupil.

These Better Specified Regression Studies Tend to Show:

n Some types of school “inputs” do affect student achievement

n But effects are very small, and are swamped by the much larger effects of family background and characteristics of students’ peer groupn For example, the book by Betts, Rueben and

Danenberg (2000) finds that student socioeconomic status explains much of variation across California schools in test scores:

Resources Do Affect Achievement

Teacher experience

Predicted percentage of students scoring at or abovenational test-score median (grade 5 reading)

Percentageof

students

Fully certified

05

1015202530354045

Teacher education

Class size

Low Average HighResource Level

But Student SES Far More Important Than School Resources

Predicted percentage of students scoring abovenational test-score median (grade 5 reading)

Percentageof

students

0

10

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30

40

50

60

StudentSES

Teacher experience

Fully certified

Teacher education

Class size

Low Average High

School Characteristic

Long-Term Impact of School Resources

n Effect of spending on wages also quite small (e.g. Betts, R.E.Stat. 1995,Grogger, JOLE, 1996)

n Betts (Brookings, 1996) surveys the literature on school spending and students’ subsequent earnings.

The Present Value of Additional School Spending on Wages of Students is Low Compared to Value of Keeping Students in School an Extra Year (Betts, Brookings 1996)

-300%-200%-100%

0%100%200%300%400%500%600%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

11.0%

Discount Rate

Net

% B

enef

it

Spend. Per Pupil, State Teacher-Pupil, State

Teacher-Pupil, School Extra Year High School

Old Hopes: Can Increased School Spending Improve School Quality?

n Evidence suggests that more spending can improve student outcomes, but effects not systematic, and not large

n Gaps in socioeconomic status explain large share of variation in student achievement.

n Merely equalizing school spending will do little to narrow achievement gap

n WE NEED MORE IMAGINATIVE REFORMS THAN MORE SPENDING BY ITSELF!!

New Strategies for School Reformn Many economists believe that past efforts to

improve schools through doubling of expenditures ineffective because of inappropriate attention to INCENTIVES.n Specific issues:

n 1) Do teachers maximize average student achievement? Do they have other goals?

n 2) What incentive do teachers, principals and school systems have to improve?

n 3) What incentive do students have to improve?

Teachers May Care More about Students who are Further Behind

n Schools may not maximize student performance because they don’t care about average achievement so much as min(Achievement) in class

n Evidence: Brown and Saks – classroom observation of teacher allocation of time

n Teachers react to class size reductions by devoting more time to individual instruction (Betts and Shkolnik, EEPA, 2000):

The Microecomics of Teacher Time Allocation

n If teachers have N students, they maximize some function f of student scores Si subject to a time constraint. If T=total minutes of class time per week, then T=G+I*N where G=group instruction and I=average individual instruction per student:

n Max f(S1,…,SN) subject to T=G+I*N

Group

Instruction

Individual Instruction

T

T/N

The Tangent of the Time Budget Constraint and the

Isoquant Shows Optimal Time Allocation by the Teacher

The Dotted Line Shows Time Constraint after Class Size Falls From N to NSMALL

Group

Instruction

Individual Instruction

T

T/N T/NSMALL

In Smaller Classes, Teachers Increase Individual Instruction n Further, they REDUCE group instructionn Betts and Shkolnik (unpublished) find that

class size reduction would have larger effect on test scores if teachers left group instruction G constant, instead of reducing it!!

n Implies that teachers do NOT maximize average student learning. Pay more attention to weakest students (supported by classroom observation – Brown and Saks)

Another Possibility: Schools Don’t Maximize ANY Function of Test Scores. Evidence: Production Frontier Analysis Suggests Many Schools Not Even on Efficient Frontier

Scores of B

Scores of A

Production Possibility Frontier (set of

efficient outcomes)

6

10

??

Teachers’ Unions

n Eberts and Stone: schools with unionized teachers have test scores as high as non-union schools but at 15% higher cost.

n Hoxby: School resources DO affect outcomes, but only in the minority of high schools without teacher unions.

Conclusions about Efficiencyn Teachers seem to value increased

achievement more among less advanced students (perhaps a good thing)

n Teacher unions seem to reduce productivity (a bad thing)

n Many schools appear to be operating inefficiently.

What are New Strategies to Increase the Productivity of Public Schools?

n Think of parents as consumers and schools as firms. If parents can send children only to the nearest school, schools have a monopoly ⇒ higher prices for given services, and lower consumer satisfaction

n Need policies to increase competitionAMONG public schools.

Examples of Ways to Increase Competitionn Open enrollment at all schools in districtn Smaller districts: encourages inter-district

competitionn Charter schoolsn Vouchers to attend private schools

n But severe constitutional issuesn EACH OF THESE POLICIES IMPROVES

INCENTIVES FOR SCHOOL STAFF, WHO MUST MAINTAIN SCHOOL QUALITY OR LOSE STUDENTS

Other Forms of Incentives for Schools and Teachersn Accountability: Most states have introduced

state standards, student testing, and carrot/stick approach to school accountabilityn But must be sensitive to predominant role of

student SES in determining student achievement

n Weaken policies of automatic tenure for teachers, perhaps in return for higher salary (compensating differential)

n Introduce teacher merit payn Has existed in U.S. for a century, but need bigger

pay differentials and objective means of assigning bonuses (e.g. gains in student achievement).

What about Incentives for Students?

n Many districts/states ending “social promotion”

n California has implemented college scholarships for students scoring highly in state test and Advanced Placement courses

Parents Require Better Infon For “school markets” to function better,

parents need better info about school quality.n Stevenson and Stigler: Study of schools in MN,

Japan, China and Taiwan found that the best U.S. schools had test scores about same as worst schools in Asian countries.

n Yet American parents were the most happy with the education provided to their children.

n Betts (1997) finds evidence of huge variations in grading standards in U.S. schools. n Parents don’t realize how bad some schools are,

because they’re happy if children’s grades high.

Conclusion: Promising Paths for Reformn Increased spending has limited effectn Link future increases in spending to improved

incentives for schools, teachers and students:n School choice (at least in public sector)n Accountabilityn Teacher merit payn For students: external standards, testing, and

accountabilityn Introduce the competition and free flow of

information that characterizes U.S. private sector, and U.S. college system, to public education