Education, Economic Performance and Social Progress

To a glitter of international attention, the commission that French President Nicolas Sarkozy asked “to identify the limits of GDP as an indicator of economic performance and social progress” presented its report last month.

Normally I would merely skim a report like this, believing as I do that little benefit results from comparing countries across time using crude proxies for progress. But the report kept drawing me deeper and deeper. There is much room for debate about specifics, but throughout the report there is also a humane tone that invites consideration of a better global future.

For example, at the conclusion of an uncomfortable section on educational competency assessment, the following sentence appears:

More generally, a QoL [Quality of Life] perspective on education would suggest the importance of looking beyond excellence in specific competencies, to include openness to other cultures, a capacity for self-expression and reasoned discussion, tolerance for other people’s views, and the enjoyment that students derive from classrooms. [p169]

The classroom phrase seems incongruous, but otherwise the sentiment is remarkable. Thank you, whoever wrote this!

The report pays considerable attention to education. Indeed, the word education appears 249 times in the 292-page document. So I was curious to see what specific education-related measures the commission mentioned and to see what new measures they might suggest.

Before getting to this, a bit of background will help. I won’t attempt to summarize even the major points in the report, but rather want to provide context for the education-related discussion.

With a name as hefty as the intellectual composition of its membership, the Commission on the Measurement of Economic Progress and Social Change was chaired by Joseph Stiglitz with Amartya Sen as chair adviser. Stiglitz, Sen, and three other members of the 28-member Commission are Nobel Laureates in Economics.

Most of the press stories that I read highlighted only a single feature of the report with headlines like “Happiness is the new GDP.” In fact, what the report said in this regard is more nuanced and more powerful:

The time is ripe for our measurement system to shift emphasis from measuring economic performance to measuring people’s well-being. And measures of well-being should be put in a context of sustainability. [p12, emphasis in original]

In many ways the report is a remarkable document. You’ve got to admire, for example, a commission dominated by economists that can produce a report that includes these and other similar leanings:

For a long time, economists have assumed that it was sufficient to look at people’s choices to derive information about their well-being, and that these choices would conform to a standard set of assumptions. In recent years, however, much research has focused on what people value and how they act in real life, and this has highlighted large discrepancies between standard assumptions of economic theory and real-world phenomena. [p43]

You’ve also got to admire the diligence and rigor with which the commission explored both the limitations of Gross Domestic Product (GDP) as an adequate measure of economic well-being and possible alternatives that better reflect actual social progress. Here’s an example, one among many, that illustrates how the commission struggled:

While talking about the concepts of “prices” and “quantities” might be straightforward, defining and measuring how they change in practice is an altogether different matter. As it happens, many products change over time – they disappear entirely or new features are added to them. Quality change can be very rapid in areas like information and communication technologies. There are also products whose quality is complex, multi-dimensional and hard to measure, such as medical services, educational services, research activities and financial services. [p21]

The commission judged these complex multi-dimensional services like education to be “badly measured,” but at least the report is refreshingly direct rather than snidely derogatory:

[I]ndividual services, particularly education, medical services and public sports facilities, are almost certainly valued positively by citizens. These services tend to be large in scale but badly measured. Traditionally, for government-provided non-market services, measures have been based on the inputs used to produce these services rather than the actual outputs produced. [p26]

With that as context, let’s get to a few specifics.

Education as human capital that is foundational to economic production has a long history in economics, and that emphasis is certainly evident in the report. But most other education (and health) topics appear in the chapters devoted to quality of life. I’ll concentrate my comments on those sections.

Here is a list of education indicators mentioned specifically in the report:
a. Percentage of population with post-secondary education.
b. Early school-leavers as an indicator of at-risk-of-poverty. Includes measures of educational attainment by age group.
c. Associations of education with health status, unemployment, engagement in civic life.
d. Educational inputs: school enrollment, expenditures, and resources.
e. Educational outputs: graduation rates, completed years of schooling, standardized test results, adult literacy.
f. Various international assessments of learner competencies (e.g., OECD’s Programme for International Student Assessment).
g. Disparities in the distribution of educational opportunities (e.g., gender differences in school participation rates).

Here is a second list of education indicators that the report mentions as currently in active development or, if only they existed, as potentially useful:
a. ICT skills linked to early school-leaving.
b. Low reading literacy performance linked to early school-leaving.
c. The OECD Programme for International Assessment of Adult Competencies (PIACC).
d. Time-series studies to better measure the wider benefits of education on communities.
e. Out-of-school educational experiences that affect the knowledge and skills development of individuals.
f. Measures of care arrangements and development of “soft competencies” in young pre-school children.
g. Benefits of adult education and training by characteristics of individuals, to better design these programs.
h. Competency comparisons of students in higher education.

Comments:
1. The Commission did not attempt to catalog educational indicators. My lists above should not be construed as recommendations of the Commission.

2. My overwhelming reaction to the education indicators in the report was one of bleakness. If expanding people’s educational opportunities is a step toward improved quality of life, as the report suggests, then the educational indicators listed above are too tame and too puny to have much impact. I’ll come back to this in a later comment.

3. I like several aspects of focus in the report. These include sustainability, a household perspective, and distributional effects. All of these could be extended to education with little effort. For example, can we continue to sustain current higher education participation rates in the United States given the long-term increases in the real net price of attendance? One pertinent unit here is the household or family that must absorb these expenses. Considering the distributional inequalities of this access and opportunity is a powerful way to illustrate the effects of business as usual.

4. Other aspects of focus in the report seem like misdirections for education. National comparisons are one. It’s difficult enough to say something meaningful for a single country, where the rules of the game are at least similar. The focus must be on institutions, technology, households, and other actors in the education game. It’s here where more innovative educational measures are most needed.

5. In a chapter on sustainability, the author asks “what do we want to measure exactly?” It’s a critical question for education also. Co-mingling multiple issues only dilutes the impact of measures. So asking the right question is a big first step. Both the question and the answer must be easily understandable by people.

6. Rather than deal in abstracts, here’s an example that may clarify what I mean. In the United States there is currently much hand-wringing that postsecondary educational attainment is stagnant. Now that’s a co-mingled issue. Suppose we narrow it and focus on the decisions that families make about university enrollment. Cost plays an important role in these decisions, so let’s narrow the question again to focus only on financial affordability. That’s a little better, but still pretty broad. But let’s stop at that point for illustration only. Then the question becomes one of indicators of financial affordability. Here we might use aggregate indicators such as the proportion of median family income needed to attend various categories of colleges and universities (e.g., 2-year public; 4-year private liberal arts; etc).

These comparisons are helpful. And they already exist. What I’m suggesting is that we need other measures with more bite to them. For example, imagine that you’re a parent with a child considering college. Gross numbers like tuition and fees discounted by financial aid are important in your decision. These measures are available at the institutional level. But they can hide a multitude of sins. Wouldn’t it help to know more precisely what you’re buying? Suppose you could do a financial ultrasound on a college or university and use it to identify institutional priorities and policies that will likely affect the experiences of your son or daughter at that institution?

Something like that is not as farfetched as it sounds. It would likely involve revenue and expense flows within institutions and summary analysis at student, course, and faculty unit levels to determine the internal transfers and subsidies that a college or university makes. Is your child likely to receive what you think you’re actually purchasing? Or, for example, does undergraduate revenue subsidize faculty research or graduate education?

It’s just an example, but a plausible one.

I’ll end with another quote from the report, directed to the educators among you. It is something you already know, but you may not have seen it presented in quite this way before:

Studies that have computed monetary estimates of human capital stocks found that they account for an overwhelming part of all wealth (80% or more). [p30]

Basically, the wealth of the world is in your hands.

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The report is available as a pdf on the website of the Commission on the Measurement of Economic Performance and Social Progress. A small sample of the reaction is available here: The New York Times; Der Spiegel; Financial Times; The Globe and Mail; The Guardian; Wall Street Journal; and Le Monde (or English translation).