No Edu-crats Left Behind

Speaker 2

I'm Phil Magnus, the economist. Well that's the claim that's always made is that ⁓ you know, we need to give more money to our teachers or more money to our universities. So ⁓ you know, education spending in total is both lower and higher education. And both are massive public resource gobblers. They're like multi, multi-billion dollar industries, if they were considered that, ⁓ that are operating basically as public bureaucracies.

Speaker 1

So how much are we spending on education per pupil? I guess when it comes to public schools or ⁓ government schools as I prefer to call them.

Speaker 2

Yeah, so according to the Census Bureau, it's about seventeen thousand dollars per pupil, ⁓ in the K through twelve system every f every year basically.

Speaker 1

So I've heard New York, for example, they spend considerably more than that. Something like over, I think, forty K a pupil. That's a lot of money. Yeah. And I'm just imagining, you know, if I was say putting together a system of education for my own kids and someone was giving me forty thousand dollars a year, I'd probably be pocketing quite a bit of that. You know, how much money is necessary to educate a child?

Speaker 2

Well we actually have economic theory that explains this pretty well. There's a concept from public choice economics that's referred to as the budget maximizing bureaucrat. ⁓ these are people that are not in marketplace situations, in other words, like they're not in a private company that faces competitive pressures to you know, keep their management of the company in line and make sure that ⁓ it's not wasteful. ⁓ instead, public sector bureaucracies, you know, they get their money from the taxpayers. And there's no real incentive to save on that money. ⁓ you don't return the money to the taxpayers if it's unspent at the end of the year. ⁓ you know, imagine that type of a concept. Rather, what bureaucrats do in ⁓ public settings, if they have a fixed budget, they have a couple different motives or incentives for what they do. One of those motives is to get an even bigger budget next year. And how do you get a bigger budget next year? Well, you spend everything that you were given this year, and then you go back to the legislature or the Local ⁓ school board, local school district, the city, depends on whoever's your your main source of funding, and you tell them, Well, ⁓ I didn't didn't have enough money last year to do everything that I wanted to do ⁓ because I spent it all, as you can obviously see on this budget I've turned in. ⁓ can you give me even more? But what does this do in terms of the the perverse incentives that it creates? Well, you're at the end of your budget year and you know that you have to submit your ⁓ numbers for the next year, your requests for the next year, and there's still money in your account. Then suddenly the school buys a new coffee machine in the teacher's lounge, or maybe it upgrades the furniture, or maybe it ⁓ gives a new paint job to the building or uses some of that money to hire an assistant to one of the staffers to take off some of their workload. ⁓ so there's an accretion that develops over time from this budget maximizing behavior ⁓ to spend everything that you're allocated so you can request for more. And then when you haven't spent everything you were allocated at the end of the year. Find things to spend it on because otherwise the granting authority will look at you and say, Well, wait a minute, we gave you too much, so we're going to cut it.

Speaker 1

Back. I was in graduate school and I taught undergrad for a couple of semesters. And with that job comes a very tiny budget. You know, say it's like a hundred bucks or something like that. I was told basically, spend the hundred dollars. And I didn't need to spend the hundred dollars, but I found ways of spending the hundred dollars and making it just tangentially. Connected to the class, like like one of the classes, I think was a creative writing class. I bought an album from the band Tool that I really wanted to listen to. And I think maybe I played like a song, a track in class. And Tool is a very creative band. For anybody out there who's a creative writer, you might often write with music in the background. I've written with Tool in the background. Ergo, that's ⁓ that was a reasonable expense. And I'm not proud of it. I'm not giving back the money or the tool album. I I think ⁓ ti enough time has passed. But w when the incentive i is there just to get rid of it, you will get rid of it.

Speaker 2

That's exactly it. And I mean, ⁓ I experienced this all over the place when I taught in higher education as well. And I won't name names. I'm not gonna say the institutions, I taught it many. But you know, there were times when someone in the department would come to me and say, Hey, well, we have this budget line, there's about five hundred dollars left in it to ⁓ give a presentation on XYZ. Can you go find a conference to give that presentation at? That I otherwise would not have gone to, just because they wanted to make sure the budget budget was spent. And you compare this to the private sector, you know, ⁓ imagine if you're you're working in a company that ⁓ the their budget line is reportable to shareholders or reportable to the owner of the company or something like that. ⁓ well, that person or the party that ⁓ represents them has an interest in actually making sure that you are not overspending. If you went to your boss in the private sector and say, Hey, we budgeted $10,000 for this initiative last year, but I only needed about $8,000. Turns out I got everything I needed done and met my goals with $8,000. There were $2,000 left over. And you know, I just decided I was gonna go take a a real estate seminar in Hawaii. Or I decided that ⁓ you know, my desk was getting a little shabby, so I bought myself a big fancy new one. ⁓ that's made out of mahogany or something. ⁓ your boss would look at you and go, Yeah, you're wasting company resources. You get fired. If you do that in the public sector, if you're a ⁓ an educrat, they come back to you and say, Good, you spent your entire budget this year. Now we can up it by ten or fifteen percent and request even more next year.

Speaker 1

that word educrat. I think it's important to separate educrats from educators because you'll often hear stories about teachers who you know have to dig into their own pockets to buy school supplies. Absolutely. Absolutely. And it is interesting to see as the balance sheet has gotten so bloated where the growth is, there are more educrats playing in the system now than there are actually teachers. Yeah.

Speaker 2

Yeah. And this is ⁓ unambiguous in both lower and higher education. ⁓ you know, the stats in lower education, they're all aggregated from 50 different states and a gazillion different school districts, so it's it's harder to track on that case by case, but the trend has been upward. ⁓ and it comes from a couple of different sources, but I I point to higher education because it's much more clear where you you can actually see it. ⁓ sometime in the past about 15 years, the number Of administrators and mid-level bureaucrats that work in the US university system surpassed the actual number of professors that are teaching classes. Which is just it's pretty astounding. Cause you know, what's the purpose of having a a university? What's to teach people? And that like that's the main mission there. That maybe football ⁓ is to to teach students. And yet you have more people. working in the office of diversity student services and parking lot management ⁓ in aggregate than actual people that are teaching in the classroom. And then in lower ed, it's a similar pattern that's played out. There are all these auxiliary offices that are attached onto schools. So you have streams and streams of student services and guidance counselors and extracurricular activity. You know, some of that's perfectly fine. ⁓ some of that's perfectly understandable, but the growth has been exponential in that area. And a lot of it comes about From maximizing budgetary bureaucracy. Now, what what are the major motives for this? So one, you can say, okay, I didn't spend all my money last year. Let's hire a new assistant. So you've got that driving it on one side. ⁓ that's kind of like the employees demanding it, but there's another factor in it. And that is state, local, and federal governments often put mandates on ⁓ public institutions, both K through 12 and higher ed. on what they have to do and what they have to report. You have to have like a a campus crime report that has to be delivered to the government if you're a a a college or a university. There may be good reasons to report this, but ⁓ you know it's a mandate that comes from above. There are other things the district may tell you you have to spend X number of dollars on such and such extracurricular programs and you need people to run that. So when you're getting mandates from somewhere in the government above to do all these extra things that are in addition to teaching, Plus you have a budgetary incentive to overspend so you could get more allocated to you next year. It's like both the supplier of the budget itself is mandating you to do things. And then the people that are working in there have a higher demand for ⁓ resources. So y y you you overspend. Well, what do you do? You justify a new hire based on I need this for regulatory compliance from above.

Speaker 1

As spending has gone up, what has happened to student achievement, graduation rates? I mean, how how are students competing on you know on the international level?

Speaker 2

nosedive quite a bit. And you know, there's a lot of diversity in outcomes across school districts. There are some school districts that are very, very top-notch. They consistently graduate students that go on to ⁓ high placed, high-rigor academic programs and jobs. Then there are school districts that ⁓ have basically been dysfunctional for decades. ⁓ so there's quite a bit of ⁓ variation district by district, but One thing they all have in common is there's more and more money seems to be dumped into them. And yet the outcomes are not getting better. ⁓ you may remember about twenty years ago, George W. Bush, he put this whole ⁓ notion of no child left behind, and it was a mechanism to try to steer public education toward ⁓ better outcomes based ⁓ metrics and funding. Well, they did that for a little while, and then in the Obama years they dramatically scaled back the penalty side of it and Yet the money kept flowing. It's kind of the the situation. So there there's there's no real incentive to actually do a measure on the ⁓ the performance and outcome side. And you see this in in higher education as well. In particular, there's this whole subset of higher education we refer to as the general education classes. That's the thing that you have to take to graduate, whether you major that or in that or not. ⁓ you have to go in there, you get get your poetry credit, even if you're a an engineering student. Why? Because it's on the checklist that you have to get for your degree. Well, ⁓ a lot of these classes are concentrated in what we would call critical thinking skills, reading, writing, ⁓ humanities analysis, stuff like that. And that's how they're justified. It's like, well, we want the engineer to also have good critical thinking and be able to write and ⁓ be able to do these basic educated functions. Well, there are there's been pretty exhaustive studying of these gen eds on what they deliver. What ⁓ like are students emerging from the first year and a half to two years of taking all these mandatory courses and and writing composition and poetry and things like that? Are they emerging as better writers or better poets? And the answer is overwhelmingly no. ⁓ they have test data that looks at the student outcomes when they arrive on their first day of ⁓ freshman year and then they test them again with the same type of questions at the end of their sophomore year when they finish supposedly all these critical thinking classes. And it turns out there's no change. There's no difference. They aren't getting any better at the things they're supposedly skilled in. And yet they've spent tens of thousands of dollars in tuition money, often subsidized by the government, to take these classes.

Speaker 1

A few stories that have come out, one involving high school, the other involving college, and I'll start with the college one. So in the New York Post, a professor writes, I teach mathematics at UC Berkeley. Three days a week I stand in front of lecture halls with five hundred to fourteen hundred students. By the second week of the semester, I already know who is in trouble. Some students are five to eight years behind in mathematics, and that's college students.

Speaker 2

Right. It's ⁓ they're they're supposed to be in there on a baseline. And I've read similar st stories. I think there was one about a a statistics professor that said, I have to teach my kids that are coming in here basic fractions that they should have learned in like sixth grade or something.

Speaker 1

I went to NYU and one of the classes that I had to take was quantitative reasoning and it was a it was a mathematics class and I did really well in the class. I was kind of amazed at how easy it was for a college class in high school. I did really well in pre-calculus, but then calculus happened and I and that just went somewhere there where I I you know, you know, God bless all you guys who are awesome at calculus. So I was kind of amazed at just how rudimentary the mathematics were as a requirement at NYU.

Speaker 2

Yeah, which is a top university but I have

Speaker 1

Feel like I'm I'm in a a different universe where kids are entering their freshman years unable to do the basics of of mathematics.

Speaker 2

And it's getting worse because ⁓ you have to overlay this. You know, what do we have traveling through the pipeline of soon-to-be college students? It's people who had one to two years of their K through twelve education disrupted because of COVID. They were shut down, they were kicked out of their schools and had to dial into the Zoom class. And I think we're seeing some statistical evidence that that's even worse and a ⁓ already severe learning outcomes problem that had been moving through the educational system. So ⁓ and there they're actually historical examples of this type of thing. When kids are kept out of the classroom ⁓ for long periods of time, you have generational problems that play out through ⁓ that cohort, basically not have not meeting learning outcomes. So there's a real infamous case that in the 1950s after Brown versus Board of Education, some of the segregated ⁓ states that had Jim Crow in place rather than abide by the decision, They tried to shut down their public school systems for a couple of years. And the people that got harmed by that the most were the students, white and black. ⁓ and there's studies that look at students in that district or that county that shut down its school district ⁓ for a year or two because of all this ridiculous segregationism lagged behind in educational outcomes vis-a-vis their peers in other parts of the country for like you can follow it for a decade or more afterward. And I think we've seen a nationwide experiment. with a similar effect of shutting down schools, trying to do things online and through Zoom and at a time when educational outcomes are already not great, and yet, you know, what's the school district doing? Well they they they they get to say, ⁓ we've ⁓ we've moved online, ⁓ give us more budget to pay for more Zoom licenses and hire computer technicians or something like that.

Speaker 1

I remember during the lockdowns when, you know, so many kids were trapped at home having to take these virtual classes. And, you know, looking at that and looking at, you know, the budget in education and saying, well, can't a an argument be made that if all these kids are just logging in, then okay, who's the top math teacher in the country? Yeah. Okay. Everybody can log into that person's lecture. There was a story that that came out recently that was really

Speaker 2

Yeah.

Speaker 1

really heartbreaking ⁓ to watch a video of a of an educator. ⁓ he put a video out there and he broke down in tears after realizing that his students couldn't read or write. Yeah. Juniors and seniors in high school and they couldn't do basically you know basic basic light school. And they're graduating. And some of them are going to college, which just again, just doesn't make any sense to me. Some will just make the excuse, well, we need more money to be thrown at the problem rather than addressing the problem.

Speaker 2

Exactly. Well, yeah. It turns out that both lower and higher education, ⁓ you know, for lack of a better word, they're a jobs program for a bureaucracy. And when you become that and your incentive is all about maximizing your budget and and maximizing the number of people you can pay and perks of the job that they can have, then outcomes really don't matter as much. ⁓ and I'm not saying that like teachers are are bad teachers or are being ⁓ are are bad at their jobs. It's quite the contrary on that. There are many, many good teachers out there that are trying to do ⁓ very noble tasks of educating the next generation. Their calling is there in the classroom for a good reason. But the incentive structure of the system that they're in j generally ⁓ undervalues that vis a vis bureaucracy and spending things. What role

Speaker 1

Do parents play? Because I'm somebody I don't want to take any responsibility for for my own failings, the failings of my children, or anything like that. But ⁓ you know, I do wonder, you know, how big of a role I can play. It just last night, my ⁓ my oldest who's gonna be starting first grade, and first grade was big for me. I remember my teacher, Miss Hossein. If you're out there, I'm Luis Perez, little Louis. If you're a listener, and she was delightful, and I you know absolutely loved her. But my son was, you know, kind of he's anxious and a and a little he was a little upset because one, he was afraid that he wouldn't know anybody right in in his class. And the other thing was he was upset because he doesn't know how to read yet. And you know, had to explain to him like one, he's ⁓ he's a great kid, makes friends very easily. And to explain, you know, the role of you going to school is is to learn to read that, you know, and it's a skill that you're going to get better and better at. And we could we're going to work together and and and make it happen. And there there's the there's the possibility, you know, for a lot of parents out there with kids. One, I don't know how social their kids are to be able to, you know, integrate and have a good time and, you know, be social and all that. But then two, if they are going to be learning the basic skills of reading. Sometime before high school, before they they start Read before high school. Hopefully before you know their doctoral programs they're able to to read.

Speaker 2

Yeah, and I I think this gets kind of really to the heart of it. You know, what did what can a parent do in an educational situation? And there's actually an economic theory behind this. ⁓ so there's a economics slash political science ⁓ theorist writer by the name of Albert Hirschman, who developed ⁓ what's referred to as the theory of exit versus voice. And he's basically asking the question is ⁓ so you're in a situation and you want to improve the quality. Of what's being offered ⁓ from the product that you're you're consuming. Well, think of it if you're ⁓ a soft drink ⁓ manufacturer versus a soft drink consumer. If the manufacturer starts putting out poor flavored soft drinks, the quality control is not there, ⁓ they just taste bad, what do consumers do? They switch to a different brand, they exit, and that becomes a signal to the soft drink manufacturer, hey, there's something wrong with your product line, fix it, or you go out of business. Well, public education is a bit different because you don't really have much in the way of choices if you're a consumer of the school system. The school you go to is the one that your neighborhood is located next to, where you're zoned ⁓ and directed to go there. So what are your options in the school system if you want to improve the quality as a parent? You have something called voice. And that is to call the principal, call the teacher, go to the PTA meeting, ⁓ all the different things that ⁓ the more active parents do, and ⁓ you know, they go in there and ⁓ why isn't little Johnny or little Susie learning to read? Why don't they know their fractions by this ⁓ this level? Well, it's the squeaky wheel ⁓ exercise of voice will hopefully improve the quality. But there's another complication on this because ⁓ there's really not a a a direct consumer relationship of an exit option. Voice is the only tool, but voice is very disproportionately exercised. Sometimes you have parents that are really, really invested in their kids. ⁓ they're ⁓ making sure that they get in the best classes and that the outcomes are met. They're they're the ones that are most likely to exercise that voice. But what about the parent who just sees K through 12 education as their substitute to a ⁓ a babysitting service? They drop their kid off in the morning, go to work, and then they don't have to worry about them, and then they come home. And it's like, ⁓ fine. I I I I drop my kid off at a school. The school took care of him. ⁓ he was their problem for the day. And there are unfortunately parents that approach it that way. Those parents do not exercise voice. They don't care one way or the other if ⁓ little Johnny or little Susie comes home and doesn't know how to read by ninth grade.

Speaker 1

Obviously the way things are going, you you know, go to grammar school, then high school, then college, or at least that's the way that that it's been. ⁓ when it does come to college and just looking at the cost of college, how it how it's gone up, I ⁓ did work recently on a on a documentary with ⁓ a fellow NYU alum. And when I went to NYU, it was about twenty thousand dollars a year. Nowadays I think it's Running pretty close to a hundred K and it's gonna be even more than that if you're you know, if you're staying on campus and

Speaker 2

doing all the yeah, in the in the nice dorm and yeah, the meal plans and

Speaker 1

I was fortunate I I got an academic scholarship, so I was able to leave college without any debt. I can't imagine having studied what I studied and having spent so much time not studying when I was supposed to be studying and partying in New York City, you know, leaving with quarter of a million dollars in debt or or more and starting my life with that much debt. What impact does that have on higher education, people choosing whether or not to go ⁓ In the first place, you know, what are we looking at there?

Speaker 2

It's astronomical. Now, the one difference between higher education and K through 12 is there's a lot more choice, and that choice comes on two different margins, and they're both economic. One is what what type of institution do you go to? Do you go to the elite private Harvard, Princeton, Yale, Ivy League type of a school where you are paying $100,000 a year unless you get a a scholarship of which there's you know very slim money available. But ⁓ you're probably gonna have to take out some debt if you do that. Or you can go to the local community college, and it's one, it's heav heavily subsidized, two, it's at a price point that's ⁓ much more competitive because that's what they need to be for the community college, and it might be a different style of education, but you could be paying, you know, a couple hundred bucks per class. And maybe you're talking in the thousands per year, not hundreds of thousands per year. Then the second thing you have a choice on is well, what do you major in? And if you show up and think, ⁓ I'm gonna be an electrical engineer, this is a high-paying career. It might make sense to take out a couple hundred thousand dollars in debt because you're going to go into a job, especially if you've gone through graduate school or some sort of ⁓ advanced training that is making easily a six-figure starting salary. And there are several majors that that fits into, a lot on the engineering side, business, finance, accounting, things like that. But what if you took out a hundred thousand dollars in debt per year to get a degree in post-colonial studies?

Speaker 1

You're gonna spend a lot of time complaining about capitalism. I'll tell you that much.

Speaker 2

A lot of time complaining about capitalism and you know, sit there in paying off your student loans for ⁓ for decades. ⁓ or going to the government and asking the government to pay them off for you. And what what if you go on to get an an advanced degree? And there's a just a huge gradient. So like the ⁓ the very lowest paying careers, and I think there's a there are several indices that put this out every year. ⁓ like what are the majors that pay the lowest and I think one at the bottom I always mention because it does actually exist at some institutions, there's a degree in puppetry. Yeah, it it just doesn't pay all that well.

Speaker 1

I should have taken that actually.

Speaker 2

The other end it's like brain surgeon and really advanced engineering and things like that that do pay very well.

Speaker 1

Bring two together. Phil, bring the two together. If your brain surgeon brings out a puppet in the middle of your surgery, ⁓ just go

Speaker 2

Keeps you keeps you distracted while they're cutting and and poking. But yeah, i that this gradient, the fact that it exists, ⁓ it means that a lot of the financial decisions you make as a student ⁓ are going to be impacted by later down the line based on the career that you choose and the major that you choose. ⁓ and unfortunately a lot of the incentives are aligned against this. You'll go to almost any college in the country and when they're giving you the tour to try to recruit you to go there, it's not Well, arrive on the first day and declare that you're going to be an accounting major and ⁓ focus all your courses on that and get your degree done and graduate and go into the world and and have a job. It's no, you can come here and you can spend the next two years discovering yourself. And ⁓ experimenting in all these different subject matters because they're all equal and they're all ⁓ part of the university system. And if you discover you like puppetry, you can go be the best puppet master that you can be. If you discover you like engineering, you can go do that too. ⁓ but it's all about selling the whole university as a lifestyle package. And plus, if you get here, ⁓ you know, you'll be in the nice dorm that has a chipotle on the ground floor of it, ⁓ that you can get with your meal plan. And we also just installed the new campus rec center that has a lazy river and a rock climbing wall. And these are the perks that they actually sell us. And all these examples are real. I I I mentioned that I'm not Yes, a lazy river, where ⁓ you know, you're done with classes, you can go get on a an inner tube and float around ⁓ the circle in the campus rec center on that. You know, these things are not free. ⁓ they they don't come out of ⁓ the ether and just ⁓ grant themselves on every institution. They have to be paid for.

Speaker 1

The lazy river.

Speaker 2

And part of the payment to ⁓ maintain those comes from student fees, it comes from ⁓ tuition, it comes from public funding that's given for for capital campaigns, it comes from private sources to build things and put a name on it on your institution. But there's all sorts of money flowing in for things that are not at the educational core. And it's led to this both a an accretion of bureaucracy and an accretion of perks and benefits and facilities around higher ed. And what does that do? What drives up costs. And when we see this, where do the costs get paid or who who bears them? It's either the students and their tuition for a hundred thousand dollars a year to get the same thing. It used to be a fraction of that, even five, ten, fifteen years ago. And it's from the taxpayers that are keeping these institutions alive through public funding grants, subsidized loans, you know.

Speaker 1

What are some policy changes that you would enact if you had the power that would that would completely make the educational system functional and cheaper and etc?

Speaker 2

And functionality on the on the K through twelve side of voucher system. This was Milton Friedman's proposal. ⁓ he actually had an interesting debate with with the ⁓ the other fellow I mentioned, Albert Hirschman, said, Well, wait a minute, if you allow students to leave to exit the school system, yes, that improves the quality of the school that they go to. But it also means who's left behind in the failing school? Well, there's no longer any voice to make it better. It's just the parents that think their perfect little angel can do no wrong, drop them off in the morning. He beats up the other kids, they pick them up at the end of the day and the parents defend him to the principal. So you do have a bit of a trade-off there, but Friedman's going to come back and he'll say, well, wait a minute. Schools that are underperforming and then are losing students through a voucher mechanism, those are people voting with their feet. And that should be a signal to the district that runs it, hey, you have a failing school right here. And maybe that school needs its administration cleaned out. Maybe that school should be shut down even. ⁓ which no one likes to talk about that, but it's not like saying that we're we're going to exclude children from schools. That's the the the point of the voucher system is everyone can use it, no matter their income level or status or ⁓ where they live, to go to a school of their choice and create some competition. So that's the K through twelve side. And then if I were to reform higher education, I think a couple of things. One is get government out of the subsidized student loan business. It's distorted all the signals of what you can do with a degree. It means that you can get a loan to go study post-colonial studies, ⁓ which is basically ends up being ⁓ a degree in Marxism and then have no employability afterward. Or you could use it to get electrical engineering. The point here I'm making is that human capital dimensions of higher education are not all equal across the board. What you choose to major in matters. So ideally I don't like government subsidizing student loans at all. But if we were to reform it, one thing that they could do is ⁓ you know, you direct some of that money toward majors that actually pay. But if you want to go get your puppetry degrees, we're not saying you can't get a degree in puppetry, but you're gonna pay for it yourself, not ask for the taxpayers to pay.

Speaker 1

Thank you for listening to the show. We hope that it has been an education for you, a free education. In exchange, all we ask is that you like us, share us, and if you're just joining us now, we have a ton of episodes that you need to listen to. This has been Happy Hour Ecom. We'll see you next week.