Improving America's Schools The Role of Incentives (1996) / Chapter Skim
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3 Outcomes, Costs, and Incentives in Schools
3 Outcomes, Costs, and Incentives in Schools
Pages 29-52
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From page 29... ...
These economic issues are at the core of interest in and apprehension about the state of the nation's schools. Not only are economic results a key motivation for improvement, but economic principles are an essential means of achieving improved performance of the education system.
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From page 30... ...
It does not point to a specific program or reorganization of schools that will solve all of the problems, in part because single answers do not appear to exist. Instead, it points to an overall approach, strengthening performance incentives, and a set of decision rules, comparing benefits with costs, that have proved extremely useful in enhancing business performance, even if they have been largely ignored by schools.
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From page 31... ...
. Moreover, the education level of the work force affects the rate of productivity growth in the economy and thus the future economic well-being of society (Lucas, 1988; Romer, 1990; and Jorgenson and Fraumeni, 1992)
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From page 32... ...
It is clear that past decreases in productivity could not have been caused by the recent declines in student performance, because these students were not in the labor force in sufficient numbers to have influenced the observed productivity changes.5 Any direct effects of current student quality on national productivity growth will be felt only at some time in the future. Moreover, the direct effects of changes in American school quality on the level of trade deficits or on the character of international trade are almost 4Although the evidence on the effects of cognitive achievement is sketchier than that for amount of schooling, recent work suggests an increasingly strong impact on individual earnings.
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From page 33... ...
Thus, claims about the effects of schooling, past or future, on the overall aggregate performance of the economy appear exaggerated and do not provide direct justification for significant expansions in public schooling. In sum, schooling is important.
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From page 34... ...
Throughout the century, teachers have been used more intensively, as a result of both direct efforts to reduce class size and the introduction of new supplementary programs that expand on teacher usage. Real teacher salaries have also grown, although in a somewhat complicated way.
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From page 35... ...
If this happens, local taxpayers, who continue to play an important role in American school finance, are likely to resist future expenditure increases with unprecedented insistence, perhaps putting schools into a real fiscal squeeze. Moreover, many major urban districts face fiscal pressures from competing demands for public revenues, such as welfare or police funding, suggesting that the worst of the fiscal crisis might appear in the already pressured schools of major cities.
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From page 36... ...
and Japanese students in the early 1980s showed, for example, that only 5 percent of American students surpassed the average Japanese student in mathematics proficiency (McKnight et al., 1987, and National Research Council, 1989)
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7Although the precise pattern of SAT score changes is obscured by well-known problems of selective test taking, the existence of significant differences over time and by race is beyond question (Congressional Budget Office, 1986)
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From page 38... ...
. More recently, the state of Tennessee conducted an extensive statewide random-assignment experiment of reduced class size in grades K–3.
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From page 39... ...
Nothing in today's school finance system, save perhaps the ultimate rejection of school budgets, pushes schools to promote efficient use of resources. Unless significant changes occur, there is little reason to believe that additional resources applied in the future will be used any better than resources applied in the past.
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From page 40... ...
These inefficiencies also indicate that continuing the general policies of the past, even if dressed up in new clothing, is unlikely to lead to gains in student performance, even though cost pressures will continue to mount.14 It may be appropriate to increase spending on schools in the future, but the first priority should be restructuring how existing resources are being used.15 WHAT MIGHT BE DONE One common response to the evidence of pervasive inefficiencies, often linked to appeals for added spending, is that "if we spend money effectively, we can improve student performance." This tautological statement is just the concern. History suggests that spending money on effective programs will not happen naturally or automatically in the current structure of schools.
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From page 41... ...
Moreover, schools are likely to run into greater and greater difficulties in raising funds, especially if they are unable to show results. Performance Incentives Incentives based upon student outcomes hold the largest hope for improving schools.
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From page 42... ...
If there is no single-best approach to performing specific educational tasks, it is simply not possible to design policies that are based on full descriptions of what is to be done and how it is to be done in the classroom. The policy suggestions of our panel of economists differ from most previous school reform documents.
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From page 43... ...
In addition to these incentives directed at schools, it is important to think of incentives directed at students. While the previous discussion emphasized the general lack of performance incentives for teachers and school personnel, the lack of incentives is not limited to them.
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From page 44... ...
Simply introducing performance incentives is clearly risky because some versions of incentive systems will not work as hoped or predicted. We must be able to disseminate and build on good results.
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From page 45... ...
Other examples, though, go beyond simple appeals for added resources. These include lists of quite convincing ideas such as "performance increases with the amount of time on specific tasks" or "subject matter knowledge by teachers is crucial to higher student performance." These assertions then lead explicitly or implicitly to notions that reproducing these programs or insisting on more time devoted to instruction provides an obvious path to higher student achievement.
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From page 46... ...
Disadvantaged Students The educational problems of disadvantaged students are frequently treated differently from more general school reforms, but this is largely inappropriate. The most effective approaches to their education will be based on the same principles outlined here -- careful attention to student outcomes, development and institution of performance incentives, evaluation of programs, and attention to both costs and benefits.
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From page 47... ...
But, worse, the current structure is not on a path to improvement. Most new programs offer little in the way of incentives to improve student achievement and are accompanied by little experimentation and evaluation.
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From page 48... ...
Perhaps the best response involves the assurance to individual students and parents that alternatives will be provided for nonperforming local districts, say through providing extensive choice or voucher opportunities. The opposite approach, pursued now, is either to develop extensive input and process regulations to reduce the range of potentially unacceptable actions by local dis
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From page 49... ...
Moreover, if businesses insisted that employment candidates demonstrate high scholastic performance, students would have much greater incentives to work hard in school.23 Businesses could also be helpful in developing systems of performance incentives for school personnel while avoiding unintended adverse consequences. There is every reason to believe that school performance can be improved.
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From page 50... ...
1994. Looking Back, Thinking Ahead: American School Reform, 1993–1995.
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From page 51... ...
1995. "The Tennessee study of class size in the early school grades." The Future of Children 5, no.
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From page 52... ...
, Tennessee's K–3 Class Size Study: Final Summary Report, 1985– 1990. Nashville: Tennessee State Department of Education.
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