Education Funding, Burger Flipping, and the Law of Diminishing Returns
Here’s a fun hypothetical. Imagine you own a burger joint, but you only have one grill, no one to work it, and a line out the door for your burgers. If you hire one burger flipper, you can make 10 burgers an hour. If you hire two more, you might get up to nearly 30 an hour. Why stop there? Let’s keep hiring more workers on that same grill and we’ll continue to make more burgers every hour, right?
Kind of.
At a certain point the grill gets cramped and workers elbow for space. The fourth or fifth flipper might increase burger output, but at a decreasing rate relative to the gain in burger production from the first or second hire. This is what is known in economics as the “Law of Diminishing Returns.”
Unfortunately, when it comes to education, this is a law that many don’t believe exists.
Last week, the Kansas Association of School Boards (KASB) released the State Education Report Card for 2016. In it, KASB ranks states, including Kansas and Missouri, on fifteen performance measures. It then compares that ranking to state spending per pupil. The Executive Director for KASB speaks to Kansas coming in at 29th for spending per pupil in 2014 and then elaborates,
In the long run, this threatens our ability to compete with other states economically for not just high-paying jobs, but almost any job.
Really? If the state doesn’t spend a few hundred more dollars per pupil it will set the entire economy back? This argument suggests that the more you spend, the better you’ll be—or the more flippers on the grill, the more burgers you’ll make.
As it turns out, the data they present offer a great example of the law of diminishing returns.
In the chart below, I plotted funding per pupil on the horizontal axis and educational ranking on the vertical axis. Each point on this chart represents a state. I noted Missouri, Kansas, and states that KASB “aspire to be” on this chart. If the KASB’s diagnosis is accurate, then we would see a steep downward sloping line (or trend), because that would mean that an increase in education spending comes with a significant improvement in outcome rankings (lower-ranking numbers are better). The flatter the line/trend, the weaker the relationship between funding and outcome rank. This is a concept in statistics known as the coefficient of determination.
The line is pretty darn flat. In fact, education funding per pupil only explains about 10% of a state’s improvement in educational outcome rank.
So, what does this mean? Well, since 90% of the variation in state performance is determined by factors other than spending (a good example of which might be how that money is spent), we need to look beyond simply pumping more money into our schools if we want to improve those schools’ performance. School funding is subject to the law of diminishing returns. And I think now is a good time to go get a cheeseburger.
