Paul Krugman on Education Spending
Paul Krugman writes that public-school layoffs bode ill for America’s economy:
According to the Bureau of Labor Statistics, the United States economy lost 273,000 jobs last month. Of those lost jobs, 29,000 were in state and local education, bringing the total losses in that category over the past five months to 143,000. That may not sound like much, but education is one of those areas that should, and normally does, keep growing even during a recession.
Krugman doesn’t mention the steady growth in per-pupil spending that has taken place over the last several decades. I refer interested readers to Andrew Coulson’s analysis of public schooling’s productivity.
Sinking resources into an inefficient sector will not propel the economy forward. But Krugman is right that people should increase investment in human-capital formation during a recession. So, why would the government back away from funding schools just when people need education the most? Is it a newfound interest in efficiency? Not if the calls for a stimulus are any indication!
It turns out that the government isn’t very good at timing expenditures. Russ Roberts explains why:
Government is actually staffed by human beings. It is not something called G that economists or even politicians can move up and down at will. Bureaucrats are cautious. They’re uncertain about what is going to happen to their budgets in the future. They’re uncertain about what the best thing is to do with the money they’re given. They’re worried about being accountable for their actions. So what do they do? They hoard.
Education means different things to individual people and to states. A person who can’t find a good job during a recession will think ahead, realize that he will earn more later if he goes to school now, and pay tuition in order to reap the future benefits. But, to government officials, education spending is just spending — it isn’t an investment that they will personally benefit from later. Sure, they may talk about it as an investment, and they probably know that education can lead to higher tax revenues in years to come. However, there’s no direct link between what officials spend on schools now and their prosperity in a few years’ time, the way the market rewards people who pay for their own education. So the government spends less on education during a recession.
Recessions are a rare opportunity for inefficient public systems to be pared back, which is good. The flip side is that when the government pays for education, spending increases don’t come at the optimal times. If Krugman cares about the timing of human capital investments as much as he cares about the overall level of education spending, he should reconsider whether the government ought to pay for as large a share of schooling as it does.