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Op-Ed

How improving education could pay off in economic growth

Robert E. Litan

In a recent Think Tank piece, I focused on two ways to boost long-term economic growth: more risk-taking by larger companies, and more start-ups. Neither is easy to accomplish, nor for government to immediately change.

Fortunately, there is one surefire way, at least in principle, to boost growth and improve equity: by improving the quality of K-12 education (emphasis on quality). Up to now, most economic research on education has focused on quantity or how many years of schooling the average person has completed. Yet it’s what people learn, not how long they take to get there, that really matters.

Research by a longtime expert on the economics of education, Erik Hanushek of the Hoover Institution, and professor Ludger Woessmann of the Ifo Institute for Economic Research in Germany discusses evidence from across that world that national average student performance at age 15 on an internationally standardized mathematics test is predictive of that nation’s future economic growth. The authors’ statistical analysis shows that math abilities are most highly correlated with economic growth and that they are probably serving as a proxy for a range of problem-solving skills (which require ability to comprehend what one reads and to use that knowledge in constructive ways).

On the international test where the average score is 500, raising the average by 25 points would generate more than $40 trillion in cumulative additional output over the next 20 years in the U.S., the research found. That’s after discounting for the “time value of money,” a standard adjustment in benefit-cost analyses. That addition is equivalent to two entire years of gross domestic product!

Here is an even more provocative calculation: If we were able to bring poorly performing students to a score of 400–remember, the average score is 500–the U.S. would enjoy cumulative additional output over the next two decades of $72 trillion. That’s roughly four times annual GDP. Moreover, the narrowing of the skills gap that such an achievement would imply would also help narrow income disparities, an issue that’s weighing on many Americans and policy makers.

This research points up the question: How do we get students to learn better? We know from many academic studies that the quality of teachers matters greatly to student outcomes. So it follows that we would be helped by an educational system that weeds out poorly performing teachers while continuing to attract good new ones. Given the size of the potential payoffs, these are not incentives to ignore.

This post originally appeared in the Wall Street Journal.

Author

Robert E. Litan

Former Brookings Expert

Adjunct Senior Fellow, Council on Foreign Relations

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