Sunday, October 07, 2007

Economics and Education

Response to an education listserve post:



"When that becomes a bit more obvious, let's return to the question whether there is indeed a link between EDUCATION and ECONOMIC.. WORLD LEADERSHIP."

John,

Life is never so easy. Part of the energy driving the US economy is contributed by foreigners educated in their home country. Example: Indian software developers make up a growing number of the US-based IT professionals. Yet, these individuals are not products of the US education system. In addition, offshore IT professionals perform services that are credited to US corporations.

Under your concept of economic accounting, the US education system is credited for the contribution of foreign-trained workers.

Human capital moves much quicker than physical capital. If I became The Glorious Leader of some impoverished island nation, improvements in education would not be my solution to encourage economic prosperity. By reducing or eliminating taxes, regulations, tariffs, and other such blights, the economy would turn around quickly. Of course, the citizens would quickly see that The Glorious Leader provides nothing, so I would always have the incentive to create programs and blame their failures on a host of made-up reasons.

You are confounding cause and effect. Take Ohio for instance: The current tax and regulation structure provides a disincentive for companies to move here. The political class refuses to accept this fact. What do they do instead? They raise taxes and "invest" more in education. So, like India, Ohio-educated workers move to areas that provide high-paying jobs. It is much easier for a new graduate to leave Ohio than for a start-up company (or expansion of an existing company) to make a go here.

Your solution for Ohio would have to be: raise taxes in order to pour more money into education. The result: more companies and graduated will leave the state, further impoverishing the area. You would then blame the education, and propose a new round of taxes, etc. A quick spiral to the bottom would be the result.

Hey, is it possible that you are Ohio's governor?

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