In a recent paper titled 'Does the United States Spend Enough on Public Schools?' Patrick J. Bayer, Peter Q.Blair & Kenneth Whaley write-
The United States ranks low among peer countries
The US has dual sovereignty, Education is locally funded, and its States, even districts within a State, differ greatly. You are doing 'Junk Social Science' if you disregard this.
on the ratio of teacher spending to per capita GDP.
In absolute terms, an American State spends more than a similar State across the border. There are diminishing returns to spending on teachers.
Is this (in)efficient?
There are inefficiencies baked into the public school system. Teachers have votes and powerful unions.
Using a spatial equilibrium model we show that spending on schools is efficient if an increase in school spending funded through local taxes would leave house prices unchanged.
This is foolish. Houses don't just provide a stream of services. They are also a type of asset and affected by speculation. This means they are more sensitive to things like long term interest rates and implicit tax subsidies than to perceived school quality- which, in any case, is 'lumpy' and slow to change. Court ordered desegregation led to the redrawing of school districts. Did houses in poorer areas rise in value if they came into a better School district? Yes. But not by much. Moreover, a change in the demographic composition of a public school could lead to 'White flight' or, more generally, a preference for selective private schools. Thus, medium to long term, the positive correlation might disappear.
By exploiting plausibly exogenous shocks to both school spending and taxes, paired with 25 years of national data on local house prices, we find that an exogenous tax-funded increase in school spending would significantly raise house prices.
This is mad. Families with school going kids are likely to have to pay mortgages or rent and thus will be driven out of the market if house prices rise 'significantly'. In any case, the 'private school choice' movement is gaining ground. Thus alternatives to public schools are gaining salience. There is a political and 'culture war' angle to this.
These findings provide causal evidence that teacher spending in the U.S. is inefficiently low.
These findings are garbage. If and only if the marginal benefit to students of extra spending on schools is greater than the cost is teacher spending allocatively inefficient. There is no 'externality' if a market- in this case the housing market- captures it.
Economists naturally approach questions about the optimal provision of publicly provided goods like education through the lens of the Samuelson equation . According to the Samuelson equation, a public good is efficiently provided when its marginal cost equals the sum of the marginal benefits of those who enjoy it.
In the case of schools, the marginal benefit is to the students. Parents factor this into their own utility functions.
Due to the inherent difficulty in inferring the marginal benefits for the millions of members of society, public goods provision stands as a classic example of a potential market failure in economics
more particularly if unionized public school teachers are lazy or useless. Monopolies can be very inefficient.
— presenting a challenge for policymakers who decide how much to spend on schools and teachers . In fact, in the U.S., public opinion on increasing school spending and increasing teacher salaries is particularly divided. Among survey respondents who are informed about the level of school spending and teacher salaries in their state, the partisan gap is 31 percentage points: 62% of Democrats versus 31% of Republicans believe that school spending should be increased .
Do those people want to pay more in taxes? If so- cool. If not, the survey is meaningless.
Likewise, while 70% of informed Democrats believe that teacher salaries should be increased, only 46% of informed Republicans share that view (Houston et al., 2022). At its heart, answering the question of whether the current level of public school spending in the United States is optimal/efficient requires a way of measuring and aggregating the marginal benefits and cost of school spending.
That way involves looking at educational outcomes, not house prices.
The primary goal of this paper is to theoretically define and empirically implement a test for the efficiency of public school spending in the U.S. that is based on a credible research design.
It is incredible that these cretins refuse to look at educational outcomes relative to spending on schools. Instead the assume that 'if increasing local property taxes to provide more of the public good results in increased house prices, then the prior level of spending was inefficiently low'. Yet, most of the variation in house price, both spatially and temporally, is wholly unconnected to school quality. Only 40 percent of American households have school age children. Moreover, in an ageing society, more will exit 'Tiebout models' where school spending is high, thus depressing house prices in such places. That's a good thing. Places where households with kids congregate can focus on education and other amenities for the young whereas places where few have kids can focus on 'club goods' desired by households without kids.
About 92 percent of public school spending is teacher related. Higher salaries also mean higher health insurance and pension liabilities- an important consideration when you have an ageing population. Ceteris paribus, the political clout of teacher's unions will greatly affect remuneration. This has nothing to do with the market. The authors of this piece know this well enough. They are doing 'junk econometrics' for a partisan political reason. Why bother? Just say public schools represent the last bastion of resistance to Nazism. Did you know Trump plans to ban masturbation? If the pay of teechurs are cut, public schools will cease to turn out wankers prepared to overthrow Fascism, liberate Palestine, and return Turtle Island to the First Nations.
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