What A New (Old) Economic Theory Says About Education

Should learning be broader or deeper?

The State of Indiana is working on overhauling its high school learning standards. Its goal is to make it more “learner-centric and career-relevant.” To these ends it has reduced the number of science and social studies classes that students must take. The time would instead be used either for classes that students could choose or a work apprenticeship.

It’s been a bumpy process. An initial draft of the standards was scrapped after the state’s big universities – Purdue and Indiana University – protested that high school graduates wouldn’t be academically qualified to be admitted there (the new draft resolves this issue). Parents are concerned about transportation, schools are worried about attendance, and some employers claim that local businesses aren’t ready to absorb a deluge of 16-year-old job-seekers at noon each day.

But any big change has issues at first, right? The question is: is this a good idea? Should our students aim for a broader education in which they learn more about more? Or should they use their high school years to aim at a particular skill set and job?

There is some new research that can help with this question. Titan Alon, an economist at the University of California - San Diego, has a paper called “Earning More by Doing Less: Human Capital and the College Wage Premium” (currently in peer review). Dr. Alon argues that economists have missed an important aspect of education: specialization. Focusing on how education helps us specialize can help us measure if Indiana’s new plan is a good or bad idea.

Here’s the idea: economists have historically treated the skills we learn through education as an accumulation of talent that they call “human capital.” It’s called “capital” because, like machines, what’s in our minds can be used and re-used to improve our productivity. But this misses an idea that goes back to the patriarch of economics itself, Scottish philosopher Adam Smith. Smith’s notion of human capital was that it helps one focus on particular tasks. In The Wealth of Nations, he wrote that “when the whole force of the mind is directed to one particular object, as in consequence of the division of labour it must be, the mind is more likely to discover the easiest methods of attaining that object than when its attention is dissipated among a great variety of things.” In other words, people stink at multi-tasking.

Dr. Alon’s model looks at how deeply people learn skills, which in turn affects how well education sorts people into jobs. He compares the effect of secondary education in the United States versus that of Germany. Both countries had crises of confidence in their education systems in the 1960s, but their responses to it were opposites: the USA sought academic enrichment while (West) Germany chose to double down on career-focused education.

The result: German workers got fewer skills than Americans, but more wages compared to college graduates. Their learning is narrower but deeper, and they spent more time on the job. German education got people more money and even led to more wage equality, since there wasn’t as much a need to go to college to get a good job.

Friends, this result almost melts my mind! How could Americans accumulating more skills lead to lower wages? It’s because the German system locates people’s interests earlier, gets them more human capital in the jobs they actually choose, and they spend more years working. (Note: Americans aren’t poorer than Germans in general; this is just the effect added by differences in education.)

Hold on. Doesn’t the German way often track kids to the wrong jobs? Doesn’t it give them less flexibility to respond to a changing economy? Would you trust your lifetime job choices to 14-year-old you? And doesn’t this system track better-off kids to the academic path and less-advantaged kids to vocational school? Answers: yes, yes, oh goodness no, and yes. There are trade-offs. Dr. Alon’s paper doesn’t say that the German way is superior in every sense, just that it’s a bit more efficient at getting people into jobs they’re pretty good at, and that that pays off over time.

I love that my kids are getting a broad liberal arts education. I love that their education will prepare them for a wide range of tasks, some of which might not even exist yet. And I love that our school sees education not just as a way to get a job, but as a goal in itself. Education is part of the Good Life, and our children are living it right now, not just preparing for future work. But as a faithful reporter of economics and education research, I’m obligated to report new evidence. I am at peace with this result. Score one for vocational education.

Indiana education officials in favor of the new vocational emphasis have Dr. Alon’s research on their side. But the research also notes just how well-prepared the Germans were before they shuttled teenagers over to the factories. They spent a lot of money and made a lot of connections between schools and businesses first. In education, implementation is just as important (or more) than clever ideas. The next step is doing it right.

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Did you know that there are classroom lesson plans for every new Paper Robots article? Join me and the Foundation for Economic Education on September 19 at 7pm ET for a one-hour webinar to show you how to get started with them. Get info and register here.

Thanks to Titan Alon and Chris Herrington for feedback on the draft of this post.

Extra reading for deep learners: Below you can compare the U.S.A. to its peer countries in vocational education and tracking (putting students on specialized paths). The graphs are from another of Dr. Alon’s papers here.

Dr. Alon says: “The first figure [above] shows how age of first tracking in education systems varies across school systems in the developed world. The second [below] displays the variation in the degree of secondary school specialization (e.g. vocational students) versus academic ones. There is a lot of differences in both of them, and the US and Germany really span the spectrum! In other words, maybe Indiana is revolutionary here, but there is a lot of precedent for it working in many other places abroad — despite the issues.”