The Value of Education?

Here's something that I've been thinking about for a while now: A very common idea is that more education equals greater economic growth. What's more, one of the main ways that Third World countries could advance is to spend more money on education.

Now this may not be true at all: According to Alison Wolf's research, there's no proven connection between increased education and increased economic growth. But even if it's true to some minor extent, the thing that bothers me is that we only seem to be talking about formal education. Schools . . . universities . . . years spent in a classroom.

It seems to me, however, that two propositions are likely true:

A) The most useful skills that you will ever get from formal schooling are fairly basic: reading, writing a coherent description or argument, and basic math. A lot of what's studied in high school or college may be very interesting, and can make one a well-rounded person, but has little or no relevance to economic growth. (I'm all for studying Shakespeare or Western Civilization or Physics 101, but unless you plan on pursuing one of those subjects as a career, I don't think that your studies have anything to do with economic growth.)

B) By contrast, if there exists any knowledge that leads to economic growth, the overwhelming majority of it is captured in businesses and other institutions, and cannot be taught in schools. I'm not talking just about "job training," i.e., formal training classes that might last a day or a week at the beginning of one's employment (or formal "continuing education" classes in various professions). Instead, I'm talking about all of the informal knowledge that relates to "how we do things here at ____."

Take a simple example: A McDonald's store. They're at the bottom rung of the American economy. So they should be simple to run, right? Any one of you could do it?

Not right now, you couldn't. You don't know how. There's no course at a government-run or private school that teaches you how to open a McDonald's (the most relevant thing that you might learn in school is how to make change, which hardly qualifies you to open a McDonald's).

So you're looking at an empty lot near an interstate. What sorts of knowledge do you need in order to open a McDonald's? As someone who worked at McDonald's as a teenager, here's what I can think of, off the top of my head:

1. Is the location suitable? What's the average traffic here? How do you find it out? How much traffic should there be anyway?

2. What sorts of permits do you need from local or state governments?

3. Who is going to build the store? Where do you get the architectural plans to give to the builder? How do you make sure that the building complies with innumerable legal requirements (from local zoning regulations to federal disability law)?

4. How do you hire the managers and workers? What do you look for? What kind of training do you give them?

5. Where do you get all of the machinery and other items that fill a McDonald's kitchen?

6. Where do all of the food items come from? How are the food items cooked/assembled/whatever? (This would include what to put on a Big Mac, how to fill the shake machine, how to mix Coke syrup, how to work the fry machine, and a hundred other tasks.)

7. How do you set employees' schedules? Make a payroll?

Well, I could go on and on. The point is, if you want to open a McDonald's store, there are innumerable facts and skills that you will need to know -- knowledge that McDonald's can give you but that you could not learn in a regular school. After all, even if regular schoolteachers knew all of this information (they don't), no school is going to waste its time teaching all of the specific knowledge that it takes to run a McDonald's (or any of the other thousands of types of businesses that exist). That's just not the sort of thing that a school can or should do.

I would suggest that all of the above is true -- at least to some extent -- for all of the businesses that exist in America. For any type of business that you can imagine, the overwhelming majority of the information necessary to run the business consists of informal knowledge that has accumulated over years or decades, and that will never be taught in schools.

At most, one can point to a few trades or professions where some specialized schooling teaches someone the basics (i.e., a trade school might teach the basics of installing electrical wires, or a law school teaches the basics of how to analyze statutes and cases). Even there, a large part of what you do on the job involves information or tasks that weren't specifically taught in school.

What's the upshot of all of this? That there's no real reason to think that formal education is going to magically produce increased business activity -- i.e., economic growth -- here or in Third World countries. You could take the entire population of a Third World country and send them to 12 years of school to learn all about social studies and literature and political science. At the end, they wouldn't be any closer to a modern economy than they are now. What would be far more helpful is if the necessary institutions -- i.e., the many different kinds of businesses -- existed in that country, so that people could gain the knowledge that is actually relevant to economic growth.

The fact that this seems to be a chicken-and-egg problem leads to a further suggestion: Anything that increases business activity in Third World countries -- whether globalization or micro-credit loans that encourage local entrepreneurs -- is far more likely to produce the sort of education that creates further economic growth. With globalization, a factory might open in such a country, providing a place where workers will learn at least some skills that are economically relevant. Even better, entrepreneurship allows people to gradually accumulate the necessary knowledge to run their own businesses.