What if?

U.S. House Budget Committee Chair Paul Ryan asks a good question:

Let me ask you a question: what if your President, your Senator and your Congressman knew it was coming? What if they knew when it was going to happen, why it was going to happen and more importantly, what if they knew what they needed to do to stop it from happening and they had the time to stop it? But they chose to do nothing about it, because it wasn't good politics?


What would you think of that person? It would be immoral.

This coming debt crisis is the most predictable crisis we've ever had in this country. And look what's happening. [emphasis added]

Now, I've not been following American budget politics and am consequently agnostic about whatever budget plan he might be proposing; I'd be surprised if it made more sense to cut Medicaid, which helps poor people, than to cut cut Medicare, which helps old people many of whom are wealthy. There's more informed analysis of American budget politics elsewhere.

But I really liked the question. Recall New Zealand Prime Minister John Key's position on maintaining former Prime Minister Helen Clark's policy of zero-percent student loans:

Charging interest would bring in considerable extra revenue for the Government, but Key said he would be voted out if National did so.

"Bluntly, if you want me to be really crude about it there are 565,000 student loans out there. If we add interest back on the student loans, it doubles repayment time of the loan.

"If your loan is $50,000, and it's estimated it will take you eight years to pay it off, we effectively turn it into a loan that is about $90,000 with interest that takes you about 15 years to repay," Key said.

"That is about the only thing that will get [young people] out of bed before 7 o'clock at night to vote, but it's not politically sustainable to put interest back on student loans. It may not be great economics, but it's great politics. It is a bit of a tragedy because it sends the wrong message to young people, it tells them to go out and borrow debt." [emphasis added]

What do we think about this person? Here's what Matthew Hooton thought.

At least Key's not pretending it's good economics; politicians more typically convince themselves that whatever's politically popular is also economically sound.

But instead of leading a national conversation about the size of the deficit and ways of addressing the problem, including reintroducing interest on new loans and phasing interest back in on existing loans over time, he shuts the door on sound policy. Recall Justin Wolfers' argument against forgiving student loans; zero percent loans aren't that different - they forgive a good chunk of the proper present value of the debt.

Budget constraints do bind; Key last year suggested limiting access to loans rather than charging market interest rates. The coming budget is likely to have more restrictions on loan access: rationing the zero-interest credit. And such restrictions aren't necessarily bad economics either: if government-backed loans solve a market failure in credit markets that stems from inability to collateralize human capital, restricting people with other assets that could serve as collateral from accessing zero percent loans reduces costs without any particular policy cost. Or, if some degree programmes or student cohorts are exceedingly unlikely to see sufficiently enhanced earnings for the policy cost to be recouped through the tax system, restricting loan access there also doesn't necessarily do harm relative to a policy of loans issued at market interest rates. But it smacks a bit of government picking winners rather than letting students make their own choices after looking at the expected loan repayment burden at market interest rates.

And, there are other negative consequences for tertiary policy that flow directly from maintaining zero percent loans. The Government caps tuition increases, ostensibly for the students, but really because it can't afford to dish out loans at zero percent were tuition to rise. Similarly, the government has moved to limit domestic tertiary enrolment via capped enrolment at the universities - a policy that would be superfluous if tuition were higher and students charged market interest rates.

I sure hope the budget has something other than "Yeah, the deficit is really big. But everywhere we looked for savings would have somebody complaining, and Labour would then get elected and boy wouldn't that be worse. So we're not really going to do anything - not even commit to raising the age of superannuation eligibility two decades from now. It's horrible economics and boy the Treasury guys will get mad at me. But it's great politics."

iPredict says there's a 43% chance National wins government again in 2014. Pulling out a couple of high variance plays might not be crazy.

NZBR Blog

I miss Roger Kerr's blog.

The New Zealand Business Roundtable has resumed blogging, though, at Policy Matters.

Roger Partridge points to some of the NZBR's resources on school choice and to a 2006 report by Caroline Hoxby for the New Zealand Education Forum.

Great to see the NZBR back to blogging; I've added Policy Matters to my RSS feed.

School quality and crime

David Deming argues in the Quarterly Journal of Economics (HT: @Crime_Economist) that high risk kids experienced lower likelihood of later criminal activity if they won random lotteries allowing them to attend their first choice public school.

How does it work? High-risk youths spread out over more schools rather than being concentrated in a few bad schools. If peer effects work with thresholds or if there are increasingly negative peer effects as concentrations of high-risk kids increase, this makes a lot of sense.

Lessons for us in New Zealand?

• The lottery design in North Carolina resulted in higher-risk youths being more, not less, likely to flip into competitive schools. This cuts against arguments that school choice and charters necessarily result in pools of worse kids left behind. 
• The gains from moving to charters here might be rather more extensive than just educational outcomes. This is also consistent with evidence from things like the Perry Preschool project where educational outcomes washed out over time but social outcomes, like crime reduction, persisted.

Here's an ungated working paper version.

For and against charters

It being useful to develop the best possible argument against a position you support, here's my best case against New Zealand moving towards the use of charter schools. I'm not convinced by this case. Or, at least I don't think I am. Let's see if I've convinced myself by the end of the argument.

- Begin Advocatus Diaboli -

First, we have to recognize that the New Zealand school system is, on the whole, pretty good as compared to the American school system. Not always and everywhere, but on average. That isn't to say that we can't have improvements. But we have to keep in mind that a lot of the gains found in charter schools in the U.S. are measured against a counterfactual of abysmal urban public schools that compare poorly with some of Dante's circles of hell. Here's a fine description of one such nightmare case. That the enthusiastic young teacher there was able to flip over to a charter school, along with some of the students, produces real gains, both for the students who flip, and for the average quality of those engaged in teaching. The worst US public schools drive the best teachers out of teaching; the Charters give them an option where those who'd rock the boat against horrible school principals and stultifying union rules can flourish.

But are any New Zealand public schools really that bad? If the worst New Zealand public schools don't come within cooie of those American schools, we'd be overestimating the potential gains here from adopting charters. Sure, we can find a few isolated cases where the school principal condoned or covered up horrible bullying. But the worst here just doesn't match the worst there (though I invite readers to show me otherwise).

Further, it's really hard to pin down the gains from American charter schools. Sure, those quasi-experimental studies I cited yesterday are nice. But there's a meta-selection issue: the only schools that use lottery for entry are the really successful charter schools that are oversubscribed. You can identify the gains to the students who make it from the public schools into those schools by that method, but you shouldn't extrapolate from those gains to the average potential gains from widespread use of charters. Then, you have to go to some of the estimates of the overall effects of charter schools, and the empirics there are, frankly, a mess. Selection issues are all over the place. Where do new charters open? Where the worst public schools are as that's where parents want to get their kids out. Which kids flip? Those whose parents care more. Taking average cohort performance across public and charter schools doesn't work if charters disproportionately pick up the better kids from the worst areas, but it's not immediately clear whether that helps or hurts charters' performance stats. And so we find all kinds of studies showing little effect in the aggregate, or strong heterogeneity in results across different charters.

Finally, many of the gains from charters are already available in New Zealand in the form of Integrated Schools - state-funded schools established for a special purpose or with a special mission, but that are restricted to cover the national curriculum. Those aren't impossible to open. What's then gained by allowing entry to those who would perhaps eschew the national curriculum in favour of weird stuff? Yes, it's possible to improve on NCEA, and the best charters will. And, sure, there are already religious integrated schools using public funds to provide a religious message. Brian Tamaki's Destiny Church even runs one. But do we really want Tamaki released from requirements to nominally adhere to the national curriculum?

In the best case, charter schools open in neighbourhoods where zoning keeps poor kids stuck in underperforming schools, parents send their kids there, and public schools are forced to lift their game or suffer enrolment drops, funding drops, and downsizing or closure. And so everything's great. But the more likely case, depending entirely on how the regulations are set up, is that those charters pull the better students from the worst schools. Those better students do fare better in the charter schools. But those left behind fare worse as the public schools remain the residual claimant on the worst cases - the disruptive students that the public school system, for better or worse, cannot help but keep integrated into mainstream classrooms where they ruin outcomes for others. Those students become a greater proportion of those left in the public schools, further depressing outcomes for decent students whose parents just don't care enough to send them over to the charter school; cohort effects matter. Those best students would have made it through regardless, but we worsen outcomes for the middling students of indifferent parents.

- End Advocatus Diaboli -

What do I take from this? Upside gains here, relative to those in the States, are likely to be limited. And, as Seamus noted, it can be tough to extrapolate from US studies to here. But particularly bad outcomes seem unlikely unless we make strong complementary assumptions about parental indifference / parental stupidity and about public school inflexibility in response to the competitive threat.

There will be here, as there are in the States, some charter schools that fail. But even the failures let us learn. Roland Fryer dug into the correlates of charter school success (Freakonomics summary here) and found results a bit divergent from usual teachers' union requests. Input-based solutions like smaller class sizes and higher proportions of staff with teaching certification don't do much. Instead, "frequent teacher feedback, data driven instruction, high-dosage tutoring, increased instructional time, and a relentless focus on academic achievement" explains most differences in outcomes across charter schools. Perhaps it's possible to mandate that state-sector schools here simply adopt best practice. But I worry that that's best-case thinking; the government barely seems able to compel its public schools to disclose student achievement statistics. The threat of student exit seems the best long-term discipline for poorly performing schools. And, as Seamus noted, there's a lot of value in the experimentation to see what methods work here. I find it very plausible that charter schools drawing on tikanga will find more appropriate instruction methods for lower decile Maori groups, and that other approaches will be successful in poorer Pacific Island communities. But we won't know until we try.

Charter Schools

The coalition agreement between ACT and National has provision for trial charter schools in South Auckland and Christchurch:

With respect to education, the parties have, in particular, agreed to implement a system, enabled under either sections 155 (Kura Kaupapa Maori) or 156 (Designated character schools), or another section if appropriate, of the Education Act, whereby school charters can be allocated in areas where educational underachievement is most entrenched. A series of charters would initially be allocated in areas such as South Auckland and Christchurch. Iwi, private and community (including Pacific Island) groups and existing educational providers would compete to operate a local school or start up a new one. Schools would be externally accountable and have a clearly-defined, ambitious mission. Public funding would continue to be on a per-child basis. (Details are included in the attached Annex)

So, what evidence do we have on the performance of charter schools in the States?

First, a note of caution in all the American studies - charter schools operate under regulatory constraints and vehement opposition from American teachers unions, both of which may affect observed results. Further, suppose a charter school opens in a neighbourhood and you find higher test scores among the students who go there compared to those who stay at the public school. Are the results due to differences in school quality, or selection effects? Two kinds of selection effects will be relevant - schools may try to get the best students, and high quality parents may be more likely to flip their kids out of failing schools. DimPost seems to think everything's due to selection; it would have been more helpful had he hit Google Scholar.

There are ways of controlling for selection effects. Here's Josh Angrist and coauthors from 2009, HT: Marginal Revolution. They used a lottery as random assortment mechanism: Boston charter schools were oversubscribed, so a lottery was used to determine which kids got in. So Angrist can compare those who won lotto with those who didn't. Remember, this is Josh-freaking-Angrist. The econometrics here aren't going to be wrong.

Charter schools are publicly funded but operate outside the regulatory framework and collective bargaining agreements characteristic of traditional public schools. In return for this freedom, charter schools are subject to heightened accountability. This paper estimates the impact of charter school attendance on student achievement using data from Boston, where charter schools enroll a growing share of students. We also evaluate an alternative to the charter model, Boston's pilot schools. These schools have some of the independence of charter schools, but operate within the school district, face little risk of closure, and are covered by many of same collective bargaining provisions as traditional public schools. Estimates using student assignment lotteries show large and significant test score gains for charter lottery winners in middle and high school. In contrast, lottery-based estimates for pilot schools are small and mostly insignificant. The large positive lottery-based estimates for charter schools are similar to estimates constructed using statistical controls in the same sample, but larger than those using statistical controls in a wider sample of schools. The latter are still substantial, however. The estimates for pilot schools are smaller and more variable than those for charters, with some significant negative effects.

Upshot: charter schools do better, and because they're outside of collective bargaining and because they face the risk of shutting down if parents don't choose to send their kids there.

Other evidence?

• In another randomized trial, Caroline Hoxby finds substantial gains for students winning entry to charter schools in New York. Here's an ungated version of the paper. Here's the report.
• New Orleans moved heavily towards charter schools after Katrina; outcomes improved.

Here's Caroline Hoxby explaining her work.

Caroline Hoxby: The Promise and Performance of Charter Schools from The Hoover Institution on FORA.tv

I'd not be surprised if charter schools weren't already in National's plans, but it's still a nice win for ACT.

And it's great fun to watch all those who rallied for MMP now whining about post-election coalition deals. You guys should have ticked the box for FPP.

When you go out to do your own literature search, be sure to upweight results from studies that control for selection effects either by this kind of randomized lottery treatment, or by instrumental variable approaches (like this one). Put less weight on studies that just compare charter and regular schools without addressing selection issues.

Today's reason to hate the State [updated]

The State mandates that children attend school - either public or, if their parents are rich enough, a private or home-school alternative.

The State restricts your choice among schools through zoning. There are options for getting an out-of-zone placement, but it's not always easy.

Then, when children of Mongrel Mob members torture your children at school, including sexual assault, the school allegedly covers it up and gives the vicious little creatures five days' suspension.

Hutt Valley High School pupils were subjected to torture, extreme violence and sexual abuse, but school authorities failed to protect victims, alert parents or report numerous attacks to police.
A long-awaited Ombudsmen's Office report reveals chilling details of systemic violence at the school, intimidation and abuse. It also identifies a history of failing to punish culprits or acknowledge the seriousness of their crimes.
A gang of six teens terrorised classmates in late 2007, chasing younger boys around the school, dragging them to the ground to remove their pants then violating them with a screwdriver, scissors, branches, pens, pencils and drills.
The premeditated attacks were committed on year 9 boys during lunchtimes. There was little teacher supervision because some staff were too scared to carry out duties "for fear of their own safety", the report says.
When the offending was identified, the 1700-pupil co-ed state school did not alert victims' parents, police or Child, Youth and Family. It instead chose to stand down the culprits for a few days.

Things have gone far too far the other way in the States, where kids seem regularly to get stuck on sexual offender registries for sending each other naughty pics via cell phones. But this is awful.

Imagine this having happened instead in the private sector - suppose at an after-school programme. If there weren't lawsuits against the adults meant to be stopping the damned place from turning into Lord of the Flies, I'd be really surprised. I'd also be really surprised if the place didn't quickly go bankrupt as parents pulled their kids out. But the State protects its own. The Ombudsman's report finds all kinds of fault. But here are the recommendations (as summarised in the press):

Recommendations

• Amend school national administration guidelines to make anti-bullying programmes mandatory in all schools, rather than being simply a recommendation from ERO.
• Education Ministry to provide specific guidance to schools on what level of punishment is appropriate for various offences and actions. Improve disciplinary procedures by requiring principals and school boards to consider victims' views when making decisions on discipline in cases of bullying or violence.

Nobody's recommending that the teachers who allegedly looked the other way be fired or sued. They've already replaced the principal; the old one who allegedly covered up the abuse is now Deputy Principal. [I love how the podcast link at left uses the weasely "mistakes were made", "errors were made".] I have a hard time seeing how there isn't grounds for civil suits against a whole lotta folks, and probably criminal suit as well. Unless State employees are protected from lawsuit in case of negligent performance of duty. I'd sympathise with the teachers who feared Mongrel Mob retaliation, but they chose to allow freaking kids to be victims instead.

Mydeology has more details, here and here.

But isn't it freaking wonderful that we have the State to protect us. Give it a monopoly on the use of violence that it mostly exercises against the kinds of people against whom you could already defend yourself. For the ones where you'd really need the external help, like Mongrel Mob kids shoving screwdrivers into your kid's anus at school, the State won't do anything because it's too scared of the Mongrel Mob.

Today's one of the days I'd be pushing the button for the abolition of the State and its replacement with private security. Or at least make it easier for kids to switch out of criminally incompetently managed schools.

[I added the word allegedly a couple of times to be safe]

See also DomPost

Update2: Ombudsman's report says some of the involved youths were referred to the family and juvenile courts. Nothing is said of outcomes.