Eric Hanushek`s $20 Trillion Idea—Instead Of Trying To “Close The Gap”, Improve Scores For All Americans


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In the 2010 paper The High Cost of Low Educational Performance: THE LONG-RUN ECONOMIC IMPACT OF IMPROVING PISA OUTCOMES, Stanford economist Eric A. Hanushek and Ludger Woessmann take a pretty scientific SWAG at what would be the economic benefits of your country enjoying the higher cognitive skills associated with higher PISA scores. They mull over the results of a series of mostly forgotten international math and science exams going back to the 1960 and find a surprisingly high, probably causal relationship between having a cognitively gifted student body in the past and an economically productive one today. 

This report uses recent economic modelling to relate cognitive skills – as measured by PISA and other international instruments – to economic growth. This relationship indicates that relatively small improvements in the skills of a nation’s labour force can have very large impacts on future well-being. Moreover, the gains, put in terms of current GDP, far outstrip today’s value of the short-run business-cycle management. This is not to say that efforts should not be directed at issues of economic recession, but it is to say that the long-run issues should not be neglected. 

A modest goal of having all OECD countries boost their average PISA scores by 25 points over the next 20 years – which is less than the most rapidly improving education system in the OECD, Poland, achieved between 2000 and 2006 alone – implies an aggregate gain of OECD GDP of USD 115 trillion over the lifetime of the generation born in 2010 (as evaluated at the start of reform in terms of real present value of future improvements in GDP) (Figure 1).

A number of years ago, I suggested that the American Establishment drop its obsession with Closing the Gap — in effect, boosting black and Hispanic scores by close to a standard deviation while not allowing whites and Asians to improve — in favor of a fairer and far more feasible goal of improving all groups by an average of a half standard deviation. Hanushek looks at just boosting everybody by a quarter of a standard deviation on test scores (25 points on a PISA test or on a SAT test) and finds the net present value for the U.S. would be $20 trillion.

Bringing all countries up to the average performance of Finland, OECD’s best performing education system in PISA, would result in gains in the order of USD 260 trillion (Figure 4). The report also shows that it is the quality of learning outcomes, not the length of schooling, which makes the difference.