One thing I’ve seen a lot of recently, particularly from the left, are exhortations to “invest in education”, “invest in people”, and “invest in students”. However, as economist Stephen Gordon noted on twitter this weekend, the actual meaning of the verb “to invest” is “to acquire a productive asset”. So, in a literal sense, it would appear that a lot of people on the left are interested in a government-led return to slavery.
Of course, this isn’t what the left means when it says “invest”. In fact, calls for “investment” are a kind of rhetorical sleight of hand, combining one perfectly sensible idea with a much more dubious one. The sensible bit is that “public spending on higher education has significant positive returns”; the less sensible bit is “if we spent more, we will continue to get similar high returns”.
The problem here – one which the investment crowd isn’t always keen to acknowledge – is that when real investors make investments, they actually measure returns. And when they do, they measure returns relative to the original amount invested. If returns do not increase in-line with investments, then this is what we call a bad investment.
To understand what I mean, let’s think about the Klein cuts in Alberta in the early 90s, or the Harris cuts in Ontario in the mid-90s, or the Bouchard cuts in Quebec in the mid-90s. In all three cases, universities saw double-digit percentage decreases in operating grants. Did student intake or graduation rates fall? Was the quality of these graduates materially worse than those of any other era? No? Then what we have here is a case of a rise in returns to investment; governments spent less and got the same return.
The argument that a rise in spending will return a better investment is actually a tough one to make. Will we get more graduates? Will we get more thoughtful or productive graduates? Will we get more research? These are all things you have to measure. By and large in Canada, our investments of the 2000s bought us more graduates and more research. On other aspects – who knows?
(At this point in any of my talks, someone always asks something to the effect of: “but what about the other aspects of higher education, like citizenship, or critical thought?” To which my answer is: if that’s what you think we’re buying with public expenditure: fine. The issue is: on what basis do you think graduates will have more of those qualities if spending goes up 5%, or 10%, or whatever?)
I suspect some of the “investment” crowd wouldn’t mind actually measuring its investments; but, I also suspect there’s a larger portion of this group that could not care less about return on investments. For these people, the word “invest” is simply a crude disguise for the word “spend”, and by “spend” they mostly mean transferring spending from the private sector to the public sector, hence raising private returns and lowering public ones (and this is from the left, for God’s sake).
None of this is to argue against public spending on education, of course. And none of it is to say there aren’t reasons why higher education spending shouldn’t be increased. But be careful of the language of investment: it doesn’t always lead where you think it will.
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You ask whether “the quality of these graduates materially worse than those of any other era” as part of exploring whether more or less investment in postsecondary education is worthwhile. Quality is difficult to measure but I have no doubt that quality declined when the Harris government abruptly cut 15% out of Ontario’s postsecondary operating grants, Institutions of necessity made a lot of cuts. Among them there were things that improved efficiency (e.g. shutting down low enrolment programs) and staffing cuts that made a lot of people’s jobs that much busier. There was also a substantial reduction in instructional hours that made today’s Ontario’s 3-year college diplomas equivalent to what was delivered in 2 years in the past – the new normal. Two-year diplomas now provide what was previously a certificate program. Instructional hours is an input measure and ideally we would just look at the impact on learning and employment or employability (productive asset) outcomes and do complex analysis to tease out the effect of cutting instructional hours vs. anything else going on in the economy, and it could all be hotly debated, but let’s be realistic: this input had better be closely related to outcomes – otherwise we might as well shut the institutions down. The cuts served a purpose, but they did not magically yield a higher public rate of return on investment in postsecondary education.
Alex, I expect you recognize that some “outcomes” aren’t measurable? Isn’t this a basic dilemma in accountability thinking?
I will also provide a very solid example of a direct relationship between funding and quality. You can’t assess written and oral communication without people to grade this stuff. This is far and away the most significant complaint about large class sizes and inexperienced TAs doing assessment. It’s not hard to draw a direct line from this situation to employers’ complaints that their new hires need to be able to write and present effectively.
Hi Laura. It’s true that some outcomes are a lot harder to measure than others, yes. But to the extent that’s the case, don’t make an “investment” argument on the basis of things you can;t measure. “Give us money! We’ll give you more of something totally intangible – take our word for it!” (I know that’s not what you’re suggesting – just making a point about how these issues are framed).
Interesting point re: assessment (and you;ve given me a great idea for a blog). Of course, one experiment you could do is compare how employers feel about reading/writing ability of grads of small lib arts colleges (where they get small classes) vs. that of grads of larger institutions. I wonder if you;d see a difference?
Hi Alex. I enjoy your blog immensely. But I wonder in this blog whether you missed the point on the language of “investing in education.” I would not argue that “the word ‘invest’ is simply a crude disguise for the word ‘spend’,” but rather that “spend” on its own suggests consumption to the point of using up, whereas “invest” suggests a sacrifice of current consumption to be able to consume more later. I think the use of “invest in education” in debate about government spending is to underline that such “investment” should pay off later, similar to how investment in infrastructure and public transit should pay off later, and that when discount too heavily or even ignore such future considerations we do so at our peril. Consider the state of Toronto’s public transit system.
It is also my understanding that, roughly speaking, investment shouldn’t done to the point of maximizing the rate of return on investment, but rather should be done to where the rate of return on the money invested is equal to what that money could earn if it were invested elsewhere–which, as I believe you argue, would mean a lower rate of return on the last dollar invested. As you say, such returns on education would be difficult to measure, but I would argue that, for a variety of reasons, there are gains to be had.
Hi Chris. I guess I;m more comfortable with the language of “buying” than I am with language of “investing”. Does society want to purchase more graduates, more research? Great. Let’s figure out how much that costs and how to pay for it. And I guess I;m even ok describing education as an “investment” in the sense that there are returns (as you say). Where I get annoyed is the notion that *because* it is an investment, we must necessarily do more of it and what we get back is irrelevant.
I wonder if the problem with the language of investment is precisely that it suggests the sorts of measurable returns you speak of. Whereas the benefits of education — both personally and for society — are often quite intangible. Moreover, even where education does yield clear improvements of some sort, they fail to be explained by the crassness of cause-and-effect reasoning.
In my opinion, these types of cuts in the short term just result in institutions becoming more creative in how budgets are spent. Frivolous spending is cut down on so that core objectives can still be achieved. In the past, funding has come and gone and as Alex mentions, overall student results were not affected. Obviously cut backs put a strain on staff and faculty as job security, workload and operating budgets become more of an issue. Institutions on a macro level however can continue to operate efficiently and successfully while they rely on faculty and staff that as they have shown in the past can still function under stressful conditions.