Wednesday, September 05, 2007

Baumol's disease

Chris Dillow (, who I am getting to like more and more, has an excellent piece on school productivity, which, if you have read Graeme Archer on Platform10 about schooling today, should give everyone involved in education and paying for it pause for thought.
In essence, Baumol's Disease says that, because you continue to increase salaries and the cost of inputs (=buildings) by definition the productivity of school teachers falls ( see article below*).
Now anyone in business knows this. Paying someone £50,000 to do a non-producing job ( that's a paper-shuffler to you and me) instead of the £45,000 you gave them last year is supposed to increase their "productivity" As far as I am concerned, you can only send so many emails, type so many letters and have so many meetings in a year. If, on the other hand, you give someone £50,000 a year for producing not 45,000 widgets (when they were on £45,000), but 55,000, their productivity has increased.
So, to get back to education, what do we want out of it? The answer is we want a workforce that can read, write, do arithmetic , and a certain number of doctors ,dentists,chemists, phycisits etc etc.
So let's stop pretending noone can fail. When I did my A levels, the pass mark was adjusted up or down so that 30% ALWAYS failed. This meant you could fail even if you got eg 60%, if 70% of the candidates did better than you. This helped the Universities to have classes that were actually ready for tertiary education ( unlike the present system where universities are having to hold summer classes to prepare students. They even need to be taught how to write an essay, for God's sake.)
Draw a line. Stop debasing exams and inflating expectations. Make sure that pupils do NOT leave primary without basic skills.
And we might just have a workforce that can take on the Indians and Chinese in a few years time. Just think - how many British school children speak Chinese? How many are learning it? It doesn't matter, because 100% of Chinese children are learning English. Yeah, right.

Baumol's cost disease (also known as the Baumol Effect) is a phenomenon described by William J. Baumol and William G. Bowen in the 1960s. The original study was conducted for the performing arts sector. Baumol and Bowen pointed out that the same number of musicians are needed to play a Beethoven string quartet today as were needed in the 1800s; that is, the productivity of Classical music performance has not increased.
In a range of businesses, such as the car manufacturing sector and the retail sector, workers are continually getting more productive due to technological innovations to their tools and equipment. In contrast, in some labor-intensive sectors that rely heavily on human interaction or activities, such as nursing, education, or the performing arts there is little or no growth in productivity over time. As with the string quartet example, it takes nurses the same amount of time to change a bandage, or college professors the same amount of time to mark an essay, in 2006 as it did in 1966.
Baumol's cost disease is often used to describe the lack of growth in productivity in public services such as public hospitals and state colleges. Since many public administration activities are heavily labor-intensive and have a limited desirable provider-customer ratio, there is little growth in productivity over time. As a result, the costs of the bureaucracy will inflate quicker than the growth in the GDP.( courtesy of Wikipedia)
Chris Dillow's conclusion is you need to cut functions - as in get rid of the bureaucrats.


Winchester whisperer said...

That's interesting. Healthcare is definitely a sinking cost. Not sure about education. I read somewhere that only 6% of maths teachers have a degree in maths. I think it's worth paying up for well-qualified teachers.

kinglear said...

ww- agree absolutely - the problem is ( as Graeme Archer says, so many universities are now dropping eg Chemistry and Maths are core courses, within a couple of generations of students, its gone.

Winchester whisperer said...