Epiphenomenon of Education and Wealth

L’Art pour l’Art, to Learn for Learning’s Sake

Let’s examine the direction of the causal arrow, that is, whether it is true that lecture-driven knowledge leads to prosperity. Serious empirical investigation (largely thanks to one Lant Pritchet, then a World Bank economist) shows no evidence that raising the general level of education raises income at the level of a country. But we know the opposite is true, that wealth leads to the rise of education—not an optical illusion. We don’t need to resort to the World Bank figures, we could derive this from an armchair. Let us figure out the direction of the arrow:

Education → Wealth and Economic Growth

or

Wealth and Economic Growth → Education

And the evidence is so easy to check, just lying out there in front of us. It can be obtained by looking at countries that are both wealthy and have some level of education and considering which condition preceded the other. Take the following potent and less-is-more-style argument by the rogue economist Ha-Joon Chang. In 1960 Taiwan had a much lower literacy rate than the Philippines and half the income per person; by the time of Chang’s comparison, Taiwan had ten times the income. At the same time, Korea had a much lower literacy rate than Argentina (which had one of the highest in the world) and about one-fifth the income per person; by then it had three times as much. Further, over the same period, sub-Saharan Africa saw markedly increasing literacy rates, accompanied with a decrease in their standard of living. We can multiply the examples (Pritchet’s study is quite thorough), but I wonder why people don’t realize the simple truism, that is, the fooled by randomness effect: mistaking the merely associative for the causal, that is, if rich countries are educated, immediately inferring that education makes a country rich, without even checking. Epiphenomenon here again. (The error in reasoning is a bit from wishful thinking, because education is considered “good”; I wonder why people don’t make the epiphenomenal association between the wealth of a country and something “bad,” say, decadence, and infer that decadence, or some other disease of wealth like a high suicide rate, also generates wealth.)

I am not saying that for an individual, education is useless: it builds helpful credentials for one’s own career—but such effect washes out at the country level. Education stabilizes the income of families across generations. A merchant makes money, then his children go to the Sorbonne, they become doctors and magistrates. The family retains wealth because the diplomas allow members to remain in the middle class long after the ancestral wealth is depleted. But these effects don’t count for countries.

Further, Alison Wolf debunks the flaw in logic in going from the point that it is hard to imagine Microsoft or British Aerospace without advanced knowledge to the idea that more education means more wealth. “The simple one-way relationship which so entrances our politicians and commentators—education spending in, economic growth out—simply doesn’t exist. Moreover, the larger and more complex the education sector, the less obvious any links to productivity become.” And, similar to Pritchet, she looks at countries such as, say, Egypt, and shows how the giant leap in education it underwent did not translate into the Highly Cherished Golden GDP Growth That Makes Countries Important or Unimportant on the Ranking Tables.

This argument is not against adopting governmental educational policies for noble aims such as reducing inequality in the population, allowing the poor to access good literature and read Dickens, Victor Hugo, or Julien Gracq, or increasing the freedom of women in poor countries, which happens to decrease the birth rate. But then one should not use the excuses of “growth” or “wealth” in such matters.

I once ran into Alison Wolf at a party (parties are great for optionality). As I got her to explain to other people her evidence about the lack of effectiveness of funding formal education, one person got frustrated with our skepticism. Wolf’s answer to him was “real education is this,” pointing at the room full of people chatting. Accordingly, I am not saying that knowledge is not important; the skepticism in this discussion applies to the brand of commoditized, prepackaged, and pink-coated knowledge, stuff one can buy in the open market and use for self-promotion. Scholarship and organized education are not the same.

Another party story. Once, at a formal fancy dinner, a fellow in a quick speech deplored the education level in the United States—falling for low-math-grades alarmism. Although I agreed with all his other views, I felt compelled to intervene. I interrupted him to state the point that America’s values were “convex” risk taking and that I am glad that we are not like these helicopter-mom cultures—the kind of thing I am writing here. Everyone was shocked, either confused or in heavy but passive disagreement, except for one person who came to lend her support to me. It turned out that she was the head of the New York City school system.

Also, note that I am not saying that universities do not generate knowledge at all and do not help growth (outside, of course, of most standard economics and other superstitions that set us back); all I am saying is that their role is overly hyped-up and that their members seem to exploit some of our gullibility in establishing wrong causal links, mostly on superficial impressions.