Spending gets results.

Photographer: Scott Eisen/Bloomberg

More Money Really Does Make Schools Better

Noah Smith is a Bloomberg View columnist. He was an assistant professor of finance at Stony Brook University, and he blogs at Noahpinion.
Read More.
a | A

It has become an article of faith among education reformers that throwing more money at public education doesn’t improve student performance. But a steady drumbeat of careful research studies is calling this into question. What if more money really does work?

The case against spending more on schools comes in two basic forms. One is to look at various U.S. states, and see whether the ones that spend more on education enjoy better outcomes. This has been done many times, with decidedly mixed results. Some studies show little state-by-state correlation between spending levels and educational performance, while others show a fairly substantial one.

The second case against increased spending comes from looking at correlations across time. If more money is better, we’d expect to see increases in school funding followed by improvements in performance. In fact, though public school spending has increased a lot in the past couple of decades, achievement hasn't really increased much.

So with mixed evidence from state-by-state analysis and discouraging evidence from the history of spending increases, many people are ready to conclude that throwing more money at education is a losing battle. Some spending opponents place their hopes in charter schools and other reform efforts, while others claim that education just doesn’t work -- that academic ability is either innate or learned from an early age.

But the discouraging evidence cited above is all about correlation, not causation. States that spend more on education might do so because people in those states value education more highly. But those states also might spend more because they need to.  That might be the case because they have a population that gets less education at home, or because local living costs are higher or because transportation is more costly. To make an analogy, if we compared spending on cancer treatments to rates of cancer, we’d undoubtedly find that regions with more cancer spend more on chemotherapy and radiation therapy. But that doesn’t mean those remedies are ineffective -- it just means people spend more because they need the treatments.

Similarly, the lack of improved national performance doesn’t mean that increased spending was ineffectual. During that period, the U.S. had a large influx of low-skilled immigrants, who are bound to rely on public schools more and parents less. There also was a large increase in single parenthood, which  probably means those kids get less education at home as well. Public schools had to fight these headwinds and without the extra money, educational outcomes might have increased less than they did or even declined.

So beware of correlations. Instead, when asking whether spending more on education boosts outcomes, it's better to look at policy experiments, such as situations where spending was suddenly increased.

One recent such study found that increased spending between 1955 and 1985 improved student performance substantially in places where courts ordered schools to spend more. But the mid-20th century might be a very different time than today. The U.S. population has changed, for one thing. Also, it might be that we wrung out all the available improvements from increased spending long ago, and that more at this point would just be waste. These kinds of caveats -- called “external validity” by economists -- are always important when evaluating policy experiments. To get the most trustworthy evidence, we should look at experiments that are as close as possible to our place and time.

Fortunately, we now have such a study. Economists Julien Lafortune, Jesse Rothstein, and Diane Schanzenbach have a new paper looking at court orders, much like the earlier study did -- but this paper looks at episodes after 1990. The authors find that in places where courts told public schools to spend more on low-income students, those students’ achievement levels began to gradually but steadily increase. As far as the authors can tell, the improvement in low-income student performance continues even several years after the funding increase.

The authors then take a look at the mechanisms by which increased spending improves performance. The spending doesn’t lure richer kids to poor districts, they find. But it does seem that certain types of spending, especially on non-instructional items like capital improvements and support services, make a significant contribution. In other words, providing better physical and social environments for poor kids helps boost their performance relative to their richer peers.

This evidence should come as a wake-up call for everyone involved in education policy discussions. The conventional wisdom that more spending doesn’t work appears to be wrong, at least in part -- more money for education does seem to help poor kids. That doesn’t mean that school reforms, including charter schools, are bad. It just means that more money for poor schools can be a real help.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author of this story:
Noah Smith at nsmith150@bloomberg.net

To contact the editor responsible for this story:
James Greiff at jgreiff@bloomberg.net