Stephen: Kling’s core issue (in essence, a restatement of Mark Twain’s point never to confuse schooling with education) is critical, and is not a theoretical concern. The stimulus is supposedly going to spend an incremental $100 billion on education. The problem is that there is no good evidence, contra Goldin and Katz, that this is really going to help anybody read, write, or do math any better, never mind help them to compete economically.
Study after study has shown that, at a minimum, there is no clearly demonstrable educational benefit from more aggregate spending on schools. I.e., there is no proof that more spending will fail to improve achievement, but there is also no proof that it will.
The classic study is Hanushek, which is a meta-analysis of more than 400 published, peer-reviewed analyses of spending increases vs. outcome changes, showing what is essentially a distribution of measured effects scattered around zero. To be fair, Hanushek had an epic methodology debate with Greenwald et al., who claimed to find a small positive effect. Brookings did a book in which a number of scholars weighed in, including Hanushek and Greenwald, and I think it would be hard to conclude upon reading it that there is good evidence of a relationship between aggregate spending and outcomes. I think it’s a fair statement of analytical opinion that there is no widely accepted evidence that there is a material causal relationship between aggregate spending and student achievement. For what it’s worth, this is consistent with accepted opinion, to my knowledge, in other OECD countries.
Goldin and Katz’s book is excellent. I cite it approvingly and use data from it in my recent National Review article “Factory Guy.” Their reconstruction of the wage structure of early-20th-century manufacturing industries is worth the price of the book by itself. Further, I fully believe in their basic thesis (at least at a high level of abstraction), which I would state as roughly: Workers in our economy are in a race between development of as-yet-non-commoditized cognitive capabilities on one hand, and wage reductions as capabilities are commoditized through technological advances on the other. But, in my view, they fail to make the case that additional years of schooling consistently create the relevant capabilities. In other words, I would say that we are in a race between capabilities and technology, rather than education and technology.
Goldin and Katz make the commonsense case that the interaction of supply, demand, and institutions (what they call the SDI framework; see page 293) accounts for changes in wage structure. This rests on the central insights they develop in Chapter 3, where they say (on page 101):
The most important conclusion to be drawn from this analysis is that the driving force behind the explosion of the college wage premium of the last 25 years was a sharp decrease in the growth rate of the relative supply of educated workers and not an increase in the growth rate of the relative demand for skill.
But what they fail to do (and I don’t think an analysis that does it is feasible) is disentangle correlation from causality. To what extent does attendance at various academic institutions create skills versus act as a marker for capabilities that drive higher wages? Has there been a structural shift in this balance over the past several decades? Does post-1980 technology, on balance, interact with capabilities and educational attainment in structurally different ways than earlier technology shifts? And so on.