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Insights 6: 5 March 2021
Newsroom: Eric Crampton on the modelling behind the Climate Commission's report
Podcast: David Law discusses education spending and performance in New Zealand
Report: Research Note - Educational Performance and Funding in New Zealand

The After-M*A*S*H
Dr Eric Crampton | Chief Economist |
During the pilot episode of M*A*S*H, surgeon ‘Hawkeye’ Pierce wrote a letter home explaining the difference between surgery at a Korean War mobile surgical hospital, and the surgery back home.

In normal surgery, you have time to get everything right. Clean sutures mean less scarring. Finesse matters.

But at the field hospital, things are just a little different. Taking the time to save the leg of the man in front of you, while saving his life, means the man on the next gurney over dies. He needed attention too.

Hawkeye called it meatball surgery. It wasn’t pretty, but it was the least bad option.

The government performed some admirable meatball surgery in the pandemic’s early phase. The wage subsidy scheme came through unbelievably quickly and prevented a lot of labour scarring. A make-do border system was thrown together with bailer wire, and largely held in keeping the virus out while making it nearly impossible to travel.

A year in, policies set in a mobile army field hospital might stand reassessing.

The government promised $2.6 billion on ‘shovel-ready’ projects to prevent mass unemployment. None of the projects received more than the most cursory cost-benefit assessment.

Consenting delays meant that not even the shovels were shovel ready, so the projects have not yet started.

The construction sector is running flat out. Without better assessment, the shovel-ready projects risk pulling scarce workers away from important jobs for building projects that add little value.

On the other side, if the government believes that border controls will have to run long after everyone is vaccinated, it really might be worth investing in systems enabling far more people to travel.

The government’s books show that things have, thus far, not been as bad as anyone has expected. But there is no extra money burning holes in the government’s pockets.

If we strip away one-off spending due to Covid, and if we strip away the effects of downturns on tax revenue and benefit spending, a substantial structural deficit still remains through 2025 – the end of the forecast period.

The Budget update might revise the numbers, but new spending programmes without new taxes would worsen the structural deficit. New Zealand needs to maintain debt headroom to deal with natural disasters.

The time for meatball surgery in the Covid response is over.

The education they deserve
Joel Hernandez | Policy Analyst |
In the last twelve months, there have been a growing number of stories about New Zealand’s educational decline. Stories of falling mathematics performance and illiterate teenagers in the media make for grim reading.  

Arresting this trend requires a better understanding of the problem and its potential causes. In the Initiative’s latest report, Educational Performance and Funding in New Zealand, Dr David Law and I show that the status quo is not serving our children as well as it should.

Major international education surveys, PIRLS, TIMSS and PISA all show declining performance in reading, mathematics, and science in both primary and secondary school students.

For instance, between 2000 and 2018 our ranking in maths deteriorated significantly, from 4 out of 41 to 27 out of 78 participating countries in PISA. In the latest PIRLS survey in 2016, New Zealand only ranked 26th out of 29 OECD observations. In the latest TIMSS survey in 2019, New Zealand secondary school students ranked 19th out of 20 OECD observations for maths and 17th out of 20 for science.

Surprisingly, however, at the same time as our relative and absolute educational performance has fallen, New Zealand’s relative rate of growth in per-pupil spending on both primary and secondary students has increased substantially.

The rate of growth was such that per-pupil spending on primary students increased from 76.9% to 93.9% of the OECD average between 2006 and 2017. For secondary students, spending increased from 75.5% to 105.4% of the OECD average over the same period.

In real terms, the Ministry of Education increased per pupil spending by over $1,700 for primary school students and over $2,200 for secondary school students during this period – an increase of 12.4% and 11.9%, respectively.

With all of that said, OECD evidence suggests that the positive relationship between spending and educational performance one might expect is not universal. New Zealand does not appear to be an outlier in this case.

For countries that cumulatively spent over US $50,000 on the education of 6-15-year-olds, a group to which New Zealand belongs, higher levels of spending do little to lift educational performance. In fact, spending explains only 1% of the variation in educational outcomes.

Only in poorer countries such as Colombia, Thailand, and Peru, that spend cumulatively less than US $50,000 per pupil, tend to show a positive relationship between education spending and performance.

Not only does it appear that our additional investment in education has not borne fruit in terms of greater achievement, but it also seems as though we should not necessarily expect that it will in the future.

Fortunately, there are other promising avenues to explore that may explain New Zealand’s educational decline and how we might fix it.

Read Educational Performance and Funding in New Zealand here.

The Theory of Human Stupidity
Leonard Hong | Research Assistant |
Humans are complicated. We are intelligent species that dominated the world with our knowledge and brilliance. We built pyramids and skyscrapers, we went to the moon, and we invented Pokémon GO.

Yet, throughout human history, human stupidity has triumphed time and time again – whether it is communism and fascism killing millions of people, recurring asset price bubbles and their eventual bursts, or carelessness leading to environmental degradation. We never cease to stop causing unnecessary harm to ourselves or others.  

Stupidity applies on an individual level, too. We have dozens of cognitive biases, believe our own lies, and feel good about it.

But is there something more systematic about human folly?

Italian economic historian Carlo M. Cipolla believes so. In his book 'The Basic Laws of Human Stupidity', Cipolla identifies four different kinds of people – stupid people, helpless people, intelligent people, and bandits.

As a group, stupid people are far more powerful than the Mafia and the Military-Industrial Complex because they actually drive and influence social outcomes. 

Cipolla found that the same proportion of people in any group tended to be stupid, even within Nobel laureates or professors, or blue-collar workers. The reality is that we have to face the same proportion of stupid people, no matter where we go.

Everyone underestimates the effects of stupid people in action because it is not apparent. As a result, non-stupid people underestimate the damaging power of stupid people.

Intelligent people benefit themselves and society; bandits steal from others to benefit themselves; helpless people are exploited for their naivety despite contributing positively to society. However, stupid people are counterproductive to both their own individual and society's overall interests.

Cipolla says that a stupid person is far more dangerous, especially if the individual was born into the elite class. Their total damage capacity is infinite within their potential position as bureaucrats, generals, and even politicians.

As stated by Yuval Harari, history teaches us that people must never underestimate the role of stupidity in human history. It is one of the most powerful forces around the world.

We cannot trust human decency and supposedly good human leadership to do what is best for humanity. We can only hope that is the case, but stupid humans could win at the end of the day.

On The Record
Our podcasts and videos this week
  • David Law discusses education spending and performance in New Zealand 
If you would like to listen to our latest podcasts, please subscribe to The New Zealand Initiative podcast on iTunesSpotify or The Podcast App.
All Things Considered
  • Graph of the week: Western countries compete for the unenviable position of having the largest increase in real house prices
  • Less 'kind talk', more rigour needed in post-Covid economy
  • Myth or Measurement: What does the new minimum wage research say about minimum wages and job loss in the United States?
  • What's the worst job you ever had
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