Normal Distributions Normally Aren't Normal

 

I saw an interesting complaint about distributions in GCSE results, and then a second article, posing the loaded question “Why do some subjects not have bell curves (see here and here)?” The big issue with their line of enquiry is apparent confusion between what they call a ‘normative process’ and a normal distribution. You see, most bell-shaped data you encounter in the real world isn’t actually normal - at least not in the strict mathematical sense. The normal distribution - also known as the Gaussian distribution - follows a precise mathematical form: 

f(x) = 1 / sqrt(2 * pi * sigma^2) * exp(-(x - mu)^2 / (2 * sigma^2))

It’s perfectly symmetric around its mean mu, defined only by its mean and variance sigma^2, and has tidy, well-known proportions, where about 68% of values fall within one standard deviation of the mean, about 95% within two, and about 99.7% within three. That’s the pure Gaussian world - it’s elegant, compact, but rarer than you think, so it’s not really ‘normal’ at all. If it's not perfectly symmetric and unbounded on both sides (that is, with no limits, skews, outliers and mixtures) then it is not technically a normal distribution. 

So, it’s certainly the case that many real-world data sets produce histograms that look like bell curves, yet deviate in subtle but crucial ways. Some such examples would be fat tailed distributions (like in many financial data sets), which have more extreme outliers than a Gaussian predicts; asymmetric processes (like biological weight categories); and combinations of multiple subpopulations (like male and female height) can produce an overall bell shape that’s not truly normal, to name three examples. All that is to say, the bell curve is a shape, but it’s not a guarantee of normality. Anyone who uses the concept of normality when it isn’t really there opens themselves up to errors, like the increased likelihood of underestimating the probability of rare or extreme events, like misapplying statistical tests that rely on Gaussian assumptions, and like drawing misleading inferences from what seems on the surface like ‘tidy’ data.

If I may suggest a better way to think about normal here. The normal distribution is an idealisation - a mathematical lens that sometimes fits reality well, but often only approximately. Real data lives in a messier world. Consequently, while the Schools Week article rightly draws attention to the potential harms of rigidly applying a bell curve to educational outcomes, it implicitly assumes that the bell curve is a natural or unavoidable benchmark for student ability, which is a hasty assumption. Student performance, like many social phenomena, is influenced by a mix of factors - personality profiles, teaching quality, socioeconomic background, learning differences, levels of freedom, etc - which do not necessarily conform neatly to a symmetric Gaussian model.

More broadly, this reflects a deeper issue that has pervaded education for too long: the push toward homogenisation - an obsession with fitting diverse learners into uniform models of “average” performance. This not only misrepresents the true distribution of abilities (especially at the upper end), but also unfairly neglects or distorts those who fall outside the assumed curve.

On The Dangers Of Home-Schooling

This is a blog post about home-schooling - and by home-schooling, I don't mean having to teach your kids at home because of Covid; I mean the radical decision to permanently teach your children at home and not ever send them to school.

I respect anyone’s decision to home-school their children, but I strongly suspect home-schooling is less good for children’s overall development than a traditional education, and that the costs will be brought to bear on young adulthood and beyond. Here’s an analogy. I think humans are like trees, and socialisation and encountering and dealing with the world full on is what makes us strong, grounded, and gives us the deep roots to withstand most natural forces. Home-schooling treats children more like bean plants, as a light, gentle organism requiring careful protection at all times, and with a trellis so it can be carefully guided in a safe manner.

Superficially, home-schooling can appear successful – especially if your child gets good grades and turns out to be a half-decent young adult. But it probably isn’t successful in the medium to long term. I’ve never met a home-schooled young adult who doesn’t lack some key behavioural traits that come from healthy socialisation, or who isn’t ill-equipped to manage the world in several essential ways, even though they themselves do not pick up the nuanced social cues that would help them understand why they are different. It won’t appear immediately obvious where the lack is when a child is not socialised properly or exposed to the challenges that come from being surrounded by peers. Although one obvious disadvantage is that if you are only being taught by parents and grandparents then you are limited to the scope of their understanding, and devoid of a diversity of input.

But there’s another profound reason that’s harder to apprehend. It’s to do with the more abstract life picture you create when surrounded by fellow pupils – it’s a bit like being immersed in a drama, with complex, multi-layered plots, intimately connected to your cognitive development - emotional cultivation, intellectual exploration, authority, diversity of problems, friendships, cultural identity, sexual awakening (interest in the opposite sex), and so forth – it resembles a shared drama, where you abstract out of it everything, good and bad, that plays a part in shaping your childhood identity. That’s an immeasurably valuable part of growing up that is not catered for in home-schooling, and its absence is not likely to be felt very tangibly by those who underestimate its power.

A bean plant, however bright and lovely, is not going to be equipped to handle the demands a tree needs to endure – and we should resist the temptation to wrap our young in cotton wool and place them in gilded cages. It won’t do them the good they need in the long run.

They Don't Know When They Are Onto A Good Thing

A parliamentary committee has got its knickers in a twist, believing that the tuition fee system for England's universities is ripping off students and giving taxpayers poor value for money. The reality is, the system is not ripping off students - the size of the debt the committee is balking at is to do with there being far too many students, doing degrees not worth their price to the taxpayer.

Currently around 45% of student loans end up being written off, so if the article is right in saying that in the next 25 years the debt is going to rise to £1 trillion, then at this rate the cost to the taxpayer will be in the region of £450 billion of unpaid debt (this will be offset by tax revenue from post-graduate earnings, but that would still come into the treasury in tax revenue if prices of degrees better matched their value to society).

The report calls for "immediate reforms" - such as “cutting interest rates on repayments”. This is a foolish idea: interest rates constitute the price of borrowing, and should not be cut, because money loaned now will not be worth as much in the future, so the interest reflects the cost of the loan to the lender. If you’d lent me £50 in 1989, and I insisted on paying it back in 2019 - it doesn’t take much imagination to work out who comes out best on the deal.

The student loan system isn't a terrible system if and when graduates pay it back through their high earnings. The system is geared towards bridging the disparity between your peak earnings, your peak equity and your peak debt, because the majority of your biggest expenses come in your first two decades of your adult life, and the majority of your equity and highest earnings come in the last two decades of your working life.

Consequently, cries that the system is unfair to students are really quite laughable - unless you have a very odd interpretation of the word 'fairness'. A post-graduate student who goes on to earn £24,000 a year will pay back just £42 per month. Earn £27,000 a year and he'll pay back just £65 a month. Earn £30,000 a year and the repayment is a meagre £87 - hardly unreasonable sums.

The main thing that muddies the waters in this system is when too many students are doing degrees. And it isn't surprising to find in a study that when prices of degrees are more in line with what they cost to obtain, the motivations to find higher paid work are more apparent - which is exactly what we'd hope to find.

Further reading - if you would like a more detailed treatment on this, I once put it all down in a blog here:

Everything You Need To Know About Why We Absolutely Should *Not* Scrap Tuition Fees (But Were Afraid To Ask)

Generation Snowflake Gets The Wrong End Of The Stick Again

 

Let me introduce you to a terribly thought out article in The Guardian by Afua Hirsch, where she tells us how 'alienating and elitist' she finds Oxford and Cambridge Universities because they contain too many white students.

Like Yasmin Alibhai-Brown, Salma Yaqoob, Mehdi Hasan and Diane Abbott, Afua Hirsch is one of the leading figures in cry-baby politics: a group of half-witted snowflakes who craft a public profile out of looking for things to take offence to, even when, as you'll see below, there is nothing offensive happening at all. 

Because of which, they almost never arrive at the (correct) conclusion that the problem is they haven't thought their arguments through adequately, and instead arrive at the (incorrect) conclusion that the reason so many people are against them is because of their skin colour, religion or ethnicity. The result of this is that all kinds of people and institutions frequently face unfair slurs due to intellectually sub-standard criticisms.

Anyway, personalities aside, let's be generous and just focus on the intellectual weight of Afua Hirsch's argument in the article: that the reason there are so few BME (black minority ethnic) students at Oxford or Cambridge is because those two universities are so horribly 'alienating and elitist'.

Even if we grant Afua Hirsch the so-called fact of Oxford and Cambridge being under-represented by BME students, it's easy to see that it is not to do with institutional racism at our top universities, it is to do with the fact that prospective BME candidates are far outnumbered by white British candidates, which has a lot of complex causes - but none of them are the fault of Oxford or Cambridge.

It is quite easy to be outraged at statistics if you don't understand them, and clearly Ms Hirsch misses the most important statistic in all of this: that there are simply not enough BME people in the country to fulfil her wish. A quick Google search reveals to me that if a top university accepted students in a way that precisely represented the UK demographic, then for every 100 people, there would be 87 whites, 7 Asians, 3 blacks and 3 others. Even on strict egalitarian grounds it is very difficult to justify a selection policy that doesn't see BME people vastly outnumbered by whites.

But, of course, that's only part of the flaw in her reasoning - the other thing wrong with her misunderstanding of statistics is that Oxford and Cambridge are not looking for a representation in terms of ethnicity or skin colour; they are looking for representation in terms of academic ability. The only way they are 'alienating and elitist' is by wanting the best and brightest students.

Cambridge and Oxford universities are the seat of academic excellence in the UK - and if the statistics show that only a small proportion of BME people get into Oxford or Cambridge, and a large majority of students are white, that does not show any institutional unfairness on the part of Oxford or Cambridge. It simply shows that if Oxford and Cambridge are trying to attract the most academically gifted students in the country, and if by far the greatest proportion of the most academically gifted students in the country are not in the BME demographic, then Cambridge and Oxford's admission policy is completely fair.

There is certainly a conversation to be had about all the ways that BME and under-privileged pupils in schools are disadvantaged or coming up against barriers to fulfilling their potential, but that's not an indictment against our two best universities.

The same principle is true when talking about pupils who are not privately educated - they are also not being unfairly discriminated against. The statistics show that only 10% of UK pupils are privately educated yet around 50% of Cambridge and Oxford graduates come from private education. Once again, people who think this exhibits unfairness are confused about what fairness is.

A scholastic system is fair if results match ability, hard work and diligence. Therefore, if Cambridge and Oxford are trying to attract the most academically gifted students in the country, and if 50% of the most academically gifted students in the country are in private schools, then Cambridge and Oxford's admission policy is completely fair on this matter too.

 

 

Afua Hirsch's article is a crassly distorted attempt to stir up ill-feeling when none need exist. By failing to understand statistics she has not grasped that Oxford and Cambridge Universities aim to admit the most academically talented students - and that therefore, the fair percentage of BME admissions depends on what proportion of the UK's most academically talented students are BME students.

 

If it is the number that is currently studying at Oxford and Cambridge then those admissions have the right ratio of BME students. Otherwise, what Afua Hirsch is asking us to believe is that Oxford and Cambridge Universities are deliberately disadvantaging themselves in the academic results tables by discriminating against brighter but unselected BME students. There is no madness to which our nation's leading snowflakes won't subject us if it gives them a chance to play the victim game and divest these topics of rational enquiry and sensible reasoning. 

Everything You Need To Know About Why We Absolutely Should *Not* Scrap Tuition Fees (But Were Afraid To Ask)

Politicians are often playing political football with the matter of university tuition fees and whether they should be 'free' or not. I italicised the word free because, as any thinking person ought to understand, free university education is not free at all - it simply means that the cost of obtaining a degree is transferred from the beneficiary of the degree to the taxpayers. It also means forgetting about all the spillover costs of scrapping tuition fees - and here is not the sort of place where I am going to let you get away with that.

It's actually unbelievable to me that people can argue for 'free' tuition' fees, and not be embarrassed by how careless they've been in ignoring who picks up the cost, the nature of supply and demand, and the numerous unseen costs attached to this policy.

The supply and demand problem of further education began to get worse with the Blair government - his party wanted more people to go to university, and they wanted tuition fees lowered so that it encouraged more people to sign up to higher education. Alas, Blair never bothered to consider whether too many people might go to university at a reduced rate, and that the lower fees might increase demand to an unhealthy or unmanageable level. As for the fact that however much you increase demand you will not increase the universities' capacity for more students than they can take....nope, there wasn't even a mention of that.

At their most expensive, tuition fees are currently at the top level of £9250 - which basically amounts to a loan from the government which is paid back when the graduate earns more than £21,000 per year. If you are coming at this with a socialist agenda, then the current tuition fees system is pretty much the fairest system you could wish for: the government loans to those who need the money to obtain a degree, and it only asks for payment when the post-graduate can afford to repay with a small proportion of their earnings. Anyone who thinks that that is unfair has a pretty peculiar idea of unfairness.

What you have to realise is that nothing comes for free in education. If tuition fees are scrapped, then the cost of obtaining a degree is picked up by the taxpayers. Tax that goes on to subsidise higher education amounts to lots of tax paid by low earners to subsidise people better off than themselves. We know this because we know that two thirds of working people do not have a university degree, and we know that on average obtaining a degree boosts one's life earnings by 60% (at least, that was true last time I checked - but that percentage is going to decline if the market is oversaturated with post graduates).

The only way to think correctly on this matter is to try to ascertain the value of higher education in terms of prices. The value of higher education is this. University fees should amount to exactly what it costs to obtain a degree, and fees (prices) should match demand, whereby the right number of people are getting degrees, and degrees are priced at their true value - a value that measures costs associated with supply and demand. As I said the other day to a proponent of scrapping fees, you cannot even begin to argue for 'free' university education until you have tackled the four most pertinent issues:

1) How would you square the demand-side problem of your policy, given that prices (to the students) will be misaligned with limited supply?

2) How would you square the supply-side problem of your policy, given that even with highly increased demand, 'free' tuition won't magically make all those extra university places available?

3) How would you ensure the equitable allocation of resources (degree courses) in a system where demand heavily outweighs supply, and in a situation where you no longer have price signals to ensure the supply and demand curves intersect?

4) How would you respond to the fact that the UK will suffer a degree inflation due to a surplus of post-graduates?

As expected, she made no attempt to answer any of those questions - she barely even acknowledged that they needed answering. But this was no surprise, because the reality is, answering the questions properly will not lead you to conclude that scrapping tuition fees is a good idea - it will scream the opposite. Scrapping tuition fees would distort the market signals regarding supply of degrees and demand for university places, as it would artificially ramp up demand for places, and bring deadweight losses regarding how people value university education.

You're not even getting off the ground if you're not getting this most basic of points. When fees are too low, people will study even though the cost of going to university is greater than the benefits of a university education. When fees are too high, people will be put off studying, which means there'll be too few university graduates. A few of the low-fee protagonists have argued that a decline in applicants would be evidence that the fees are too high. It would not be, as I'll explain in a moment; it would be evidence of less educational waste, with those no longer doing degrees being the people for whom the cost of going to university is greater than the benefits of a university education.

Of course, the standard argument in favour of subsidised higher education is that higher education confers benefits on others as well as on the main beneficiary, so it must be good for society if it is subsidised. It's a nice idea, but like many nice ideas, the logic is faulty. Deodorant, mouthwash, shampoo and washed clothes each confers benefits on others as well as on the main beneficiary, but no one is arguing for deodorant, mouthwash, shampoo and washing powder to be subsidised.

Here's the key reason why - to take washed clothes as one example - when you wash your clothes you enjoy the benefits of clean and fresh clothes, but so do others too - your not smelling, your looking smarter, and your being a generally more pleasant person to be around are benefits that do not need subsidising, because you'd willingly buy washing powder yourself to ensure such things happen. The same is true of avoiding bad breath and greasy hair - the government doesn't need to subsidise mouthwash and shampoo because it knows you'll willingly pay for them yourself in order to feel fresh and at the same time be socially agreeable.

This is what higher education is like - the benefits and rewards that are obtained (increased employment opportunities, higher earnings, being more highly educated, higher social status, academic prestige, greater knowledge, better conversations, and greater opportunities) certainly extend beyond the person doing the degree, but they are benefits and rewards that people feel are worth having without the need for a subsidy. That's why a heavy education subsidy only encourages inefficient numbers of students, and why a system that charges people the cost of their degree won't discourage people with real promise and potential from entering higher education.

For those reasons - unusual as it is - the government has its policy just about spot on with tuition fees. It loans to those who need it, and it only asks for payment when the post-graduate can afford to repay with a small proportion of their earnings, which means smart people from poorer backgrounds need not be put off from further education. To have no tuition fees would be to spread the cost of people's higher education amongst the rest of the taxpayers - and quite why anyone thinks they should foot the bill is beyond me.

Another good thing about the government's policy is that it also avoids too much of a market mechanism in higher education, which, if too money-centred can be a bad thing. Consider why. Suppose Oxford and Cambridge had hiked up admission fees to attract the elite. Such a policy goes against the thing they should value most - academic credentials. If you are an employer looking to employ an Oxford graduate, who would you prefer; one who got in on scholastic merit, or one who got in because of a privileged financial background? The value of attending Oxford depends largely on the university's reputation, which is built primarily on prior academic excellence of former students. By having applicant quality as the measure of admission, the average student quality can be increased, which then further increases the prestige, which then increases the allure for high-quality future applicants.

A system that neatly balances the admission quantity between talented young people that can pay (and do), and talented people that can't pay and are helped along the way, is a system that is just about right. It is inevitably true that being from a privileged high-achieving background does confer advantages on young people that young people from working class backgrounds do not enjoy. This upsets lots of people - but it should not. Privilege mostly comes (either directly or indirectly) from high achievement. Therefore if you want to argue that that is a bad thing, you are arguing that a world in which achievement engenders advantage is a bad thing, which amounts to devaluing merit-based advantages - and to do that is to make a mockery of applying skills and working hard in general.

Are fees actually too low, not too high?

Instead of worrying too much about rising tuition fees, what should be considered is that putting up tuition fees might actually be a good thing for the country overall. There's no doubt that higher education brings about huge financial benefits to the county*, but there's also no doubt that having too many graduates devalues graduation in the labour market, and that in a state of diminishing returns the financial benefits would no longer bring about such efficiency.

The irony is, instead of worrying too much about rising tuition fees, what should be considered is that putting up tuition fees, or demoting some degrees to college level qualifications, might actually be a good thing for the country overall. We know that currently around 20% of post-graduates are doing a job that doesn't require a degree (this figure might actually be higher) - which is indication itself that there is a surfeit of degrees in a labour market with too few degree-level jobs.

There is another very good reason why value is so important - if degrees are valued commensurate with the landscape of both supply and demand, and of the labour market, there is a better chance of the number of graduate-level jobs matching the number of graduates. For example, the future job market is going to see many current graduate-level jobs replaced by computer technology, but it will also see an increase in other graduate-level jobs that look likely to grow in number. Only a proper market-based further education system can be optimally responsive to a rapidly changing labour market environment, particularly with the proliferation of service-industry jobs.

Prices are the market's method of signalling how much of a good is available against the level of demand for that good. An expensive good (like a degree) costs resources (time and money) but those costs signal that those who value degrees most will get them. The abolition of tuition fees would mean that universities have no way of signalling the true scarcity and value of university places to prospective students, particularly as through a taxpayer-funded system high and low demand opportunities are going to be similar if not equal in price. Students, like people in general, make much more informed decisions in life when signals accurately match supply and demand.

The supply-side problem of inflated degrees causes another issue too. According to Merryn Somerset Webb at MoneyWeek - one of the go to places for statistical updates - currently around 45% of student loans end up being written off, where the tipping point at which the whole thing starts costing rather than saving money is 48%. This problem is in part due to graduates earning less than expected, or sometimes nothing at all, but also due to the tax avoidance incentives woven into the system, such as salary sacrifice.

“With clever planning, an employee can use salary sacrifice to reduce their income below certain thresholds and therefore make further savings. Take student loans, for example; many students leave university with high hopes of landing a top job but can find themselves undone, with low pay and laden with debt. Repayment of student loans is 9% of income earned above £17,335 for those taking out student loans before September 2012, and £21,000 for those taking a loan out after 1 September 2012. This can often leave many university leavers with a lot less take-home pay than they need. Taking into account Income Tax and National Insurance, a graduate will take home just 59p in the £1 for part of their income earned above the repayment thresholds. This would further reduce to 49p in the £1 for income earned above the basic rate tax threshold and a quite frightening 32p in the £1 for each pound of income earned between £50,000 and £60,000 if the graduate has two children and is in receipt of Child Benefit payments.”

It's not exactly rocket science, is it? Suppose our graduate earns £30,000, and has a choice of putting money into her pension either via salary sacrifice or out of her net salary (whereby the tax is claimed back). If she does it using salary sacrifice, her official gross salary is not £30,000, it is £27,000. That cuts her National Insurance bill and her income tax bill – but most essentially, it also cuts her loan repayments from £810 to £540, where the resultant outcome is a take home pay of £20,907 instead of £20,277. That's all very nice for our graduate, but it's not such good news for taxpayers as a whole. It might well be time to ditch the salary sacrifice scheme.

The thing is, if the university supply and demand curves intersect - that is, if the demand for degrees and the supply of degrees are in market equilibrium, then you can be confident that the price at which this happening is an accurate one. However, once the system becomes skewed whereby a loan is involved yet nearly half the graduates never pay back even a penny of that loan, the alarm bells ought to start ringing, because it's obvious that this is down to there not being enough post-grads doing degree-level jobs. This is the market’s way of trying to tell us that there are currently too many people doing degrees.

Because the taxpayer picks up the cost of unpaid student loans, it means the surfeit of university degrees in this country end up being subsidised by the general public - many of which are low earners. Consequently, this means a great many of them are subsidising people that are doing degrees and never earning enough to pay them back, while the rest of the post-grads, the people that do pay them back, are effectively being taxed twice on the same degree. Only a very narrow thinker could believe that this is a system that's working well.  

I am fairly certain that even Jorbyn Corbyn is not stupid enough to think that if tuition fees were scrapped, there would magically be enough university capacity for everyone who wanted to take him up on this offer of a taxpayer funded free lunch. The only effective way to align number of degrees with demand for degrees is to allocate them with an efficient price system, because there are not an unlimited number of degrees nor are there a limited number of degree level jobs. Subsidising further education can no more eliminate degree inflation than adding more dollars to Zimbabwe’s hyperinflated economy can ease its monetary crisis.

What's the solution for a better model then? Personally I doubt any system would be without problems, because although it's true that market forces are the vital incentive-drivers missing from further education, it is quite difficult to forecast the value of a degree in terms of future earnings, overall value to the student, and by extension society. A philosophy degree is a valuable indicator for a prospective employer, so is an economics degree, but which is more likely to be a better return on the investment? How would that compare to, say, a geography degree or a degree in global development? You'd need a strong and reliable metric for this determiner, and that could be economically intractable.

Given that most students have no capital behind them, so no chance of paying their fees without a loan, my hunch is that the best system would be a system vaguely resembling what we have now, except that degrees would be priced in accordance with supply, demand and value; and universities, possibly backed by finance companies, would pick up the cost of the degree themselves, under a system in which students sign over a proportion of their future income in order to receive an education. This would provide greater incentives for universities to align degrees to their value, and it would increase competition in higher education amongst competing universities, because currently the state ensures that the universities don't have to worry too much about the students' ability to repay, creating moral hazard.

Universities that invest in the future earnings of their graduates would align the incentives of buyer and seller, increasing the chances of society having the right kinds of degree, the right number of degrees, and the fewest number of graduates defaulting on any part of their loan. The interests of the student and the university have to be aligned, where they both invest in the future of the student's education for their mutual benefit, eradicating as many perverse incentives as possible, and pricing degrees accordingly, and also in the process aligning the value of a degree with its wider value in society.

Are universities bastions of unfair discrimination?
I remember when the then Prime Minister David Cameron launched a scathing attack on the universities of Oxford and Cambridge for failing to recruit more BME (black minority ethnic) students, saying that racism in the UK’s leading institutions “should shame our nation”.

He was right that it's a shame that there are not more BME students in our leading universities, but he was quite wrong to lay the blame at the door of Oxford and Cambridge universities. The so-called fact of Oxford and Cambridge being under-represented by BME students is not to do with institutional racism at our top universities, it is to do with the fact that prospective BME candidates are far outnumbered by white British candidates, which has a lot of complex causes - but none of them are the fault of Oxford or Cambridge.

It is quite easy to be outraged at statistics if you don't understand them, and clearly David Cameron just didn't get that there are simply not enough BME people in the country to fulfil his wish. A quick Google search reveals to me that if a top university accepted students in a way that precisely represented the UK demographic, then for every 100 people, there would be 87 whites, 7 Asians, 3 blacks and 3 others. Even on strict egalitarian grounds it is very difficult to justify a selection policy that doesn't see BME people outnumbered by whites.

But, of course, that's only part of the flaw in David Cameron's reasoning - the other thing wrong with his misunderstanding of statistics is that Oxford and Cambridge are not looking for a representation in terms of ethnicity or skin colour, they are looking for representation in terms of academic ability. That is to say, Cambridge and Oxford universities are the seat of academic excellence in the UK - and if the statistics show that only a small proportion of BME people get into Oxford or Cambridge, and a large majority of students are white, that does not show any institutional unfairness on the part of Oxford or Cambridge. It merely shows that if Oxford and Cambridge are trying to attract the most academically gifted students in the country, and if by far the greatest proportion of the most academically gifted students in the country are not in the BME demographic, then Cambridge and Oxford's admission policy is completely fair.

There is certainly a conversation to be had about all the ways that BME and under-privileged pupils in schools are disadvantaged or coming up against barriers to fulfilling their potential, but that's not an indictment against our two best universities - and David Cameron should have known better - particularly as it's very likely the case that this phony 'outrage' is really just an attempt to court popularity amongst the BME demographic

More bad reasoning

Another piece of faulty logic doing the rounds in recent years has been the issue of caps. There used to be a cap to ensure universities had a limited number of students achieving grades AAB or higher at A-level. When the cap was lifted a few years ago, some higher education commentators were concerned that this would lead to the creation of an elite English “Ivy League”, reflective of the American higher education systems, and possibly even alienating students from poorer backgrounds less likely to achieve high grades.

Their fears have come to pass, as currently over half of students achieving AAB or better at A Level are concentrated in just twelve universities (they are: Manchester, Durham, Oxford, Cambridge, Nottingham, Leeds, Exeter, Bristol, Warwick, Birmingham, Sheffield and Southampton.)

However, even though there is a high concentration of high grade students attending just twelve universities, there is absolutely no reason why this should be a problem - in fact, it is quite the opposite: it is a blessing in disguise, because it gives exhibition to the healthiness of competition and the value of incentivisation to do well and go to the best universities.

By equal measure, a competitive higher education market incentivises universities to pull out all the stops to attract the brightest and best students and be as high up as possible in the league table of results nationwide. In a marketplace with healthy competition and demonstrable incentives to strive for high standards you would expect to see cluster groups of high achievers, just as you see in sport, in retail and in entertainment. But competition doesn't just make the best better, it raises (or has the potential to raise) the standard of everyone, because it should incentivise lower performers to up their game, either by improving standards, by innovating to capture an unfilled niche, or in some cases by trying something different altogether.

The other peculiar thing many people tell us is that if a higher education marketplace is too openly competitive it will work against people who are bright but from disadvantaged backgrounds. This is an absurdly counterfactual objection to have, because it will actually have the opposite effect. An education marketplace that is too money-centred will be a bad thing because, in terms of performance and results, selection against bright disadvantaged students will disadvantage the university.

Consider why. Suppose Oxford and Cambridge had hiked up admission fees to attract the elite. Such a policy goes against the thing they should value most - academic credentials. If you are an employer looking to employ an Oxford graduate, who would you prefer; one who got in on scholastic merit, or one who got in because of a privileged financial background? The value of attending Oxford depends largely on the university's reputation, which is built primarily on prior academic excellence of former students.

By having applicant quality as the measure of admission, the average student quality can be increased, which then further increases the prestige, which then increases the allure for high-quality future applicants. A system that neatly balances the admission quantity between talented young people that can pay (and do), and talented people that can't pay and are helped along the way, is a system that is just about right.

By capping or scrapping the fees universities can charge, politicians are depriving these great institutions of resources and stifling the competitive component out of the market, which is ultimately worse for students, universities, prospective employers and the everyday taxpayer. A reliable price system is the only way to show who benefits most from obtaining degrees and who benefits most from providing them. I don't think I could put it any more unambiguously and compellingly than that.

 

 
 

 

 


 

How We Educate Children Is Going To Radically Change

Education Secretary Justine Greening spent yesterday telling us how the English school system needs to support those who are struggling and not the privileged few. The desired outcome is correct, but her method for getting there is fraught, because the best way to improve the English school system is to drastically reduce the state's involvement in it. The problem with having the state running our education system is that it makes education far more expensive than it needs to be, and it diminishes the quality in doing so. So pupils get a less good but more expensive education than would be the case if more supply-side competition was introduced. 

I'm now going to tell you something that will startle you, or at least many of you. Without the meddling of the state in our education system, the majority of the pupils that go through the school system would get a similar kind of education to the quality that privately educated pupils get.

Let’s do some maths to illustrate this. Last time I checked, there were 9.7 million pupils in education, with approximately 630,000 attending private school. The government’s annual education spending is usually between £85-90 billion. Given that private schools have charitable status, so get no money from the state education budget, that equates to roughly 9 million state-educated pupils costing the government around £90 billion per year.

That works out at a cost of £10,000 per pupil per year. Now according to ISFA the average cost of private school fees is between £10-11,000 per year. It varies for reasons we needn’t go into here, but as you can see, the average cost to educate a pupil through the state system and the average cost to educate a pupil through the private system are very close. For roughly the same cost the government could send every pupil to the educational standard of private schools (excepting perhaps the very high fee-paying schools). That's even more alarming when you consider that currently only 7% of pupils go to private schools.  

Now I'm not denying that that is a deliberately overly-simplistic model of analysis - not least because even if all schools were of a higher quality nationwide there are going to be hundreds of pupils who through all kinds of background disadvantages and bad choices are not up to the standard of a decent education. But if nothing else, the arithmetic above gives a strong indication of how much the state education system fails to give so many of its pupils value for money (approximately 22% of school leavers in the state system leave with the reading, writing and numeracy skills of an 11 year old).

In the most comprehensive study ever conducted, spanning 25 years of international research comparing state-provided education versus market-competitive education Andrew J. Coulson showed in his paper Markets vs. Monopolies in Education just how far state schools fall behind the more highly competitive market-based schools. This is in no small part due to the fact that market-based education has the flexibility both to meet different needs and cater for diverse abilities of the pupils.

I know many in the UK are currently horrified with the idea of anyone but the state providing our education system, but that's mainly because most people are still relatively unapprised of quite how a market system would work. For ease, you have to remember that if you're paying for your child's education in a market-based system you get to keep more of your money, and the money you pay goes more directly in to benefit your child's education. In other words, more money reaches the school children, because under the current bureaucratic system there are more officials employed in the education sector than there are teachers, and in some schools there are more admin staff than there are teachers.

But what about the poorest people in society - isn't it important that the state provides them with an education?

No, it is important that the state provides them with the funds to acquire an education (vouchers sound like a good idea to me), not the education itself - that should be the parents' responsibility (where there are barriers to this happening then the law should become involved). Think of food - that is vitally important, more so than even education, but the state doesn't have a nationalised food policy, it subsidises hungry people with the cash to buy food.

 

That is what would happen in a market-based school system - the parents that cannot afford to pay for their children's education would receive the funds to pay for their children's education (and any help they needed), but the schools would be run privately, without the layers of state bureaucracy, meaning the money spent on education more directly benefits the children.

 

Furthermore, the price and quality of education improves significantly thanks to the forces of competition and increased choice on the part of the parents, and increased accountability on the part of the teachers. And remember, in my low tax, small state, market-driven financially autonomous society parents are going to have a lot more disposable income with which to make economic decisions.

 

Don't forget too that by and large a proper education is limited only to those who voraciously seek knowledge - the rest are just children herded like sheep into a classroom and narrowly shaped to fit into the agendas of the rent-seekers that govern us. One thing is for sure, just like the UK health system, the UK education system simply cannot be sustained with the current model. So, to finish, I'm going to make a twofold prediction about the future of our education system.

A prediction

In the first place, give it a few decades henceforth (maybe six or seven, possibly sooner) and there won't be any state-funded schools at all. There will be a market-based school system where parents shop for education like they shop for everything else, with the people who cannot afford to shop being given the funds with which to choose school places for their children.

In the second place, as the efficiencies of the market-based education system become more and more apparent, the inefficiencies of school buildings - such as the cost of maintaining the buildings and concomitant taxes, time lost travelling to and from school, changing classes during the day, registration and other administrative hold-ups, the sub-optimal class sizes and the numerous other interruptions to learning - will be weeded out by the gradual transition towards more widespread home-schooling.

Once you add to that the prodigious technological capacity we'll have at our disposal in the future, I predict home tutoring in small neighbourhood coalitions of about 4 or 5 families will be the standard way that children are taught (this will ensure social skills are not omitted). In fact, thanks to the advances of future technology, education will probably be so cheap to provide that the poorest people in society will all be able to be educated at a relative price of next to nothing.

And while you're pondering that, and possibly harbouring concerns about how the poor might be helped along under a more market-led system, just look across at how these young people are doing now under a state-run system, and in the case of those who are worst off, think that it couldn't really be much worse for them than it is now. Literally thousands of young people are leaving school lacking the basic skills and requirements necessary to carve out a career for themselves, in a society in which, thanks to political interference, education is not coterminous with the jobs available, and vice-versa. A more market-driven, technologically innovative system cannot do any worse for these young men and women that the current system - quite the opposite.

Think about it, even by today's relatively unevolved standards (relative to 100 years henceforward I mean) even most poor children have their own device with which to access the Internet, which means they literally have access to the entirety of the whole world's knowledge. Imagine how much more sophisticated learning can be in the future with even better technology and better systems to organise it.

These home school coalitions will benefit the pupils no end: they will be less prone to picking up bad behaviour from other children and less susceptible to bullying or scholastic isolation. For all sorts of reasons related to time, money and resources, home schooling is a remarkably proficient method of teaching children - not just with facts to learn but in shaping them with the wisdom of 'how' to think.

There will also be much more diversity in the ranges of learning available, with specialised learning for pupils with particular types of mental and physical abilities, specific types of interests, nuanced barriers to learning, and the multitude of other ways that a localised, consumer choice-driven, trial and error-based system enriches society.

The effect of state-enforced taxation, in most sectors, not just education, is that it reinforces the monopoly of politicians and diminishes the ability of consumers to spend their own money more autonomously. As we continue to evolve and more people begin to understand that most of society's achievements and advances come from the bottom up not the top down, we will begin to redress the problem, diminishing the state's control on our finances and strengthening our own.

Taxpayer-Funded 'Free Lunches' Are Choking Us

"Education is our right – we should be cutting tuition fees, not raising them”, declares Malia Bouattia in her Guardian column. It’s rare to see quite so much confusion all crammed into one article, but we’ve been through this before on this Blog (see here, here and here for example) so I won’t labour the points again.

There is a deeper problem, though, with tuition fees. According to Merryn Somerset Webb at MoneyWeek - one of the go to places for statistical updates - currently around 45% of student loans end up being written off, where the tipping point at which the whole thing starts costing rather than saving money is 48%. This problem is in part due to graduates earning less than expected, or sometimes nothing at all, but also due to the tax avoidance incentives woven into the system, such as salary sacrifice.

“With clever planning, an employee can use salary sacrifice to reduce their income below certain thresholds and therefore make further savings. Take student loans, for example; many students leave university with high hopes of landing a top job but can find themselves undone, with low pay and laden with debt. Repayment of student loans is 9% of income earned above £17,335 for those taking out student loans before September 2012, and £21,000 for those taking a loan out after 1 September 2012. This can often leave many university leavers with a lot less take-home pay than they need. Taking into account Income Tax and National Insurance, a graduate will take home just 59p in the £1 for part of their income earned above the repayment thresholds. This would further reduce to 49p in the £1 for income earned above the basic rate tax threshold and a quite frightening 32p in the £1 for each pound of income earned between £50,000 and £60,000 if the graduate has two children and is in receipt of Child Benefit payments.”

It's not exactly rocket science, is it? Suppose our graduate earns £30,000, and has a choice of putting money into her pension either via salary sacrifice or out of her net salary (whereby the tax is claimed back). If she does it using salary sacrifice, her official gross salary is not £30,000, it is £27,000. That cuts her National Insurance bill and her income tax bill – but most essentially, it also cuts her loan repayments from £810 to £540, where the resultant outcome is a take home pay of £20,907 instead of £20,277. That's all very nice for our graduate, but it's not such good news for taxpayers as a whole. It might well be time to ditch the salary sacrifice scheme.

The thing is, if the university supply and demand curves intersect - that is, if the demand for degrees and the supply of degrees are in market equilibrium, then a tuition fees system whereby the government loans to those who need the money to obtain a degree, and then only asks for payment when the post-graduate can afford to repay with a small proportion of their earnings, is not a terribly bad system. It's not perfect, but it isn't too shabby.

However, once the system becomes skewed whereby nearly half the graduates never pay back even a penny of their student loan, the alarm bells ought to start ringing, because it's obvious that this is down to there not being enough post-grads doing degree-level jobs. This is the market’s way of trying to tell us that there are currently too many people doing degrees.

Because the taxpayer picks up the cost of unpaid student loans, it means the surfeit of university degrees in this country end up being subsidised by the general public - many of which are low earners. Consequently, this means a great many of them are subsidising people that are doing degrees and never earning enough to pay them back, while the rest of the post-grads, the people that do pay them back, are people whose degree earns them a degree-level job, and whose lifetime earnings are likely to make them better off by approximately 60%. Any writer that entitles their article “We should be cutting tuition fees, not raising them”, really ought to think a bit more about the basics of arithmetic and supply and demand before waxing lyrical on this subject.

David Cameron's Confusion Over Statistics & Racism

David Cameron has launched a scathing attack on the universities of Oxford and Cambridge today for failing to recruit more BME (black minority ethnic) students, saying that racism in the UK’s leading institutions “should shame our nation”.

He is right that it's a shame that there are not more BME students in our leading universities, but he is quite wrong to lay the blame at the door of Oxford and Cambridge universities. The so-called fact of Oxford and Cambridge being under-represented by BME students is not to do with institutional racism at our top universities, it is to do with the fact that prospective BME candidates are far outnumbered by white British candidates, which has a lot of complex causes - but none of them are the fault of Oxford or Cambridge.

It is quite easy to be outraged at statistics if you don't understand them, and clearly David Cameron just doesn't get that there are simply not enough BME people in the country to fulfil his wish. A quick Google search reveals to me that if a top university accepted students in a way that precisely represented the UK demographic, then for every 100 people, there would be 87 whites, 7 Asians, 3 blacks and 3 others. Even on strict egalitarian grounds it is very difficult to justify a selection policy that doesn't see BME people outnumbered by whites.

But, of course, that's only part of the flaw in David Cameron's reasoning - the other thing wrong with his misunderstanding of statistics is that Oxford and Cambridge are not looking for a representation in terms of ethnicity or skin colour, they are looking for representation in terms of academic ability. That is to say, Cambridge and Oxford universities are the seat of academic excellence in the UK - and if the statistics show that only a small proportion of BME people get into Oxford or Cambridge, and a large majority of students are white, that does not show any institutional unfairness on the part of Oxford or Cambridge. It merely shows that if Oxford and Cambridge are trying to attract the most academically gifted students in the country, and if by far the greatest proportion of the most academically gifted students in the country are not in the BME demographic, then Cambridge and Oxford's admission policy is completely fair.

There is certainly a conversation to be had about all the ways that BME and under-privileged pupils in schools are disadvantaged or coming up against barriers to fulfilling their potential, but that's not an indictment against our two best universities - and David Cameron should know better - particularly as it's very likely the case that this phony 'outrage' is really just an attempt to court popularity amongst the BME demographic.

Why This University 'Problem' Is Actually A Blessing

Following on from a recent blog about the importance of tuition fees, there is another bit of confusion doing the rounds. There used to be a cap to ensure universities had a limited number of students achieving grades AAB or higher at A-level. When the cap was lifted a few years ago, some higher education commentators were concerned that this would lead to the creation of an elite English “Ivy League”, reflective of the American higher education systems, and possibly even alienating students from poorer backgrounds less likely to achieve high grades.

Their fears have come to pass, as currently over half of students achieving AAB or better at A Level are concentrated in just twelve universities (they are: Manchester, Durham, Oxford, Cambridge, Nottingham, Leeds, Exeter, Bristol, Warwick, Birmingham, Sheffield and Southampton.)

However, even though there is a high concentration of high grade students attending just twelve universities, there is absolutely no reason why this should be a problem - in fact, it is quite the opposite: it is a blessing in disguise, because it gives exhibition to the healthiness of competition and the value of incentivisation to do well and go to the best universities.

By equal measure, a competitive higher education market incentivises universities to pull out all the stops to attract the brightest and best students and be as high up as possible in the league table of results nationwide. In a marketplace with healthy competition and demonstrable incentives to strive for high standards you would expect to see cluster groups of high achievers, just as you see in sport, in retail and in entertainment. But competition doesn't just make the best better, it raises (or has the potential to raise) the standard of everyone, because it should incentivise lower performers to up their game, either by improving standards, by innovating to capture an unfilled niche, or in some cases by trying something different altogether.

The other peculiar thing many people tell us is that if a higher education marketplace is too openly competitive it will work against people who are bright but from disadvantaged backgrounds. This is an absurdly counterfactual objection to have, because it will actually have the opposite effect. An education marketplace that is too money-centred will be a bad thing because, in terms of performance and results, selection against bright disadvantaged students will disadvantage the university.

Consider why. Suppose Oxford and Cambridge had hiked up admission fees to attract the elite. Such a policy goes against the thing they should value most - academic credentials. If you are an employer looking to employ an Oxford graduate, who would you prefer; one who got in on scholastic merit, or one who got in because of a privileged financial background? The value of attending Oxford depends largely on the university's reputation, which is built primarily on prior academic excellence of former students. By having applicant quality as the measure of admission, the average student quality can be increased, which then further increases the prestige, which then increases the allure for high-quality future applicants.

A system that neatly balances the admission quantity between talented young people that can pay (and do), and talented people that can't pay and are helped along the way, is a system that is just about right. It is inevitably true that being from a privileged high achieving background does confer advantages on young people that young people from working class backgrounds do not enjoy. This upsets lots of people - but it should not. Privilege mostly comes (either directly or indirectly) from high achievement. Therefore if you want to argue that that is a bad thing, you are arguing that a world in which achievement engenders advantage is a bad thing, which amounts to devaluing merit-based advantages - and to do that is to make a mockery of applying skills and working hard in general.

How Come So Many Students & Politicians Are So Ignorant About Value?

It astonishes me when something so simple and obvious is misunderstood by so many people. This doesn't happen as infrequently as one might expect - and in the case here, I'm talking about the notion that if you don't have tuition fees then vast swathes of important information about value is lost. Alas, the people causing civil unrest in London because they want a 'free' university education are not only blockheaded louts with a crass and arrogant sense of entitlement, they are unapprised of some basic economics - namely, that there is no such thing as a 'free' education, and that if you try to do away with the price of a university degree by passing it onto the taxpayer you distort the essential signposts to value.

 

Unsurprisingly, Jeremy Corbyn (backed by many of his Labour party affiliates) has come out in support, encouraging the angry mob to carry on protesting until university education is 'free'. It's worrying that so many of our students and politicians are this confused about value - not to mention prices, information, and supply and demand. Here is the reality that they are missing.

In proposing to artificially lower tuition fees people are showing contempt for the notion of pricing education at its value. The value of higher education is this. University fees should amount to exactly what it costs to obtain a degree, and fees (prices) should match demand, whereby the right number of people are getting degrees. How do we know what the right number is? This is down to a utilitarian efficiency, which is measured in terms of what we might call practical economic utility. What is meant by 'efficient' here is that an efficient transaction occurs when the overall increase in utility is greater than the overall decrease in utility. In other words, when degrees are priced at their true value - a value that measures costs associated with supply and demand - you have the right number of people doing degrees, and you have the right people paying for them, which is, it won't surprise you, the people actually doing the degrees.

When fees are too low, people will study even though the cost of going to university is greater than the benefits of a university education. When fees are too high, people will be put off studying, which means there'll be too few university graduates. A few of the low-fee protagonists have argued that a decline in applicants would be evidence that the fees are too high. It would not be; it would be evidence of less educational waste, with those no longer doing degrees being the people for whom the cost of going to university is greater than the benefits of a university education.

The current tuition fees system is pretty much the fairest system imaginable: the government loans to those who need the money to obtain a degree, and it only asks for payment when the post-graduate can afford to repay with a small proportion of their earnings. Anyone who thinks that that is unfair has a pretty peculiar idea of unfairness. What you have to realise is that nothing comes for free in education. If tuition fees are scrapped, then the cost of obtaining a degree is then picked up by the taxpayers. Tax that goes on to subsidise higher education amounts to lots of tax paid by low earners to subsidise people better of than themselves. We know this because we know that two thirds of working people do not have a university degree, and we know that on average obtaining a degree boosts one's life earnings by 60%.

Tuition fee subsidies do something else as well - they artificially ramp up demand for places, which has all sorts of negative spillover effects on how people value university education. Labour, under the Blair years promoted the ludicrous idea that they wanted to encourage 50% of school leavers to go on to further education. I assume they never bothered to consider that too many people would end up going to university. Similarly, people averse to tuition fees have presumably never bothered to consider whether too many people might go to university at a reduced rate, and that the lower fees might increase demand to an unhealthy or unmanageable level. As for the fact that however much you increase demand you will not increase the universities' capacity for more students than they can take....nope, there probably wasn't even a mention of that.

The irony is, instead of worrying too much about rising tuition fees, what should be considered is that putting up tuition fees, or demoting some degrees to college level qualifications, might actually be a good thing for the country overall. There's no doubt that higher education brings about huge financial benefits to the county, but there's also no doubt that having too many graduates devalues graduation in the labour market, and that in a state of diminishing returns the financial benefits would no longer bring about such efficiency. We know that currently around 20% of post-graduates are doing a job that doesn't require a degree (this figure might actually be higher) - which is indication itself that there is a surfeit of degrees in a labour market with too few degree-level jobs.

There is another very good reason why value is so important - if degrees are valued commensurate with the landscape of both supply and demand, and of the labour market, there is a better chance of the number of graduate-level jobs matching the number of graduates. For example, the future job market is going to see many current graduate-level jobs replaced by computer technology, but it will also see an increase in other graduate-level jobs that look likely to grow in number. Only a proper market-based further education system can be optimally responsive to a rapidly changing labour market environment, particularly with the proliferation of service-industry jobs.

As I often say on here, prices are the market's method of signalling how much of a good is available against the level of demand for that good. An expensive good (like a degree) costs resources (time and money) but those costs signal that those who value degrees most will get them. The abolition of tuition fees would mean that universities have no way of signalling the true scarcity and value of university places to prospective students, particularly as through a taxpayer-funded system high and low demand opportunities are going to be similar if not equal in price. Students, like people in general, make much more informed decisions in life when signals accurately match supply and demand.

How To Fix Schools

Education secretary Nicky Morgan wants to give parents greater choice in state-funded schools because she thinks schools will “up their game”. We hear this a lot from politicians - they regularly tell us they are trying to do us a favour by giving us more free choice in our public services. Basically, they are trying to sell us the choice-driven qualities of a private enterprise consumer market. Alas, what they fail to realise, or don't want to tell you, is that choice is always going to be sub-optimal when the things being chosen are funded by taxpayers.

Suppose the government nationalised handbags and gave them away for free by obtaining money from our taxes. What would happen? Demand would increase, but supply wouldn't be able to keep up with the demand, because there are a limited number of handbags. Consider a Gucci handbag for £2000 and a Next handbag for £30. Taxpayers cannot fund Gucci handbags for everyone, so they must be rationed. So wealthier people will have the Gucci handbags (because they've paid more tax) and others will queue for Next products.

The problem arises because the government won't be able to match supply to demand. The reason being: it doesn't know how much everyone values handbags, so nationalising handbags would be unsuccessful. The free market of private enterprise doesn't have this problem because the market of supply and demand dictates prices of handbags and tailors those prices to how much people value them.

Rich Rachel may wish to buy a Gucci handbag for £2000 and Skint Sally may only be able to afford a Next handbag for £30. But that doesn't just tell us about wealth; it tells us about desire for handbags too. Loaded Lorraine may have more money than Rich Rachel, but she might have no care for ostentatious handbags and instead prefer to spend £30 on a Next handbag and use the remaining £1970 to pay for a holiday or a painting. The right supply of handbags (and holidays and paintings) depends on how consumers make the trade offs.

Public services paid for by the taxpayers are not better off with the introduction of more choice because the government does not have the supply and demand price mechanism to factor in consumer choices - and thus it has no metric by which it can check people's valuation of the different products. Understanding this is the key to understanding why increased choice in taxpayer-funded services fails to capture what people value.

Suppose we have a city in which there are two only schools - let's call them S1 and S2. One of the schools is bound to be better than the other - let's say S1 is better. In a public sector system where prices are not attached to value, everyone is going to be paying for S1 or S2, but some parents are going to receive better service than others (apply this to state run anything and the same applies). In a state funded, unpriced system (obtained from taxation) everyone is going to prefer S1 over S2, and half the city's population is going to be disappointed that they got S2.

Let's take it to an extreme and suppose that there was no more nationalised education - and that schools were fee-charging, with tax for education (roughly about £10,000 per year, per person) staying in the pockets of families. Now S1 and S2 would operate under a much more efficient system. Here's what would happen. By charging for services, the inequality between S1 and S2 would turn into something better; there'd be an increase in demand for education in S1, which would bid up prices, which would engender lower prices at S2. This process would carry on until the differentiation between S1 and S2 matched the value parents placed on them. Those in S2 would be compensated by paying less for a less-good service, and because parents would be considering the average trade-off, they'd be free to splash out on better education, or have cheaper education and more money in their pockets.

My thought model only had 2 choices - imagine how much better with dozens of choices. Good and expensive or not so good and cheap is the kind of choice we should value (‘not so good’ ought not to mean ‘bad’ though). We are constantly being told that it's wrong to disadvantage those who can't pay for better education like the wealthy can. But not only is it undesirable to attempt to suppress those opportunities, it is also the case that if we stopped wealthy people's ability to buy more than their poor counterparts then monetary value would go out the window. Of course politicians don't really mean this - and neither do the electorate - they really mean everyone is entitled to a decent education. But this favours supply and demand in a free market because it is when choice is obtained and prices match value that standards improve.

I'll wager quite a few of you are uncomfortable talking about schools in this way - after all, education is such an important thing that all talk of cheaper, less good education is surely to be guilty of failing our children. Yes it would be if that were the case - however, given that education is such a precious resource it is precisely for that reason that competition ought to be the mechanism to improve standards.

Of course, it’s worth noting that no one has any trouble understanding this if the subject is mobile phones, cars or televisions. Everyone agrees that if mobile phones, cars and televisions had been funded from taxation for the past 25 years that the products would be far less good, and more expensive (or poorly allocated). Tax-funded projects would generate far less concern for providing consumers with better products at better prices. Why, then, do so few people understand this same principle when it comes to schools?

A system in which schools are funded by taxation frees schools from such a high burden of satisfying consumers' preferences, just as would be the case if this applied to Sony, Panasonic or Apple. By and large private schools provide better educations than state-funded schools, not just because fee paying schools contain a greater proportion of bright pupils, but also because, just like Sony, Panasonic and Apple, the school has market pressure to deliver the standard of education that the parents demand at the price paid.

The popular assertion from politicians that tax-funded schools are best because children deserve a good education gets things backwards. It is because education is such a vital resource that it needs price signals and market competition to allocate those resources better.

Finally, I will grant you that at the moment we are not quite ready to overhaul the current system and make children's education solely a matter for market forces - which means such a system ought to be brought in gradually, and tweaked and refined over time, not piled on to parents in one foul swoop.

But even so, to suggest that in the meantime more taxpayer-funded consumer choice will continue to generate a healthier competition that can greatly increase the standards of education in this country is at best naively optimistic, and at worst, just plain wrong.

Finally, if you are having trouble imaging a life where schools aren't the responsibility of the state, you may like to know (if you don't already) that politicians only took over education in Britain as late as the late 19th century, and in that period a much higher proportion of working class people could read and write competently (90%), whereas nowadays it is thought to be somewhere between 75-80%.