Social preferences of Australian parents

The Australian (conservative) government has finally embraced the Gonski school funding reforms. For those outside Australia, ‘Gonski’ (named after David Gonski who lead the review) is a ‘needs based funding model’ where schools with low socio-economics student cohorts receive more funding than comparative schools with a cohort of higher socio-economic students.  Gonski was originally implemented by the previous Labor government and has proven to be extremely popular with the electorate. Even though up to 30% of students in some states (for example Victoria) attend private schools.

Australia has a ‘universal voucher’ system where funding is on a per student basis out of national taxes. Via state governments for public schools and directly for private schools.  Consequently, private schools in Australia are partly funded by the government plus additional fees paid by parents.

It is interesting given Australia’s flexibility in school choice – mixing public and private education – that there is very strong support for a funding model that re-balances natural inequities within an education system due differences in wealth.  In contrast to the USA where electoral support for a progressive funding model for education seems to be lacking. The difference between Australia and the USA may have something to do with the social preferences of parents.

Social Preferences

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Self-control and social trust

In Mischel et al.’s (1972) famous ‘marshmallow test’ four year olds were given a choice between eating a marshmallow (or similar treat) now or waiting and receiving an extra marshmallow at the end of the experiment. The marshmallow was placed on a table in front of the children and left unattended to maximise temptation. In this way self-control is seen as a finite resource which can be depleted. In a follow-up study a positive correlation was found between delayed gratification and SAT scores, with the correlations stronger for quantitative test scores than verbal test scores (Shoda et al., 1990). Importantly, studies have shown that self-control is a better predictor of academic outcomes than IQ (Duckworth & Seligman, 2005).

However, self-control is also shaped by social interactions, particularly perceptions of trust. In a modified marshmallow experiment Kidd at al. (2013) added a preceding stage where perceptions of researcher reliability could be shaped. In this pre-stage, children were promised new crayons to draw with while they waited for the marshmallow experiment. One group received the new crayons as promised while the other group received old, clearly used crayons. Children who received the promised new crayons waited significantly longer than those who received the old crayons. Suggesting that self-control is strongly shaped by reasoned beliefs of the reliability of promises made by the researchers. Michaelson et al. (2013) found similar results for experiments with adults that showed social trust having a causal role in the willingness of individuals to delay immediate gratification.

from:
Leaver, S. 2016. Behavioural education economics. Routledge handbook of behavioral economics, ed. R. Frantz, S.-H. Chen, K. Dopfer, F. Heukelom, and S. Mousavi, 379–391.

 

 

How parents solve the ‘wicked’ problem of choosing a school

research poster ‘How parents solve the wicked problem of choosing a school’ has been accepted for display at the ‘Beyond Research – Pathways to Impact’ Conference, 21-23rd February 2017 in Melbourne, Australia.  (Social Change stream)

As the poster is formatted for A0 print size, the original PDF can be viewed here:  How parents solve the wicked problem of choosing a school

how-parents-solve-the-wicked-problem-of-choosing-a-school

ABC Radio National segment on choosing schools

I was interviewed on ABC Radio National about my research into how parents choose schools for their children. The radio segment Navigating the seas of schooling aired on Thursday 9th February 2017.  The ABC interviewed a number of researchers about choosing schools in Australia and their interest in my research focused on the behavioural economics of choosing schools.  In particular, how parents solve what is an inherently complex choice process limited time and information.

The ABC RN program link Navigating the seas of schooling provides a full audio podcast.

 

15% universal loan fee for HECS/HELP

The Grattan Institute released a report calling for a universal 15% loan fee to be added when student incur a higher education HECS/HELP liability.  Reasoning behind a 15% loan fee is that it would go towards offsetting the interest-rate subsidy students receive as a result of their HECS/HELP liability being indexed at the rate of CPI (currently 1.3%).  That is, a real rate of interest that is zero. As opposed to the Commonwealth Government actual cost of funding which is closer to 2.75% (current 10 year bond yield).  In 2015/2016 this interest rate subsidy was around $550million for the year on total outstanding HECS/HELP liabilities of around $40billion. Bruce Chapman also wrote an article for The Conversation supporting the idea of a 15% loan fee.

Below are my reasons why a 15% universal loan fee is a far better idea than alternative proposals for reducing the funding burden of HECS/HELP. Not just the interest-rate subsidy that makes HECS fair for all types of students with many different backgrounds but also the implicit understanding that some students will fail to repay their HECS liability due to simple bad luck and the uncertainty of life. Continue reading

Six keys to making high school choices

An article on my research in the Sun Herald, Sydney, 7 Aug 2016

Understanding the behavioural economics behind choosing a school can save parents a lot of time, writes JAMES MELOUNE

Education is the bedrock of a prosperous society. However the responsibility for getting education “right” and wealth of school choices can be bewildering for some parents.

The behavioural economics behind decisions parents make has prompted Sean Leaver, a former banker, to survey parents. Leaver, a PhD candidate at Melbourne’s RMIT University, has surveyed more than 800 families. His thesis, Behavioural Economics and the Complexity of School Choice, has found there are six keys to high school choice.

1.        PRIORITISE CRITERIA

Leaver’s study found that parents fall into one of five groups, based on what they feel is most important for their child’s development. Continue reading

Some readings (& podcast) putting Randomized Control Trials (RCT)s into perspective

Like incentivised laboratory experiments Randomized Control Trials (RCTs) are all the rage in economics.  RCTs are commonplace in the health sector starting with Pasteur’s first controlled trials 200 years ago. While application of RCTs to social sciences is relatively recent.

However, by their very nature social sciences involve researching social groups and networks where information is distributed and co-ordinated with relative ease and frequency.

This creates a unique problem for RCTs in social research because it is very difficult to construct experiments that are able to completely seal information within evaluated units.  Importantly, the closer the social networks of individuals the more likely there will be information contamination and that individuals in the ‘control’ condition will act on this information. Continue reading

An Incentive Compatible Model for Higher Education deregulation

Given the level of opportunism occurring in the Australian Vocational Education & Training higher education sector since deregulation (uncapping places & fees), recent articles:

I think it is worth reblogging my Senate submission (Feb 2015) suggesting a new incentive compatible model for a deregulated higher education market where education providers have ‘skin in the game’.  This Senate submission provided a solution to what I saw as a fundamental misunderstanding of the risks associated with deregulating higher education within the current policy framework, published as an opinion piece in The Australian (Oct 2014):

This was followed up by an article calling for universities to have more ‘skin in the game’ (Mar 2015):

I presented this model at the ANU Forum on Higher Education Financing, Friday 13th August 2015, on the topic ‘Should universities have skin in the game?’.

This model can be applied to any type of higher education provider where students have access to government administered income-contingent loans. Whether providers be universities, vocational, professional bodies or dedicated postgraduate institutions.  This model can even be applied to specific types of courses which are regulated separately, such as proposed Australian university flagship courses.

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What drives increases in University fees? Bennett hypothesis vs Baumol’s cost disease

Over the last 15 years, increases in higher education fees have accelerated and are now rising faster than any other part of the economy.  Outstripping even the rising cost of medicine and health care.  And yet we see no meaningful improvements in productivity or GDP growth over the same time period.  Since 1978, the cost of higher education has increased in the US by 1,120% – more than 11 times.  This graph from Bloomberg clearly illustrates the anomaly of higher education fee inflation.

 Bloomberg tuition (s)Source: Bloomberg, Data: Bloomberg Labor Department

 What’s driving higher education fees higher? 

What we see in the wider economy does not justify an explanation that fees are increasing in line with improved earnings expectations.  There is some improvement in earnings overall but productivity and GDP are not rising anywhere near as fast to justify this optimism.  If we had a matching 1,120% increase in productivity or GDP over the last 30 years the world economy would be a lot more rosier place than it is at the Continue reading

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