Economic thinking is corrupting education in Australia

By Nick Kelly

There is a growing trend in education of proposing and enacting policy ideas that are based primarily upon economic thinking. I believe there are hidden impacts of applying economic thinking (typified by price signals, market mechanisms and market-oriented ideas) to education. In this post I want to unpack some of that thinking and look at what is happening to education because of it.

 Corruption of the concept of education

The philosopher Michael Sandel proposes that there are two main arguments against policy based on economic thinking. These arguments are made on the basis of fairness and corruption, and both are significant for education researchers and policy makers. While it is typical in policy formation for much attention to be given to the concept of fairness – with steps taken to ensure that policy is as fair as possible – the concept of corruption is rarely given consideration. In the case of education policy, this relates to questions about how policy can change (or corrupt) society’s conception of the role and purpose of education, and about how the moral value of education can be crowded out by economic values.

If you want to read more about this notion of economic thinking in education you should read Hidden Privatisation in Public Education and (released in July this year) Commercialisation in Australian Public Schooling. This latter study provides data confirming that teachers in Australia are indeed concerned about the influence of commercialism in schools, characterised by “top-down, test-based accountability, the introduction of market competition between schools, the use of private sector managerial practices, and an increasingly standardised curriculum that focuses on literacy and numeracy” .

In this climate of economic thinking there is a great need to attend to the moral value of education – its role and its purpose in society.

What does economic thinking in education look like?

 Some examples from Australia and around the world demonstrate what economic thinking in education looks like:

1) Various schools within the USA have experimented with paying students to learn. In Dallas, a school district paid students to read books ($2 per book) to motivate higher literacy. In New York and Chicago students were given rewards based on their performance in assessments.

2) Still in the USA, there was an experiment in some charter schools with the inverse of this: giving students financial penalties for bad behaviour. This was dubbed as a move “from corporal punishment to capital punishment”.

3) In Australia, in the Northern Territory, a similar concept was enacted on a broader scale when schools had part of their funding determined by student attendance levels. Some commentators referred to this as “inverse needs-based funding”.

4) Politicians and think tanks have at various times come up with the idea of linking school funding or teacher pay to performance in standardised tests such as NAPLAN.

5) In Australia, recent increases to higher education student fees and repayments have been justified by claims about the higher earnings gained by those who have attended university. Minister Birmingham uses this rationale to suggest that the extra cost for students is a “fairer deal for taxpayers”. In the United Kingdom, the former Secretary of State for Education recently stated this same argument more bluntly, saying “it’s wrong if people who don’t go to university find that they have to pay more in taxation to support those who do.”

6) Australia has invested $5.1million to pilot ‘P-TECH’ (Pathways in Technology) high schools, and there are currently 14 pilot sites across the country. These schools are jointly funded by industry and government. They provide traditional high school study in parallel with industry-supported STEM education geared towards employment, or further education, in a particular sector. The economic thinking and employment-oriented focus of this program is evident in Wyong High School’s rationale for adopting the P-TECH model:

“In the P-TECH model, local employers partner with schools, TAFEs/RTOs and universities to strengthen students’ prospects of a successful transition to work by ensuring they develop the technical and personal skills employers are looking for. To achieve this goal, the school is working collaboratively with other education and training providers and a number of major locally-based employer partners including Mars Food Australia (Masterfoods), Sanitarium Health & Wellbeing Australia, the University of Newcastle and the Central Coast NSW Business Chamber. Commencing in January 2017, Wyong High School has begun to introduce an innovative P-TECH styled skills-based program that will provide an industry-supported pathway for students to achieve a post-school qualification in areas of growing local employment demand.”

When economic thinking takes over

These varied examples highlight different aspects of economic thinking. For example, when students are being paid to learn or are fined for bad behaviour, when schools are being paid for improving attendance, and when teachers are being paid for having higher achieving students, a financial incentive is being introduced where, previously, the motivation had been intrinsically oriented.

The economic justification for these ideas is that by “incentivising” a particular behaviour, you get more of it. However, this is not always the case as introducing a price mechanism, certain intrinsic or pro-social motivations can be lost – or “crowded out” as Sandel describes it.

This crowding out effect can be observed in a classic study of a childcare centre in Israel. Parents were often late to pick up their children, so the childcare centre experimented with the idea of introducing a financial penalty for being late. Traditional economic thinking dictates that this should result in fewer parents being late to pick up their children as they now have an added disincentive to be late.

However, the inverse occurred: more parents were late to pick up their child than previously, when there was no financial penalty. One interpretation of this is that the pro-social motivations for being on-time for picking up children (e.g. not infringing upon the teachers) were crowded-out by the introduction of a financial mechanism, and the parents felt that this justified them in being late.

A similar phenomenon can occur with the introduction of price mechanisms in education. For example, to return to the cases listed above, a student may feel justified in not doing their homework if they have resolved to accept the corresponding infringement. The intrinsic motivation in this case (i.e. that doing homework will help the student learn) is therefore at risk of being lost, and the student may begin to make decisions about their education that are based primarily on perceived economic benefits. Whilst there are many possible reasons to critique such ideas of performance pay for schools, teacher, and students, the focus here is upon the way that the introduction of an incentive changes how people relate to the activity; the very concept of what that activity is about can shift.

What is lost when education is framed in economic terms?

In the case of the recent changes to HECS-HELP fees and repayments, the public discussion centred almost entirely around whether it was fair. Debate went something like this: On the one hand, there is evidence that those going to university earn more money than those who do not. On the other hand, education is a public good and should be supported by the government. What percentage of student fees should be paid by students and what percentage by government? What kind of repayment system would enable equality of access to higher education without the burden of repayments becoming prohibitive?

My point does not address the final mix that was present in the policy but rather that the terms of the debate were entirely around fairness. Was it fair for students? For different degree types? For women? For students from lower socio-economic areas? For those who drop out of a degree? These are all important questions that do deserve to take primacy in debate around this policy. However, there is a separate argument to be made about the resulting degradation of the concept of education from the repetition of such policy ideas and their rationale. What is altered or lost by framing university education as a purely personal and economic good?

A similar question applies to the case of P-TECH schools in Australia. An economic way to frame the argument is that having industry invest in high school students is a “win” for everyone who is involved: schools get more money for education, students get a head-start in skills in technology that employers want, and industry gets graduates that have the skills they need to take up entry-level positions following graduation.

However, we can ask once more: What is altered or lost when we frame the debate in these terms? Or perhaps: What are the moral values surrounding society’s conception of education that are being degraded or corrupted by promoting models of high school education solely on the basis of their economic merit and their ability to help students get jobs? To be clear, having an education system that supports a strong economy is not problematic in and of itself; but what happens when such aims crowd out other goals for education?

Why economic thinking degrades education

The aim of this short post is to draw attention to the way that economic thinking degrades the very concept of education. Often those critiquing economic rationale do so on the basis that it is unfair to certain sectors of society. Another critique that is often missed is that such rationale cheapens the very meaning of education: why we engage in it, how it benefits society.

A response to this excess of economic thinking in education is increased public discourse around why education ought to be valued as a social good.

Many teachers complain that students only wish to learn the things on which they will be examined– the classic question “will this be in the test?” Students are chastised for even asking the question because it indicates that they are blind to the broader merits of learning.

Is there not a large contradiction here? We expect our students to be aware of the intrinsic value of learning, yet they are taught within a system that increasingly values only economic thinking.


Dr Nick Kelly is a Senior Research Fellow in the Faculty of Education and the Science and Engineering Faculty at the Queensland University of Technology. He is also an Adjunct Senior Research Fellow at the Digital Life Laboratory at the University of Southern Queensland. His research focuses on motivation within the teaching profession, the online support needs of beginning teachers and the cognition of creativity. Further details can be found on Nick’s website 

12 thoughts on “Economic thinking is corrupting education in Australia

  1. Like education, economics is a social science. Economics looks at how resources are used. Market mechanisms are just one form of decision making which economists consider (the term “public good”, for example is an economic one). Those pushing for privatization of education and not necessarily economists, That said, education is a significant investment for the community. Those paying for the education will want to see that money is well spent, especially if they are not the students (or their parents)..

  2. Nick Kelly says:

    Hi Tom, I agree with your statements and the balanced way that you say them. Many thanks for the comment.

    Whilst I agree with you, I would add that I do feel like there is a significant challenge in the way that we ensure that “money is well spent” in education.

    It can at times be poorly done by imposing simplistic measures (like some of the examples in the article) or in a more nuanced manner.

    However policymakers decide to make education accountable, I believe that the rhetoric that comes with the policy (e.g. around the social good of education rather than simply its economic good) truly matters.

  3. David Zyngier says:

    Prof Alan Reid (UniSA) wrote beautifully about Education FOR the common good and Education AS a public good.
    ““The first step in defending and promoting public education is to return to the
    foundational understandings upon which public education has been built, to
    ensure that these inform policy and practice in Australian education, and that these foundational understandings are preserved and strengthened, rather than ignored or diminished”

    You can watch Alan talk about these things

  4. Nick Kelly says:

    Thanks David, I appreciate the comment

  5. Bill Allen says:

    The public sector is also part of the (Australian) economy. Whoever, and however, money is required to pay for the provision of any service (or goods). At the same time, someone has to pay for the consumption of that service (or goods). Unless of course you are happy to provide it for free: i.e. No wage or no salary…?
    (Oh, and I am not an economist!)

  6. Nick Kelly says:

    Hi Bill, many thanks for the comment. I agree with your point that education is a costly exercise. I’m not intending in this article to enter into the question of who should pay for education (although that is an interesting question) but rather suggesting that the way that we talk about education publicly tends to jump straight to economic justifications. I am claiming that, by doing this, our very concept of what education is about (as it is socially constructed) is being degraded.

  7. John Fischetti says:

    Thanks, Nick. We’re holding on to the schools that we know rather than designing the schools that we need. This is a moral conversation about the future of Australia and the planet. This is about our children. The economic aspect is a result not a purpose. Inspiring children to have great lives is our purpose. Being well educated is one of the most important aspects of that. And our opportunity to provide success for all has changed dramatically in the last 20 years. We don’t need schools to be places young people go to watch their teachers work. We can do this. Australia can be the leader in the world in education for great lives for all. We owe it to a 60,000+ year legacy of indigenous learnings to reconsider education as empowerment, opportunity, hope and love.

  8. Hi Nick
    Thanks for sharing. I love your closing sentence. I often feel like my students see very little intrinsic value in learning. Economic thinking is definitely something that appears to be on the rise (particularly in my teaching context of higher ed with international students).

  9. Pete Goss says:

    I agree that certain forms of economic thinking can be inappropriate, and even damaging, in school education.

    But more broadly, economic thinking also involves thinking about trade-offs, efficiency, cost-effectiveness and a range of considerations are vital perspectives in education and any other part of the world.

    Your claim “that economic thinking degrades the very concept of education” goes too far in the wrong direction.

    Of course we need to consider education as a social good that requires and deserves investment, as well as producing future economic benefits. But there are also other social goods that require and deserve investment, such as addressing domestic violence, foreign aid, and so many others.

    There needs to be some mechanism to allocate scarce resources — both at the national level, state level and within schools — and economic thinking should be _part_ of that mechanism.

    Isn’t the best approach (and you hint at this) to ensure that economic thinking is not overly simplistic, nor overly dominant, in the policy debate and in decision making?

  10. Nick Kelly says:

    Hi Peter, many thanks for your comment. I’m in agreement with you that economic thinking is a useful tool for deciding how to allocate resources. It is certainly not my intention to disregard the utility of economic thinking. Rather, my aim is to draw attention to what we are losing when economic thinking is the sole perspective used to analyse education.

    From your final line, I suspect that we are on the same page in most respects. I thoroughly agree with you that the aim is “to ensure that economic thinking is not overly simplistic, nor overly dominant, in the policy debate and in decision making”.

    I would however go one step further and suggest that the rhetoric surrounding educational policy matters too – after all, this is what informs society’s conception of what “education” is about and its accepted purpose.

    Wouldn’t it be fantastic if our policy makers drew more attention to the social value of education? Wouldn’t it be great if the assumptions being made about educational philosophy were called out upfront in commissioned reports, and if the limitations of all that was being left out of economic models were made even more explicit than they already are?

    An example might help. Imagine a new policy that was fair for all involved in every way, and would be likely to improve NAPLAN and PISA scores whilst saving the government money. The government decides to implement the policy. In this fictional case, the way in which the policy is talked about matters a great deal. If it is talked about in purely economic terms then something is lost – the very notion of what education is about is impoverished. This is the point of the piece.

  11. Marten Koomen says:

    there is no doubt that the economic thinking that has prevailed since the various crises of the 1970s have been successful in stabilising monetary systems. Australia, for example, hasn’t had a recession for some years. However the positive economics that underpins this stability is creating a crisis in meaning. Positive economics eschews normative thinking in favour of empirical backward looking data that is used to predict. It is a form of economics that disregards taste formation, and therefore demand formation. These models assume that what citizens demand in terms of goods, and supply in terms of labour as fixed to enable simple input-output ratios in way of neoclassical economics. It is to this kind of thinking that educators object to, because they understand that society and norms change, as is the way we do things..

    The latest kerfuffle with automatic NAPLAN marking is a case in point. It makes perfect economic sense at this point in time, and I have no doubt that algorithms are being effectively validated against prevailing educational norms on writing of TODAY. But in future years, as these algorithms keep churning through student essays, and when these algorithms cease being as aggressively validated against prevailing norms (keeping in mind that ongoing validation is expensive and doesn’t make economic sense), then these algorithms will be assessing, and locking up, children in meanings of the past. That is, as technology changes, and social media changes the way we communicate, the algorithms will be locked in a past. This is what is happening today with PISA and NAPLAN, particularly PISA, with systems being held to account by trends with meaning locked in the year 2000.

    Educational thinking is different from economic thinking, particularly market-based thinking. For example, there is general agreement that teachers only account for 10% of the variance in student outcomes. It is towards this 10% that market based economists focus their attention. By contrast, educators concentrate on the hidden 90% that is focused on maintaining culture, social cohesion, and contemporary meaning. Educators know that in a sound educational culture under-performing teachers, while very annoying, do not affect overall performance dramatically. Similarly, excellent teachers make little difference in an environment with poor educational culture. This makes educational sense, but not economic sense, yet it is by the later that contemporary educational policy is driven.

    Economics concerned with neoclassical concerns of allocating scare resources using input-output is not the way of education, particularly as some schools are not scarce on resources. This is why economic thinking is corrupting education. In seeking to address the marginal 10% of student variation in outcomes through market forces, it is undermining the 90% impenetrable to market forces takes keeps society together.

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