SwampFox

Education in 1900 Predicts Income in 2000

Submitted by: John Warner on Oct 26, 2009 at 1:08 am Tagged with: Economic Development, Education Source: Swamp Fox

Recently I came across an amazing phenomena in a blog in the New York Times, showing the strong correlation between education in 1900 and income in 2000. There is powerful insight about why this is so.

"One reason that historical education levels have such predictive power is that educational investment is extremely persistent... Educated parents and teachers produce educated children; societies that invested in schooling a century ago still generally do so today."

There is another, perhaps even more interesting, insight in the post.

"The wealth of well-educated countries is far higher than one would expect based on the private returns to schooling... Human capital externalities occur when one person’s education makes his or her neighbors more productive... Within the United States, researchers have found that when holding an individual’s own years of schooling constant, that individual’s earnings increase by around 9 percent as the share of college graduates in that individual’s metropolitan area increases by 10 percent. If you work around skilled people, you earn more, either because you have learned from those people or because more skilled entrepreneurs make production more efficient."

I have a couples of thought about how this impacts us today.

Another way of looking at this is states like South Carolina which trailed in investments in education decades ago are reaping the consequences today. There are no quick fixes to creating a more prosperous society. It takes sustained investments in education over generations.

We hear all the time in the debate over education people argue that they don't have children in school so why should they pay for someone else's children to be educated. Living in a community of other smart talented people makes everyone more innovative and productive. We all pay taxes to support education because it makes us all more prosperous, not just the children receiving the education.