Follow the money

To absolutely nobody’s surprise, towns in Massachusetts with higher median household income do significantly better than towns with lower median household income. You can see a nice little scatter plot here for HH income and percent proficiency (average of math, English and science for a school district).

Other than the hard cap at 100 (no matter how well funded a school is, it’s not going to have more than 100 percent of its students passing); its a really damn good correlation.

Proficient Scatterplot

 

Here’s the same data but with advanced:

 

Advanced Scatterplot

It’s even more clear (also, the hard cap doesn’t really come into effect). A full 65% of the variance in advanced test scores can be explained by median household income.

So whats going on here? Well, the obvious idea is that these schools have more funding than poor school districts; this leads to better schools. Is that true?

In Massachusetts, the school system with the least per pupil expenditures is East Bridgewater. Yet they are above average in the MCAS (the state testing regime) for proficiency in English, Math and Science. The highest is Cambridge, yet they are below average in English and Science. Well, those are just anecdotes; so lets talk data:

I ran regressions for percent of students who are proficient in English, Math and Science and who are advanced in English Math and Science, all against per pupil expenditures.

The result, of the six regressions, none of the test scores were positively and significantly correlated with expenditures. Two, (percent of students who are advanced at English and percent of students advanced at math), were negatively correlated at p < 1%. Percent of Students advanced in Science was negatively correlated with expenditures at p <10%. The other three were not significant, but all the signs were negative.

Here’s the scatterplot for  for the percent of students advanced at English (with a trend line):

Eng Adv Scatterplot

The answer is no, it is not explained by (only) funding. If anything, funding is negatively correlated with test scores (ok, this is a cheat, I’m doing two single-linear regression at the same time and comparing them which is kind of a statistical bad thing. I did run a some multiple linear regressions, which don’t change much, although the the sign on funding flips to positive but not significant for advanced; the sign for advanced is still negative but also not significant).

This is weird at first glance it appears that rich towns have better schools, but that this has nothing to do with funding.

One theory is reverse causation; that is some school systems are randomly good, which attracts well off people. After all, school systems are probably the number one concern for for families in choosing which town to live in. There’s a ton of truth in this, I imagine. But i highly doubt its the whole story.

The most likely theory is that, for whatever reason, children of well off families are more likely to do well then children of less well off families. Whether that thing is due to culture, genetics, or other economic reasons (better access to healthcare as an example), I don’t know, but I think this is very important.
So here’s the aside where I’ll talk about how I wanted to finish this. I wanted to make points about culture, about moral reasoning, about economic aid and welfare. And I’m realizing that I’m just not able to do those topics justice, at least right here. So I’ll close with one thought.

The above analysis should scare you. Because, basically, the rich are getting richer. And its not because we just poor resources in to the rich districts and starve resources from poor districts. If it was we’d almost have reason to celebrate. All we’d have to do to fix schools is just pass a bill and move money around; but its just not that simple.

 

(all stats regarding education from http://profiles.doe.mass.edu/state_report/mcas.aspx)

Housing Crisis

Lets imagine 4 groups of people: responsible rich people, responsible poor people, irresponsible rich people, irresponsible poor people.

Everybody wants a house. Banks won’t lend to poor people regardless of how responsible they are, but they’ll lend to any rich people, regardless of whether they are responsible or not (and the rich will not default even if they’re irresponsible).

The government sees many advantages to home ownership, so it decides to get responsible poor people to buy houses.

Since banks won’t lend to them, the government makes it much easier for poor people to borrow.

Who takes advantage of this? Responsible poor people make a decision about how they can pay off debts, and some of them are helped by the lower lending standards, so some portion of responsible poor take out loans. The irresponsible poor take advantage of the program no matter what, meaning they buy lots of houses.  This drives up the price of housing a lot. After a short time, housing prices rise so much that the responsible poor cannot afford housing anymore, so they stop buying houses. The irresponsible poor can’t afford it either but buy anyway. After a time, the irresponsible poor start to default on their loans, have their houses foreclosed, housing collapsed, yada yada yada, 2008 financial crisis.

A few things about this model. First, obviously there was a lot more going on in the 2008 financial crisis than this simple model. Second, it doesn’t say anything about whether the rich are more or less responsible than the poor; only that they have more money. There needs to be a certain percent of the poor who are irresponsible (or at least bad with money); I don’t know what that percent needs to be or what it was, but as long as there is a high enough percent of irresponsible people in your target group, a program like this is bound to fail.

Way back in the Bush years, there was a lot of discussion about the benefits of an “ownership society.” Basically, they saw that people who owned homes were much better off than those who didn’t. Obviously this screams correlation is not causation, but lets ignore that for a second. Let’s assume that home ownership really does magically make people more responsible. Does my model still work?

Yes. Even if, once a homeowner moves in, he moves from irresponsible poor to responsible poor, its already too late. He’s already made the decision and cannot easily back out.

Again, in our little model here, we basically hurt everyone, the rich have to pay more for houses, so they’re hurt a little bit; the responsible poor are probably effected the least, they couldn’t afford housing before and can’t afford it now, and the irresponsible poor now have debt and bankruptcy and foreclosure to think about. Also, the country is thrown into a recession; which is good for no-one. Its also pretty clear that the poor are hurt more than the rich are by this.

All of this is a really long winded way of saying that programs can backfire. Over my lifetime, the gap between the rich and the poor has widened. And I think that most or all of the programs we have designed to fix it do more harm than good.  I’m going to attempt to relaunch this blog while tackling this phenomena.