Education as a principal-agent problem

The Atlantic has an interesting article by Anu Partanen on its website: "What Americans keep ignoring about Finland's schools success." The basic argument is that Finland implemented education reform about a generation ago in order to achieve equity, and that excellence is, in some sense, a fortuitous by-product.

Of course, equity (in this case, equal access to the same quality educational resources for all children, regardless of wealth, ethnicity, location, etc.) is a hard sell in the United States. As a result, Partanen suggests, the dozens of fact-finding missions that come to visit Finland each year almost willfully ignore the key lesson of Finland's model.

Partanen repeatedly cites a top Finnish education official, Pasi Sahlberg, who has written the book Finnish lessons: What can the world learn from educational change in Finland? I have not read the book, so I may be kicking in an open door here, but it appears to me that Partanen's representation of Finland's model risks overlooking its most important attribute.

Consider education as a principal-agent problem. The state would like high educational achievement for all its citizens, and can be seen as the principal. The agents who, in the end, make this goal possible are the teachers. (In between are intermediate principals/agents such as state education boards and the like, but I'm ignoring those for the sake of simplicity.)

Assume that being a good teacher has two components: learnable (a skill set) and exogenous (for example, liking children) and that only a subset of the population of possible teachers has the requisite exogenous characteristics. How do you maximize the chances that your agents are all good teachers?

There are two obvious strategies to adopt: require serious training, and offer a salary (plus non-salary perks such as 'prestige') sufficiently high to attract enough people with the exogenous characteristics needed. This is what Finland appears to have done. It is also what some of the better private schools do in the United States, with pretty good success.

Of course, both training and higher salaries cost money. How might you try to achieve the same goal more cheaply? Well, you could try to specify precisely what students need to learn, and how, and then hire agents to do exactly, and only, that. And make sure they do so by administering ever more frequent standardized tests.

These agents won't need as many skills, and they won't necessarily need the exogenous characteristics, because you have specified exactly what they'll be doing anyway. So you can pay them much less. And you'll get a large number of unmotivated, relatively unskilled teachers. You'll still get a bunch of superb teachers as well, of course, but you risk demotivating them too, since they will not be able to deploy their own capabilities to their fullest extent. This situation would seem to exist in rather too many public school systems in the United States.

However, while Finland's focus on equity may be ignored by American educational reformers, the importance of higher salaries (and prestige) and better training are not. Education reformers have been calling for both for years. In contrast to Partanen, I would bet that you could retain the system of public and private schools the United States has at the moment and still achieve much better results, as long as you were willing to commit to paying for higher teacher salaries and more extensive training.

The problem, of course, is that while the state is the principal in my little model, it is also an agent: it is the agent of the American public. So we would need to convince the American public to spend more (perhaps considerably more) on teachers. And that is perhaps an even harder sell than equity.