Arnold Kling on Education vs. Entrepreneurship (emphasis mine):
I would have to agree with Kling on this. From the standpoint of economic growth, once a certain level of basic education is achieved, the ability to innovate and think creatively is far more valuable than much of what is taught in formal education.
Gary Becker writes,One of the challenging paradoxes during the past several decades is that American teenagers have consistently performed below average on international tests in math and sciences, and not especially well on reading tests, yet the American economy is more productive than any other.I can think of only two classes of explanations for this phenomenon.
(1) International tests fail to measure the superior aspects of the U.S. education system.
(2) Education is not such an important factor in comparative economic performance.
I lean toward (2). It's better to have strong entrepreneurialism and mediocre education than the other way around.
I spent over five years working for a Japanese employer and contrasting the cultures proved instructive. Many of my Japanese co-workers told me that their coworkers and country often struggle with innovation. A large part of Japanese education consists of very formal, rote memorization and repetition.
In contrast to American schools, where students are encouraged to ask questions and "think outside the box", Japanese students are taught to respect their sensei and to repeat what he teaches them perfectly. While they learn specific skills (such as mathematics) extremely well, they struggle with much of what we would consider to be entrepreneurial thinking. Unfortunately, this is reinforced by a very rigid business environment that is relatively hostile allowing new businesses to start or old businesses to fail. I believe this has played a large factor in why Japan's economy has been languishing for more than a decade.
My Japanese manager once summed it up by saying:
Stuart Buck echoes Arnold Kling:
"Japanese people make good engineers but terrible salesmen. Chinese people make terrible engineers but good salesmen. They always win at negotiation."
Beyond a certain point, the value of much formal education faces diminishing marginal returns. I have worked in engineering, journalism, teaching community college, child development, sales, marketing, project management, retail, and more. I have also volunteered in disaster relief, been involved in leadership positions at churches and non-profits, served for several years on a community service committee for Westinghouse, was a character lead at Give Kids the World, etc. Of all the things I've learned in school beyond reading, writing, and arithmetic (I'll include algebra and trig with this), the most useful for any of these jobs have been basic statistics, economics, and finance, and (maybe) a little physics (for my engineering work). Beyond this basic skill set, the most valuable things I've learned have been from life experiences and learning on-the-job.
A very common idea is that more education equals greater economic growth. What's more, one of the main ways that Third World countries could advance is to spend more money on education. Now this may not be true at all.
The most useful skills that you will ever get from formal schooling are fairly basic: reading, writing a coherent description or argument, and basic math. A lot of what's studied in high school or college may be very interesting, and can make one a well-rounded person, but has little or no relevance to economic growth.
By contrast, if there exists any knowledge that leads to economic growth, the overwhelming majority of it is captured in businesses and other institutions, and cannot be taught in schools. For any type of business that you can imagine, the overwhelming majority of the information necessary to run the business consists of informal knowledge that has accumulated over years or decades.
Anything that increases business activity in Third World countries -- whether globalization or micro-credit loans that encourage local entrepreneurs -- is far more likely to produce the sort of education that creates further economic growth. Even better, entrepreneurship allows people to gradually accumulate the necessary knowledge to run their own businesses.
The one area that would have been most valuable to learn in school would have been communication. While we are taught writing skills, speaking and presentation skills are also critical. One of the engineers I worked with when I was a co-op at DuPont told me that 90% of my future engineering career would depend on my ability to communicate well with others. He was absolutely right. People skills are far more important than is typically stressed in most formal education. The ability to not only communicate, but also get along with others is invaluable.
If I could make a short-list of what to add to high-school and college curriculum, it would be:
- Public Speaking
- Statistics
- Economics
- Finance
Some other thoughts:
For developing countries, I think the best "bang for the buck" they can get is to develop stable laws and institutions to encourage and protect entrepreneurship. I have yet to visit a developing country where people were short of entrepreneurial drive. I've lost count of the number of times I've been swarmed by sellers trying to get me to buy various trinkets and souvenirs. What they lack is credit markets to grow their businesses and laws to protect their investments and make opening new businesses relatively easy. If these were in place, I trust the people in these areas would be innovative enough to develop the educational institutions they'd need to prepare future generations to continue to grow their economy.
For more on this, read "The Role of Institutions in Entrepreneurship: Implications for Development Policy" by Frederic Sautet.
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