Public investment begins with the person who will do the work

The National Review reports that England has been borrowing American education ideas — and may now have something worth returning. I am not an educationalist, and I will not pretend to judge the pedagogical merits of phonics curricula or school accountability frameworks. But I will say this: the question of how a society forms the productive capacity of its people is not a soft question sitting at the edge of economics. It is close to its centre.

The argument for austerity — and it is not a contemptible argument — runs as follows: the state must live within its means, as any prudent household does; public spending crowds out private investment; discipline now prevents crisis later. I have spent the better part of my intellectual life explaining why this reasoning, though valid at the level of the individual, becomes a trap when applied to the aggregate. When every actor retracts at once, demand collapses and the very tax revenues needed for future prudence disappear. The household analogy flatters us with its simplicity and ruins us with its misapplication.

Public investment in education is among the clearest cases where the household analogy fails most spectacularly. A government that cuts school funding to 'balance the books' is not being prudent; it is consuming its seed corn. The return on a literate, numerate, adaptable workforce accrues not to the family that raised the child but to the entire economy over decades — precisely the kind of diffuse, long-horizon gain that private markets chronically underprovide. This is, I would submit, as good a justification for public expenditure as any I could construct.

The National Review piece suggests England's reforms — whatever their specific architecture, which I defer to those who know them — may have improved measurable outcomes in ways worth studying. If that is so, the interesting question for macroeconomists is not which party designed the programme but whether the investment was scaled to the opportunity. Incremental reform administered on a starvation budget is not a test of whether public investment in education works; it is a test of how little damage you can do while appearing to try.

I would add one caution born of my own experience at Bretton Woods and before: the political economy of any such settlement matters as much as its technical design. A reform that produces winners in the short run and diffuse beneficiaries in the long run will always face the pressure of those who prefer the immediate and the visible. The job of a government serious about human capital is to make the long run politically legible — to show constituents not just the cost today but the demand, the productivity, and the tax base that a better-educated workforce generates across a generation.

What America might learn from England — and what England learned, on this account, from America — is less a set of specific techniques than a disposition: that the state has the duty and the capacity to shape the supply of human capability, and that failing to do so is itself a policy choice with economic consequences every bit as measurable as a tariff or an interest rate. The column from National Review frames this as a question of educational philosophy. I frame it as a question of aggregate investment. We are, I suspect, asking the same thing from different ends of the same corridor.