John Stossel Fails an Education Test and Demonstrates That He’s Economically Illiterate

John Stossel is a Fox Business News reporter.  Stossel is an unabashed “libertarian” with a strong Austrian orientation on economics who focuses on economic issues.  He’s made a living out of being indignant and disgusted by “liberals” and “big government” which he sees as the root of all economic problems.  He’s been quite successful over the years, first at ABC News and now at Fox.   He also writes a blog to go with his Fox News show.

In other research I was doing recently I stumbled upon a post of his from Sept 15 called “Stupid in America” in which he asserts that schools have gotten too expensive and don’t deliver the goods.  In Stossel’s own words and graph:

School spending has gone through the roof and test scores are flat.

While most every other service in life has gotten faster, better, and cheaper, one of the most important things we buy — education — has remained completely stagnant, unchanged since we started measuring it in 1970.

It looks appalling right?  Scores have increased by 1% but the cost of an education appears to have increased by approximately 246% ($43,000 up to $149,000).  Except it’s very deceptive and the obvious product of an economic illiterate.  There’s two clear, elementary economic errors here.

First, he’s comparing test scores, a measure that’s in absolute terms on fixed scale to dollars spent in nominal terms over a 40 year period.  Dollars are not fixed units of measure.  They change value over time because of inflation.  If you want to compare test scores to dollars spent “buying” those test scores, then you need to use real dollars with the inflation taken out.

So let’s do that.  Using the Bureau of Labor Statistics CPI Inflation Calculator, we find that what $43,000 purchased in 1970 would require $241,660. in 2010.  Yes, inflation has changed purchasing power that much.  Inflation compounds so even a 2% annual inflation rate would more than double nominal costs in 40 years.  In the late 1970’s we had some years of inflation in the double-digits.  So really, the graph is telling us the opposite of what Stossel wants us to believe.

The second big problem is that Stossel is assuming that the all money spent on education goes to buying improved test scores in math, science, and reading.  He also is assuming that the inputs, the students being educated are the same in 1970 as in 2010.  They aren’t.  He ignores that we might be paying for something else in addition to math, reading, and science test scores.

Stossel then goes on the attribute all of the problems to education being a government monopoly.  Again, he ignores facts. Facts are inconvenient for Stossel.  Competition has been brought to K-12 education in many areas. Maybe not as much as he would like, but it’s a significant change since 1970.  As his test scores indicate, it hasn’t helped much.

Finally, I want to note that it’s poor practice to not cite your sources and more precisely define your data series.  The graph is labeled “Source: NCES”.  NCES is a huge website and archive of a lot of data.  Stossel doesn’t give a source. Is it because he wants us to take him at his word and not verify or check it out for ourselves? He doesn’t even label what the spending series is to which he refers.  I am assuming it is a “spending per pupil over 12 years” type of series.  A search of NCES for a series labeled as he has it turned up nothing.

I find it enormously ironic that Stossel would make such elementary errors as to not deflate a data series or to not label his measures precisely.  That’s what we demand in principles of economics courses.  What makes it ironic is that on August 23 Stossel takes Congress to task for being “economic illiterates” and not having degrees in economics or business.  Pretty rich stuff from a guy with only a psychology degree who makes elementary economic errors.

5 thoughts on “John Stossel Fails an Education Test and Demonstrates That He’s Economically Illiterate

  1. I found this chart at the NCES site in about 12 seconds:

    In “inflation adjusted” terms, “Current expenditures per pupil in fall enrollment in public elementary and secondary schools” were $2,808 for 1961-62, $4,552 for 1970-1971 and $10,441 for 2007-2008. Having been in 5th grade in 1961-62, I can state from experience that my 5th grade education in current events and history was superior to what I’ve seen of most college graduates after the absurd increase in government educational spending. Stossel is substantively correct.

    I’ve been an Austrian School advocate since 1973:

    Bob Roddis and Greta at Michigan State - Fall 1974 with Nolan Chart on his car - On Farm Lane at Baker Woodlot looking north

    Although you claim to be an economic historian, I see no evidence that you have the slightest familiarity with even the basic concepts of the Austrian School such as ignorant acting man and economic calculation.

    • Hear, Hear, Bob. Glad you knew exactly where to go to refute this person’s “facts”. I have always believed John Stossel wanted to educate America about where it’s money goes and why the government is NOT a good steward of it. I have no idea what an Austrian School philosophy is, but sounds like my own mindset (or philosophy). Thanks for your input.

  2. The cost increase is only by a factor of 2 from 1970 to 2008. This is still a lot less than what is shown in fox news. Stossel is not substantially correct.

  3. Apparently this professor doth profess too much. I thought his statement about Stossel didn’t sound right because the numbers for what education cost in 1970 v. 2010 looked OK to me as if they HAD BEEN ADJUSTED for inflation. See the link below in which CATO’s chart was first published and then decide who is economically illiterate, the “Professor” or the TV reporter:. It clearly states that the chart was adjusted for inlation.


  4. Did you miss “NOTE: Beginning in 1980-81, state administration expenditures are excluded from “current” expenditures. Current expenditures include instruction, student support services, food services and enterprise operations. Beginning in 1988-89, extensive changes were made in the data collection procedures.”?

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