Farrar fudging ACE figures

45 comments on “Farrar fudging ACE figures ”

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1. Matt Nolan 1

   24 February 2010 at 8:21 am

   Hi Rob,

   Just a few quick things I would like to say. I am in the middle of forecasts at the moment, so I’m not sure if I’ll have time to come back to this post very soon – if there is anything you really want to raise with me feel free to comment on my post, or drop me an email.

   “They assess (Table 7.2 p48) the total benefit ($4,902 $6,429 million) as being composed of $3,759 $4,903 million private benefit, and $1,142 $1,526 million Government/public benefit. Even if we accept that only public benefits are relevant, the return on ACE spending is huge ($16 to $22 on every dollar spent).”

   This isn’t a split between “public and private” though – it is between social and private, this is about looking at what optimal policy is in the absense of government right. In the post I ignored the direct issues with the numbers (which tended to use rather excessive estimates), and just focused on “what is a social benefit”. The justifiable social benefits are a lot lower than these estimates.

   Furthermore, they used the “average social benefit” as the “marginal social benefit” (which is what you look at when deciding whether to change funding) – which exaggerates matters.

   Trust me, we could do this sort of study with virtually ever industry in New Zealand – and we wold find that the “return on investment” was enormous. However, the benefits tend to be overplayed and the costs are always underplayed – which is a pity.

   “But secondly, and more importantly, in what real world are private benefits not relevant to policy? ”

   Yes for this sort of policy – as voluntary trade exists. If we move it into the public realm these “benefits” are canceled out by the “opportunity cost” of the movement.

   Now, I’m fine with NZ funding ACE because the electorate WANTS people to have private benefits – hell that is the reason we fund universities and the such to such a high as far as I can tell.

   But the inference of this report that it was allocatively efficient to do this was wrong, which was the sole point I was raising. My issue was with the inference taken from the reports figures – in terms of actual policy society can do what it wants.
   • r0b 1.1

     24 February 2010 at 9:06 am

     Hi Matt

     Thanks for dropping in, and for a very politely worded reply!

     This isn’t a split between “public and private’ though

     That’s what it’s labelled as, but in any case this dancing on the head of a pin is hardly relevant given the below.

     In the post I ignored the direct issues with the numbers (which tended to use rather excessive estimates), and just focused on “what is a social benefit’. The justifiable social benefits are a lot lower than these estimates.

     And you know this because of – gut instinct? PWC did the actual study.

     Trust me, we could do this sort of study with virtually ever industry in New Zealand and we wold find that the “return on investment’ was enormous.

     I very much doubt it. Look around you at all the trappings of our “advanced civilisation”. None of it would exist without education. In every study an educated population is more productive, is healthier, has less crime, and so on and so on. Every captain of industry, and every productive worker that they employ, is a product of education. Education is the centre of everything. In my opinion the PWC report under-estimates the value of education!

     r0b: “But secondly, and more importantly, in what real world are private benefits not relevant to policy? ‘

     Matt: My issue was with the inference taken from the reports figures in terms of actual policy society can do what it wants.

     So the short answer is, in no real world are private benefits not relevant to policy. Matt, I’m not an economist (I’m sure that’s obvious). But I can tell you as a layperson that this is the sort of nonsense (sorry) that gives economics a bad name. You construct a language and a theory of costs and benefits that is completely abstract (private benefits are not policy relevant), and then you admit that it doesn’t apply to the real world. I have nothing against abstract theoretical games, knock yourself out, but don’t let them out of the lab to make claims about a real world to which they don’t apply. Which is what Farrar has done. Farrar tries to argue bizarre conclusions in the real world, and combines it with ad hominem attacks on the competence of PWC, because he’s trying to discredit a report that shows the huge economic value of the ACE courses that National has mindlessly slashed.
2. Santi 2

   24 February 2010 at 8:35 am

   How much is Farrar being paid for his spin? Number 2 spin doctor must be making a killing at taxpayer’s expense.
   • lukas 2.1

     24 February 2010 at 10:36 am

     Have you not heard? There is a team of us operating out of the ninth floor. We submit tender documents each week. Because the amount is under 10K each time, it does not go out to public tender. 9.9K per week isn’t bad though.
3. Gosman 3

   24 February 2010 at 9:06 am

   Any report which claims a return in the realms of what the PWC claims for Adult Education is got to be suspect. The way in which they have quntified things seem to be as Matt Nolan has pointed out, (overplaying the benefits and underplaying the costs).

   Also what people here fail to comprehend is that if it provided such a great benefit then people would be lining up to pay for this themselves instead of relying on other people (i.e. Taxpayers) to do it for them.
   • DeeDub 3.1

     24 February 2010 at 9:18 am

     I like not this news! Bring me some other news!
   • Clarke 3.2

     24 February 2010 at 10:40 am

     Also what people here fail to comprehend is that if it provided such a great benefit then people would be lining up to pay for this themselves instead of relying on other people (i.e. Taxpayers) to do it for them.

     …. assuming, of course, that they have the discretionary income to pay for the additional education. Or do poor people not deserve educating?
4. Clarke 4

   24 February 2010 at 9:14 am

   Underlining the monumental financial illiteracy of National in general and Farrar in particular, the result of a tax cut is an increase in private benefit and a decrease in public benefit. By the same (il)logic he has deployed in the argument about ACE, he would be against tax cuts for the rich.

   What a blithering moron.
5. Gosman 5

   24 February 2010 at 9:14 am

   “Education is the centre of everything. In my opinion the PWC report under-estimates the value of education!”

   What a load of nonsense.

   How about someone who is ‘educated’ in Astrology r0b? Or how about Reiki healing? Do you think that sort of ‘education’ is particularly beneficial in terms of the well being of the overall economy ?
   • A Nonny Moose 5.1

     24 February 2010 at 9:37 am

     That sounds suspiciously like Tolley’s spin about “Golf Lessons and Painting Classes”, as if continuing education is the sole providence of the upper classes.
     • Gosman 5.1.1

       24 February 2010 at 9:41 am

       The reason a student loan scheme was set up was to help people of all socio-economic groups to make the economic decision whether or not to undertake higher education. If the benefits accrued to the indiciduals are as per the PWC report then it is a no-brainer. People would be flocking to course like this to improve their lot.
       • Clarke 5.1.1.1

         24 February 2010 at 10:41 am

         Isn’t it a pity, then, that student loans aren’t available for ACE courses – which does rather invalidate your argument.
         • Gosman 5.1.1.1.1

           24 February 2010 at 10:54 am

           Anyone interested in bettering themselves can find a wealth of Educational opportunities that are covered by Student loans. Just check out the following link.

           http://www2.careers.govt.nz/education_training_info.html

           If you think ACE is so beneficial then you should be campaigning for it to be included then.
           • lprent 5.1.1.1.1.1

             24 February 2010 at 11:21 am

             Why? Night classes have been running very well for over a century effectively using existing infrastructure at times that they are not in use, and doing it on a small budget $18 million per year servicing hundreds of thousands of people. They aren’t directly vocational – they’re designed to allow people to get used to learning.

             Now explain why they should radically change the behaviour to a model that would cost the country more because you have a flawed economic model that you think they should conform to.

             Face it – the biggest problem with ACE as far as you were concerned was that business people were not making money out of it.
6. Dave Guerin 6

   24 February 2010 at 9:16 am

   Hi Rob
   You also linked to my blog on this issue. This debate is really about preferences – ACE is, overall, worthwhile, but is it preferred for funding over another area? Anne Tolley talked down the value of ACE (repetitive mentions of Moroccan cooking) to defend her core decision that there were better uses of the money while the ACE lobby has talked up the value of ACE (PWC’s figures are unreasonably high and shouldn’t be relied on) because they support the spending. This government has decided to spend the money elsewhere and has worn criticism over it. They will probably lose some votes and it has affected people but the economy won’t lose hundreds of millions in output because of the funding cut, especially since the money went to elsewhere in education.
   • lprent 6.1

     24 February 2010 at 10:12 am

     but the economy won’t lose hundreds of millions in output because of the funding cut,

     Yes they will. But this is a short-term cut that removes a long-term benefit to society. It allows people to have a second chance at getting into education. The effects of that are enormous going down the generations. What it allows is people and society to lift themselves up.

     especially since the money went to elsewhere in education.

     Lets look at the ‘private benefit’ of the state supporting private schools – which is where the money appears to have gone…

     As far as I’m concerned there is little or no public benefit from such schools. We need to cut them off from being supported by the public purse. Next election….
   • Draco T Bastard 6.2

     24 February 2010 at 12:24 pm

     This government has decided to spend the money elsewhere and has worn criticism over it.

     Yeah, the criticism is because the decided to give the money to their mates in the private education sector for a negative return.
7. Gosman 7

   24 February 2010 at 9:24 am

   “They will probably lose some votes and it has affected people but the economy won’t lose hundreds of millions in output because of the funding cut, especially since the money went to elsewhere in education.”

   Exactly.

   The trouble with many on the Left is that they usually don’t see any opportunity to spend tax payer money more wisely or to cut unnecessary expenditure. The standard answer from the left is to tax the rich and spend more money which just ignores economic fundamentals. That sort of logic leads to what happened in Zimbabwe.
   • IrishBill 7.1

     24 February 2010 at 9:54 am

     What an absurd strawman argument. Returns on spending are not going to be equal across the education sector. In fact I’d suggest that a dollar spent on subsidising already well-funded private schools is likely to generate fewer gains than a dollar spent on ACE due to the law of diminishing returns.
     • Gosman 7.1.1

       24 February 2010 at 9:55 am

       Excellent, then you would agree that we shouldn’t just increase spending on ‘Education’ because ‘Education’ is always beneficial.
       • IrishBill 7.1.1.1

         24 February 2010 at 10:06 am

         No I’m arguing that we should be putting education dollars into the parts of the education system where they are most beneficial and basic economic theory would suggest that is extremely unlikely to be subsidies for private schools and highly likely to be ACE funding. What part of diminishing returns don’t you understand?
         • gitmo 7.1.1.1.1

           24 February 2010 at 10:10 am

           The most bang for buck is primary education (and the last year of early childhood) followed closely by secondary…….. so why do we throw so much money at tertiary education ?
           • lprent 7.1.1.1.1.1

             24 February 2010 at 10:20 am

             So why is Tolley wasting money tossing it at ‘national standards’ when there is a *lot* of evidence that the damn things don’t work. Why aren’t they testing the program out.

             Point out what the expected benefits are. Delineate the public benefits from it (personally I can’t see any).

             Look at the ACE program and contemplate the benefits for kids in having their parents slightly more literate and supportive of education. In my case having one parent going off and doing night classes to get her UE was the basis of our whole family getting much more highly educated.

             Frankly Farrar (and Nolan) clearly don’t know what they’re talking about. Any teacher will tell you that it is the attitude of the parents that makes a overwhelming difference to how well kids do at school.
             • Gosman …

               24 February 2010 at 10:41 am

               It is called Democracy. The National Party campainged on introducing National Standards into schools and they are fulfilling that election promise.

               You may well prefer Government policy dictated by State technocrats but I prefer to live in a society where people can influence decisions via the ballot box.
               
               IrishBill: Did they also campaign on axing ACE?
             • lprent …

               24 February 2010 at 11:25 am

               Ah the empty response.
               Show me where National promised to kill ACE?
               Show me where they promised to increase funds to private schools?

               They did promise national standards – it was a paragraph left over from the 2002 (?) election made before people saw how much of a screwup these types of programmes had been in the UK and the US. Are you saying that the nats are so stupid that they didn’t look at that and want to check it first?

               Duh – ok so it is Anne Tolley – she is that stupid.
             • Gosman …

               24 February 2010 at 11:53 am

               They campaigned on reining in the massive increase in Government spending that happened under the last Government and cutting the size of the Government sector in the overall economy by cutting taxes.

               This is what Political parties on the right of the political spectrum do. They cut the fat that parties on the left build up when they are in power and reduce the size of the state.

               When the Conservative party gets back into power in the UK they too will be cutting Government spending. They will be forced to do so because of the huge deficit built up under Labour.

               Why do you guy’s have trouble understanding this?

               IrishBill: because you’re wrong. We went into the recession with one of the smallest debt to GDP ratios in the OECD. National are also not “cutting fat” they are cutting productive economically forward-thinking projects like ACE, FastForward, the training allowance, Super Fund payments and Kiwisaver contributions and then wasting billions of dollars on projects like subsidising private schools, PR for national standards, subsiding polution and tax cuts for the rich. Political parties on the right don’t cut fat. Every one of them, Reagan, Bush, Shipley, Bolger, Thatcher, you name it, have increased the size of government. They’ve just done so at the expense of most of their citizens and in benefit of their economic elite.

               You need to check your facts.
             • Clarke …

               24 February 2010 at 1:08 pm

               When the Conservative party gets back into power in the UK they too will be cutting Government spending. They will be forced to do so because of the huge deficit built up under Labour.

               Why do you guy’s have trouble understanding this?

               And herein lies the difficulty.

               The essential disconnect between Left and Right comes because the Right choose to believe that budget deficits are a problem – thanks largely to the work of the Chicago School economists – despite all the real-world evidence that government deficits are a normal and necessary part of a modern economy.

               If deficits were an actual – rather than theoretical – problem, then the United States would have gone broke more than 100 years ago. The evidence that this has not occurred tends to rather undermine the economists on the Right who think that deficits are somehow bad, but that has not stopped this particularly dangerous meme that “deficits must be repaid at all costs!” from spreading.

               So the simple version:

               – Governments are not households. The economics that drive households bear no resemblance to the economics of countries, and the analogies that the Right draws between the two are worse than useless.
               – Where a government has a fiat non-convertible currency with a floating exchange rate (like New Zealand), running a deficit is a normal part of effective monetary policy.
               – Governments are not primarily funded by taxation or by selling bonds to the private sector; rather, their spending is primarily based on how much fiat currency is required to operate the government sector, which is then created by the central bank.
               – Where the government decides not to run a deficit (i.e. a surplus) due to capture by delusional economists, a recession inevitably results. Likewise, tightening monetary policy in a recession will always make it worse.

               So your contention that a government is forced to cut back any form of expenditure due to the deficit is completely incorrect. The government of the day may well decide to cut expenditure for political reasons, but this should never be confused with economic necessity.
             • Gosman …

               24 February 2010 at 1:41 pm

               “Every one of them, Reagan, Bush, Shipley, Bolger, Thatcher, you name it, have increased the size of government. ”

               What was the size of the Government sector as a percentage of GDP prior to 1990 and what was it in 1999?

               I think you will find that not many economists would agree with you that it was higher at the end of that decade than at the beginning.
         • Gosman 7.1.1.1.2

           24 February 2010 at 10:38 am

           I completely agree that we shouldn’t spend Taxpayers money on Private education. It makes a nonsense of the term Private.

           If the benefits of ACE are as great as made out in the PWC report then I also don’t see why Private individuals should get support from the Taxpayer to attend them.
           • Draco T Bastard 7.1.1.1.2.1

             24 February 2010 at 12:57 pm

             Because such private benefits also benefit the whole of society.
           • lprent 7.1.1.1.2.2

             24 February 2010 at 1:06 pm

             It is clear that you haven’t bothered to look at the program.

             It is designed to second chance people for whom the education system FAILED miserably.

             You have people without limited money or assets getting into education on what is almost a casual basis. There are few barriers to entry. There is no expectation that it will lead to a career. It is done at their local school. There isn’t a bureaucracy. You don’t have to do much more than turn up and enjoy learning new things. It is done as part of your local community, which means that you’ll have people around you with similar background and learning difficulties – so it isn’t competitive.

             The idea is to get people to understand that learning is fun. Then they’ll teach that to their kids and are more likely to go on to do the types of vocational training that you’re thinking about.

             It has been quietly working away as second chance education for over a hundred years delivering vast benefits both to people, their kids, and generally to society. Then you have a moron minister coming along and destroying it because she clearly didn’t understand what it was for… Mind you it isn’t surprising – she doesn’t appear to understand much.

             Now as for you….

             Personally I’d suggest that you don’t have the faintest idea about what the intent of the program was. In fact I’d say that you are a MISERABLE FAILURE because you clearly haven’t bothered to examine it yourself.
             • Gosman …

               24 February 2010 at 1:35 pm

               So where is the evidence support the view that the people taking up these courses are the ones who the education system failed?

               I suppose you have some facts and figures to back that claim up?
8. tc 8

   24 February 2010 at 10:58 am

   Australia waits for the next wave of kiwis being driven out by the banker and his mates….it truly is 21st Century muldoonism.
   Choose a brighter future eh.
9. JD 9

   24 February 2010 at 11:23 am

   If ACE does return $54-72 per dollar spend doesn’t this strengthen the case for participants to pay the cost themselves? If I was able to invest a dollar to get another dollar back then I’d jump at the opportunity. The only conclusions I can gather is that either the numbers are fudged or ACE particiapnts don’t value their course enough to pay a small amount extra with this enourmous return on investment.
   • IrishBill 9.1

     24 February 2010 at 11:39 am

     The people with the most to gain from ACE courses can’t afford to pay the hundreds of dollars these courses cost.

     I’d rather the government paid a little upfront for people to get a foot on the employment ladder than paid for them to remain unskilled and jobless or to subsidise their minimum wage employment.

     Of course I’m an economically rational man rather than a blind ideologue.
10. the sprout 10

    24 February 2010 at 12:37 pm

    the political management skills of this administration are laughable.
    should give a lot of heart to the opposition.
    these plonkers are EASY MEAT
    • Gosman 10.1

      24 February 2010 at 1:33 pm

      And hence why they are so far behind in the opinion polls………oh wait a minute.
      • r0b 10.1.1

        24 February 2010 at 1:49 pm

        Ahh, polls, the last refuge of the incompetent…
        • Gosman 10.1.1.1

          24 February 2010 at 1:58 pm

          I’m just replying to an unintelligent post with one of my own.

          The point is the Opposition has yet to get any sort of traction on these topics. If the Government was such easy meat as so laughably claimed by the sprout why hasn’t this happened?
          • Clarke 10.1.1.1.1

            24 February 2010 at 2:17 pm

            Given that only 28% of respondents in the Roy Morgan poll think that their economic prospects will improve in the coming year, I would suggest that the sense of poor economic management by this government is definitely on the increase.
            • Gosman 10.1.1.1.1.1

              24 February 2010 at 2:56 pm

              If you wish to grasp at that rather tenuous straw then be my guest.
11. richgraham 11

    24 February 2010 at 2:20 pm

    I am doing an ACE-funded course in Italian at the local polytech, costs $40 per term. There is no economic benefit in it. I’m quite happy to pay for the course’s real cost, but ACE is subsidising it and all I pay is $40. Neat eh ? And you thought ACE funding had all gone ?
    The report that assigned huge economic benefits to night classes (” $54 $72 for each dollar of funding.”)is obviously seriously in error, as Mr Kiwiblog et al pointed out. Your inability to accept the obvious does no credit to you at all Mr.Rob. Come on Labour wake up !
    • kaplan 11.1

      24 February 2010 at 5:56 pm

      You can’t extrapolate the economic benefits of ACE to society from your opinion of it’s economic benefits to you as an individual.
      That’s just a step away from statements like. “I’ve only ever been to my doctor for a cough and a sore throat and there was no real benefit in doing so. I’d gladly have paid the full cost of my visit myself so the government should stop subsidising GP’s”
12. Paul Williams 12

    24 February 2010 at 3:50 pm

    I’m concerned with the government cuts to ACE, they disrupt a pathway for a cohort students that is not well served elsewhere. That said, I’m in the education business and, a while back, I managed a project to estimate the economic benefits of vocational education and training. The clear advice, at the time, from key stakeholders (funders specifically) was that to be credible and to help frame funding decisions, the analysis had to take into account second round effects i.e. be based on econometric modelling. We did this, commissioned it from an independent body in fact, which resulted in a much more modest but defensible figure. My criticism of the PWC report is that they didn’t think about the audience which is as much policy and funding bodies as it is the public.

    Ultimately, however as others have commented, this is a simple matter of priorities and National have clearly indicated there’s are elsewhere and they’ll be judged accordingly.
13. Puddleglum 13

    25 February 2010 at 9:40 pm

    There’s a pretty deep irony in economists arguing that private benefits should be teased apart from public benefits given that modern (market) economics is based on the supposedly profound insight that pursuit of self-interest actually, and inevitably, produces positive increments in the ‘common good’ (Adam Smith, et al.).

    In fact, Adam Smith was fully aware that the notion of a fully, privatised individual is a nonsense He subscribed to the social theory that humans are fundamentally ‘sympathetic’ creatures – in the technical, philosophical sense of the word. In that sense, and to bowdlerise Thatcher, there actually is no such thing as the (private) individual – there are only various forms of social interaction.

    The political and policy question is not that of how much (or how little) individuals ‘privately’ benefit from government policies but, rather, whether public benefits are optimised through the actions of governments and, more significantly, what are, in fact, the public benefits that matter.

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