National have made a big mistake cutting funding for Adult and Community Education (ACE). For a trifling sum of money, and giving lie to their pre election rhetoric, they have killed off a decades old public institution. People are angry.
One of the stupidest aspects of this anti-education policy is its financial incompetence. Spending on ACE has a huge return. According to this report from Price Waterhouse Coopers Economic Evaluation of Adult and Community Education Outcomes :
Based on the available data, including the survey responses, the estimated economic impact of the ACE sector is between $4.8 and $6.3 billion annually. This equates to a return on investment of $54 – $72 for each dollar of funding. Each dollar of government funding generates a return of $16 – $22, but this is further leveraged through private contributions to the sector, including those voluntarily added such as unpaid volunteer labour. …
Not even National’s most dedicated apologists can defend the foolishness of killing off such returns, so their only alternative is to strap on their ideological blinkers and try and discredit the PWC analysis. Farrar summarises a recent rash of blog posts (here, here, here) attempting to do just that.
You know Farrar has little to go on when he gets in to the ad hominem attacks: “Remind me to never get PWC to do a report, if I want it taken credibly” (this despite citing PWC as an authoritative source on previous occasions). But the main substance of Farrar’s attack (quoting Nolan) is the argument that most of the benefits of ACE spending don’t count. From the list of benefits in the PWC report (Table 7.1 p47), Farrar / Nolan rule out almost all of them:
Increase in direct income: No
Savings in government benefits: No
Marginal increase in individual income: No
Increase in income from self-confidence: No
Reduction in family violence: No
Savings for health: No
Savings from crime reduction: Potentially, partially
Increased community involvement by individual: No
Higher [government] income [from] taxes: No
The reason that these benefits “don’t count” is that they are “private benefits” not “public benefits”. Private benefits (and “fiscal externalities” such as increased government income from taxes) are not “policy-relevant”. Farrar comments: “If a firm makes basic mistakes like counting private benefits as public benefits and vice-versa with costs, then they do not deserve to be taken seriously”.
I’ll try and limit myself to two points in reply to this arrant nonsense. First, we don’t need the bizarre Farrar / Nolan checklist of what is and isn’t a public benefit, because that too is covered by the PWC analysis. 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).
But secondly, and more importantly, in what real world are private benefits not relevant to policy? According to Farrar, governments should not have policy that tries to increase our income, decrease our use of benefits, reduce family violence, reduce our use of the health system, and so on. This will be news to government. National say they want us to be a “high-skill high-wage” economy. National say they want us to get off the benefit. National say they are concerned about the relationship between income and health. And so on, and so on. If Farrar believed his own post on ACE he would get on the red phone pronto and let Key know the error of his ways…
So here we have sublime idiocy on two levels. At the government level, the idiocy of killing off the ACE programme which so clearly contributes such good value for money to so many of the government’s supposedly core policy goals. It’s not just that National have no idea how to achieve a high-wage economy, they are actively killing off a programme that did actually help. And at the level of Farrar and the other apologists, the idiocy of running this bizarre attack on the credibility of PWC, a transparent attempt to shout down a message that they cannot bear to hear.
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