Ideas@TheCentre – The Centre for Independent Studies

Ideas@TheCentre

Ideas@TheCentre brings you ammunition for conversations around the table.  3 short articles from CIS researchers emailed every Friday on the issues of the week.

'Growth mindset' just another platitude

Blaise Joseph

23 February 2018 | Ideas@TheCentre

We’re constantly told schools should go beyond literacy and numeracy, and instead focus on ‘21st century learning’ to educate ‘creative’ kids and prepare them for ‘jobs of the future’.

Basically, this is code for trying to get better student results without actually doing the hard yards in literacy and numeracy.

There is no silver bullet which magically makes kids get better grades. The best way to help students be prepared for the 21st century is to ensure they leave school good readers, fluent writers, and competent in maths. These are the fundamental skills people will always need to be successful.

Unfortunately, many people still don’t understand this. The NSW government’s recent submission to the ‘Gonski 2.0’ review called for less testing in schools in order to reduce student stress, and a focus on ‘non-cognitive skills’ and encouraging students to have a ‘growth mindset’.

Tests are necessary to find out if students are actually learning and to identify which students need more help. Furthermore, a recent OECD study found there is no link between student anxiety and frequency of testing. No one likes doing tests, but that doesn’t mean they’re generally harmful to mental health.

And focussing on ‘non-cognitive skills’ and creativity in school puts the cart before the horse. You need to master the fundamentals of a subject before you can be creative, and too many kids leave school without those fundamentals. Generic creativity or critical-thinking skills are practically impossible to teach or assess.

The truth is there is only a limited amount schools can teach. Consider the ‘growth mindset’ idea. A ‘growth mindset’ is having the positive attitude that if you work hard you will get better at whatever you are trying to do. But, while we want students to have a positive outlook like this, there is little evidence schools have the ability to instil this into students. This is primarily a role for parents.

Schools shouldn’t waste time and resources trying to achieve things they aren’t capable of doing. They should focus on their core purpose: giving students excellent literacy and numeracy skills.

Producers vs consumers

Eugenie Joseph

23 February 2018 | Ideas@TheCentre

Too often, economists inadvertently fall into the trap of promoting the interests of producers, rather than the welfare of consumers.

Adam Smith once wrote, “The interest of the producer ought to be attended to only so far as it may be necessary for promoting that of the consumer.”

A good example of economists ignoring this basic principle is their gloomy views of slow growth in retail spending.

The Australian Bureau of Statistics reported earlier this month that the value of retail trade in Australia fell by 0.5% in December. In other words, you and I are spending less on goods like clothing, electronics and café meals than previously.

Economists would have you believe this is a problem, but is it really? Only if it reflects weak underlying economic conditions, like unemployment or low consumer confidence.

But these fundamentals have been positive in recent months. Consumer sentiment is at a four-year high and employment has grown at a healthy rate of 3.3 per cent in the last year.

In that case, why is lower retail spending reported as bad news? It is because economists expect us, as consumers, to support the economy by propping up local retailers who are struggling under the weight of competition.

In fact, commentary often comes with a disapproving tone for consumers, as in ‘How can you let your local retailers down, by spending less? Don’t you know that retailers need your business, to keep workers employed and shopfronts open?’

This is muddled economic thinking. Consumers do not exist to support jobs in a particular sector or to save struggling businesses.

Less spending by consumers might actually be positive news. For example, Australian households are starting to save more — a good thing, as many are dangerously over-leveraged.

The effects of competition are also evident in cheaper household goods and improvements in quality, which can mean fewer repeat purchases. Consumers also have more choice now because they can purchase from overseas.

But from the attitude of some economists, you would be convinced our appointed purpose, as consumers, is to serve the interests of producers — not the other way round.

Economics in One Lesson

Matthew O’Donnell

23 February 2018 | Ideas@TheCentre

Just over 70 years ago, economist Henry Hazlitt wrote an economics textbook, Economics in One Lesson, which is still regarded as one of the best introductory economic texts available to the public.  The book contains not a graph or a mathematical equation and reduces economics to its essence — logical reasoning.

Hazlitt’s One Economic Lesson is as follows:

The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.

From this lesson is derived two central economic fallacies common to all bad policy making:

Fallacy 1: That of looking only at the immediate consequences of an act or proposal.

Fallacy 2: That of looking at the consequences only for a particular group to the neglect of other groups.

Henry Hazlitt’s insights are as relevant to policy making today as they were when the book was published in 1946.

For example, opponents of the current company tax cut should have paid heed to Hazlitt as these critics have clearly violated both of his central economic fallacies since:

Fallacy 1: They focus on the fact that a tax cut will reduce government revenues today and ignore the long run improvements in investment, GDP, job creation and wages growth.

Fallacy 2: They only highlight the proposed benefit of the tax cut to ‘foreign’ investors while ignoring the benefits flowing to Australian companies, workers and shareholders.

The company tax debate is one of many policy debates which would be improved if participants heeded the lessons of Henry Hazlitt. Economics in One Lesson is a great book, available for free on the internet, for anyone interested in learning about the economic way of thinking.