Education Reform

A Fin 6250 Student sends this link about Washington DC education reform:

D.C. Schools Chief's Plan Faces Opposition

DC School Reform will be a really interesting laboratory over the next few years, in part because the federal government is so heavily involved in administering the District.

One interesting feature of the DC plan is to get rid of tenure for public school teachers. This raises the question: Why does tenure exist in the first place?

The main reason for tenure cited by teachers' unions is to protect teachers from arbitrary firings. This raises an important issue, namely that it can be hard to provide incentives for supervisors to do subjective evaluations of performance. Getting rid of tenure would require principals to make hard decisions about who stays and who goes, and DC will have to grapple with this issue.

One reason for tenure in at the university level comes from the work of Lorne Carmichael, an economist who was thinking about hiring decisions. University professors have very specialized expertise --- my dean just isn't trained as an economist, and so it's very hard for him to figure out who we should hire if we're going to hire more business economists. In fact, I'm really the only person at the whole university with the expertise and connections to know which business economists are really good and which are just OK.

This means the "hiring" problem is really an "information extraction" problem. The university has to provide incentives for me to tell them the truth about who we should hire.

What role does tenure play?

Well, suppose I didn't have tenure. Then I might have an incentive to hire an economist who's good, but not quite as good as me.

Why would I do this?

Sometimes universities face budget cuts (like this year). And without tenure, the university might think about laying off some business economists. And if I hire someone better than me, I might be the one laid off. But if I hire someone worse than me, then maybe I'd be the one to keep my job.

To summarize, my incentives to build an excellent department would be weaker if I feared that doing so might cause me to be the first to go in a downturn.

We're trying to hire another business economist right now, and frankly the guy we're talking to is a lot better than me! Good thing I have tenure....