Against the Grain: We may be finally tackling the economic dilemma central to grade inflation

Paul Ormerod
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YOUNG adults in England have scored almost the lowest results in the developed world in international literacy and numeracy tests. According to a recent study by the Organisation for Economic Co-operation and Development (OECD), out of 24 countries, England’s 16-to-24-year olds rank 22nd for literacy and 21st for numeracy.

New Labour and the educational establishment harangued us for years about the stupendous success of the education system, as – year after year – record numbers of passes and A grades at GCSE and A level were registered. The OECD study, by no means the first of its kind, confirms what many suspected. Grade inflation was rampant, and the statistics had about as much meaning as pronouncements about production levels from the Soviet Union. Actually, that is unfair. When the Soviet Union said 10m boots had been produced, they really had been. They might have been poor quality and all left-footed, but the boots did exist. It now turns out that many with GCSE passes barely pass muster by international standards.

The usual excuses are being made by liberal commentators. It is because of poverty or, even better, government austerity. These points were not made when meaningless grades were being ratcheted up, under Gordon Brown’s control of the domestic policy agenda from 1997. More importantly, poverty itself is not a barrier to educational achievement. The careful work of scholars like that of the late EG West shows that functional adult literacy and numeracy in Britain in the nineteenth century (when most people really were poor) was almost 100 per cent. It is lower now than it was over a hundred years ago.

The root cause of the problem was the practice of setting grade targets that schools had to achieve. People react to incentives, the key insight of economics. So teachers, with an incentive to deliver good grades, began to steer pupils away from more demanding subjects like physics and foreign languages towards topics where higher grades were easier to achieve. Some exam boards subtly signalled that the content of their courses was changing. No one was crass enough to say openly that an exam was being made easier so that more schools would choose it over a competitor. But the effect was the same.

A vicious spiral of declining standards was set in motion. A Gresham’s Law in education was observed, in which the bad drove out the good. Schools had to hit targets and created an implicit demand for easier subjects and easier exams. The suppliers, the exam boards, competed with each other for business, and were obliged to follow each other down to lower and lower levels of quality.

Setting effective incentives is often a very difficult task, especially in systems like education where feedback can magnify the initial effect many times over. Fortunately, Michael Gove understands that the problem can only be solved by a complete break with the past. The news yesterday from schools minister David Laws that the current system of grade targets is being scrapped is an important step in the right direction.

Paul Ormerod is an economist at Volterra Partners, a director of the think-tank Synthesis and author of Positive Linking: How Networks Can Revolutionise the World.