Chris Dillow at Stumbling and Mumbling draws an interesting chart of life expectancy against health spending in OECD countries. While there appears to be a strong correlation, he makes an important point about what’s driving it:
The strong correlation between health spending and life expectancy exists largely because there are a handful of poor countries (such as Turkey, Poland and Mexico) which spend little on health and have low life expectancy. If we exclude the seven countries in our non-US sample with health spending below 7.5% of GDP, the correlation between spending and life expectancy falls to a statistically insignificant 0.16.
We see something very similar looking at education spending. Take the chart below, showing education spending against maths scores in OECD countries (from the OECD’s gigantic and increasingly misnamed Education At A Glance document)
Spending vs. Maths scores (source: OECD)
There definitely appears to be a positive correlation between spending and achievement. But what if we redraw the chart, leaving out Mexico and Turkey?
Spending vs. maths score, excl. Turkey and Mexico
Positive correlation eliminated. No-one’s saying that spending is completely irrelevant to education outcomes (or health outcomes for that matter). But when politicians and pressure groups clamour for funding increases, it’s worth remembering that money isn’t everything. (And I’m an economist saying that…)