We know that schools and school systems share a lot in common with businesses. Do they also resemble nations?
Ronald Bailey recently wrote in the Wall Street Journal an article titled "The Secrets of Intangible Wealth." His introduction: "A Mexican migrant to the U.S. is five times more productive than one who stays at home. Why is that?"
The answer, says Bailey, who gets his information from a 2006 World Bank report, is that the United States possesses incredible reserves of "intangible capital." Sure, the U.S. also has more machinery, natural resources, etc. than Mexico, but America's greatest advantage comes from assets that are largely invisible.
What the World Bank showed in its report--titled Where is the Wealth of Nations?--is that, when one tots up the value of the world's traditional capital (machinery, natural resources, infrastructure, etc.), the sum doesn't come close to the value of the world's wealth. A big part is missing. World Bank analysts call this missing component intangible capital--e.g., a skilled workforce, strong rule-of-law, trust in institutions, and more.
The most successful countries do well not because of their natural resources but because of their intangible ones. In affluent countries such as the U.S., intangible capital accounts for as much as 80 percent of wealth. In poor countries, the percentage is far lower--in fact, some such countries are so badly run that they actually have negative intangible capital.
Isn't it the same with high-achieving schools?
Take, for instance, a high-achieving charter school such as Amistad Academy in New Haven, Connecticut. Amistad receives fewer resources than regular New Haven public schools; Amistad's students are no more academically capable than those in other New Haven public schools. Nonetheless, Amistad's students make incredible academic gains while their peers down the street continue to struggle. The difference is that Amistad has lots and lots of intangible assets.
An enormous proportion of the success of high-achieving schools comes from their intangible capital, things like a rigorous school culture, motivated and talented teachers, and effective administration. Such assets are not easily quantified. And of course the output of classrooms is harder to measure than the output of economies. Still, Eric Hanushek and others have for years demonstrated that the amount of money schools receive does not correlate with their students' achievement. Intangible assets make up the difference. The best schools are able to produce stellar test scores with limited traditional capital (i.e., money). Bad schools can be flush with dollars. Their slim reserves of intangible capital, however, hinder the production of good results.
Thus, the World Bank's findings are informative, especially as courts around the country hand down rulings on adequacy lawsuits, mandating that states pour more dollars into traditional capital for schools.
A Mexican migrant is five times more productive in the U.S. than in his home country. Likewise, students in schools that are well endowed with intangible capital are bound to be five times more productive than their peers stuck in educational Nigerias.