Skip to main content

K-12 Education

The need to improve the K-12 education system is a perennial topic of discussion at local, state and national levels in the United States. In various rankings of the education systems around the world, such as the Programme for International Student Assessments (PISA) conducted every three years by the Organisation for Economic Co-operation and Development (OECD), the United States consistently ranks at or below the OECD average in every subject, lagging well behind high-achieving countries such as Finland and Korea. However, according to many measures, the United States ranks among the top five countries in the world in terms of spending per student.

Given this high level of spending, and the average or below average performance of students in the United States compared with their counterparts in other countries, the question naturally arises of how to maximize the effectiveness of K-12 education spending in the United States.

The importance of an effective K-12 education system in producing the educated workforce that is critical to economic growth is widely acknowledged. More than half of all Americans do not graduate from college and, accordingly, depend on their primary and secondary education as their sole formal educational training for their professional lives. High-paying jobs increasingly require higher levels of training than they did a generation ago, a need that K-12 programs will have to meet for those students who do not continue on to college. For those who do continue on to college, the quality of their K-12 education helps determine whether they are prepared for college-level work or will need remedial courses to correct for inadequacies in their prior education. The benefits of an effective K-12 education accrue to both individuals and society as a whole: Better education is correlated with higher productivity, better health, lower incarceration rates and more stable families.

It is for this reason that the Federal Reserve Bank of Minneapolis has decided that its 28th annual essay contest will ask students: What change in the American K-12 education system would result in the most cost-effective improvement in student outcomes?

Although effective preschool programs and high-quality college and post-graduate programs are also important components of a complete education system, this question is specific to K-12 education. Additionally, it is important to note that we are asking students not only to identify ways to improve the K-12 education system but, more specifically, to identify cost-effective improvements.


In simple terms, cost-effectiveness analysis involves measuring the impact or outcome of a particular program or intervention against its cost to determine the amount of “effect” the program has produced for the given amount of cost incurred. This analysis requires students to make decisions regarding what they will propose as appropriate measures of educational effectiveness. Is an effective and improved K-12 education system one that produces higher scores on standardized tests? Increases high school graduation rates? Produces high lifetime earnings for its graduates? What are the particular impacts or outcomes that will be measured?

Additionally, in conducting a cost-effectiveness analysis, accurate measurement of cost is critical. What costs will be counted in assessing a particular intervention or program? Will only direct program expenditures be counted, or will other, indirect costs also be acknowledged and included in the analysis? Determining what is appropriately included as a cost may be difficult and somewhat subjective. For example, suppose a school district has students complete a special online reading comprehension curriculum at the beginning of the school year. The program requires parents to review the child’s work on a weekly basis and submit an online statement certifying completion of such review. The direct costs to the school district include the costs of the hardware and software, and the salary and benefits costs for the program administrator. However, in this example, parents are also incurring costs in connection with the program: the cost of their time in completing the required homework reviews and certifications. Should the school district include those indirect, external costs in their cost-effectiveness analysis?

Unintended Consequences

One key concept in economics is that all things have a cost and that even well-intentioned policies can have unintended consequences.

For example, one suggested avenue for reform has been improving standards for teachers through incentives such as performance-based salary differentiation. While in theory making teachers more accountable for the outcomes of their students sounds like a good idea, the policy, which has been adopted by several states, has been attacked for having unintended effects on the priorities of teachers. Critics of the policy fear that teachers will focus too heavily on preparing their students for standardized testing and remove otherwise meaningful material from their lesson plans.

Any proposed solution to an issue should take into account these costs and consequences and weigh them against the policy’s benefits.

A wealth of possibilities

This primer is intended to get students thinking about the topic. It is far from the last word on the subject, but rather is a stepping-off point for students who want to write a good essay. Many resources are available to draw upon, and essays can take many different approaches. The judges will reward creative thinking in addition to careful research, persuasive writing and solid economic thinking. Good luck!

If you have any questions, email or call 612-204-5168.