Since the COVID-19 pandemic started, one of the most heated public debates concerns school closure. In this blog post, we walk through the way an economist would think about this public policy.
What is the school closure tradeoff?
In economics, scarcity refers to our inability to get everything we want. Scarcity is universal.
Because we face scarcity, we must make choices. And when we make a choice, we select from the available alternatives. A government is no different: A government can choose to close schools or leave them open, but it can’t choose both options at the same time.
You can think about school closure as a tradeoff. A tradeoff is an exchange—giving up one thing to get something else. When a government chooses whether it will close schools, it faces a tradeoff between education and health.
What is a rational choice?
A rational choice is one that compares costs and benefits and achieves the greatest benefit over cost. The benefit of something is the gain or pleasure that it brings and is determined by preferences. The cost of something is what you must give up to get it. Importantly, costs are not financial—they are forgone alternatives. The opportunity cost of something is the highest-valued alternative that must be given up to get it.
Was the decision to close schools a rational choice?
Determining whether school closure was a rational choice depends on the benefits and costs.
Some benefits are large and easy to identify, such as the reduction in COVID-19 cases and COVID-related deaths gained from school closure. While researchers might disagree about the exact magnitudes of these effects, the consensus is that school closure reduces the spread of the virus among students, their parents, teachers, teachers’ partners, and neighbors. Other benefits are smaller, such as the benefit received by a minority of students who prefer online learning and the benefit of the increased appreciation the average student has for in-person instruction.
Likely the largest cost of school closure is the forgone education. Decreasing the amount and quality of education, students do not accumulate the same amount of human capital and suffer long-run economic costs. Other costs include sacrificing student physical and mental wellness, preventing parents from returning to work, and increasing socioeconomic disparities.
All? Nothing? What is the optimal mix?
Choices are not limited to all or nothing. In the case of school closure, a government must choose the length of closure. To make this decision, the government compares the benefit of closing for one more week with its cost—it makes its choice at the margin.
The benefit gained when an activity is increased is called the marginal benefit. The marginal benefit of closing schools for one more week is the increase in health it brings.
The opportunity cost when an activity is increased is called the marginal cost. The marginal cost of closing schools for one more week is the decrease in education experienced by the students during that week.
To make its decisions, a government compares marginal benefit and marginal cost. If the marginal benefit of an extra week closed exceeds its marginal cost, the decision will be to close that week. If the marginal cost exceeds the marginal benefit, schools will remain open that week.
Multiple Choice Quiz: The Economic Way of Thinking about School Closure