Gresham’s Law in Education: How the Bad Drove Out the Good

Young adults in England have scored almost the lowest result in the developed world in international literacy and numeracy tests. A study by the Organisation for Economic Co-operation and Development (OECD) shows how England’s 16 to 24 year olds are falling behind their Asian and European counterparts. England is 22nd for literacy and 21st for numeracy out of 24 countries.

New Labour and the educational establishment harangued us for years about the stupendous success of the system, as record numbers of both passes and A-grades in GCSE and A-levels were registered year after year. The OECD study, by no means the first of its kind, confirms what many suspected. Grade inflation was rampant, and the statistics had as much meaning as the pronouncements about production levels made in the Soviet Union. Actually, that is unfair. When the Soviet Union said 10 million 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 people with GCSE passes can barely read and are virtually unable to add up.

The usual excuses are being made by metropolitan liberal commentators. It is because of poverty or, even better, government austerity. These points were not made when the meaningless grades were being obtained, 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 such as the late EG West shows that functional adult literacy and numeracy in Britain in 1900, when most people really were poor, was almost 100 per cent.  It is lower now than it was over a hundred years ago.

Setting schools targets of grades to be achieved was the root cause of the problem. People react to incentives, the key insight of economics. So teachers, with an incentive to deliver good grades, began to steer pupils away from subjects like, physics and foreign languages to the Mickey Mouse topics where higher grades were easier to achieve. Some of the exam boards subtly signalled that the content of their courses was changing. No-one was crass enough to say openly that the exam was being made easier so that more schools would take their exam rather than those of their competitors, 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. The 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.

Paul Ormerod

As Published in City AM on Wednesday 16th October

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Alex O’Byrne, Associate at Volterra, is an experienced economic consultant specialising in economic, health and social impact, economic strategy, project appraisal and socio-economic planning matters.

Alex has led the socio-economic and health assessments of some of the most high profile developments across the UK, including Battersea Power Station, Olympia London, London Resort, MSG Sphere and Westfield. He has significant experience inputting to EIAs and s106 discussions as well as drafting economic statements, employment and skills strategies and affordable workspace strategies.

Alex is also experienced at economic appraisal for infrastructure. He was project manager of the economic appraisal for the City Centre to Mangere Light Rail in Auckland. He also led the economic and financial appraisals of the third tranche of the Transport Access Program for Transport for New South Wales, in which Alex developed and employed innovative methodological approaches to better capture benefits for individuals with reduced mobility.

He is interested in the limitations of current appraisal methodologies and ways of improving economic and health analysis to ensure it is accessible to as many people as possible. To this end, Alex recognises the importance of transparent and simple to understand analysis and ensuring all work is supported by a robust narrative.

Alex holds a BSc (Hons) in Economics from the University of Manchester and he was a member of the first cohort of the Mayor’s Infrastructure Young Professionals Panel.


Senior Partner

t: +44 020 8878 6333

Ellie is a partner at Volterra, specialising in the economic impact of developments and proposals, and manages many of the company’s projects on economic impact, regeneration, transport and development.

With thirteen years experience at Volterra delivering high quality projects to clients across the public and private sector, Ellie has expertise in developing methods of estimating economic impact where complex issues exist with regards to deadweight, displacement and additionality.

Ellie has significant experience in estimating the economic impact across all types of property development including residential, leisure, office and mixed use schemes.

Project management of recent high profile schemes include the luxury hotel London Peninsula, Battersea Power Station and the Nova scheme at London Victoria. Ellie has also led studies across the country estimating the economic and regeneration impact of proposed transport investments, including studies on HS2 and Crossrail.

Ellie holds a degree in Mathematics and Economics from the University of Cambridge.