This year’s RC Mills Lecture – delivered by leading economics of education scholar Professor Julie Berry Cullen, University of California – was about how government interventions designed to improve the education sector can create incentives (for school leaders, teachers, students, and parents) that have unintended consequences.

This was the second annual RC Mills Lecture, following its reestablishment in 2024. The Lecture was delivered in a special session on ‘Education of Economists for a Changing World’ at the annual Conference for Economists, held in Sydney, July 2025.

We hear from Andrew Wait, Professor of Economics at the University of Sydney, who shares his insights from the lecture.

The topic for this year’s RC Mills Lecture was timely, given the focus in Australia on improving inequality and productivity. Equality and efficiency were the two main justifications outlined by Professor Cullen for government interventions in education. These interventions come in different guises, such as school finance equalization or college access equalization to address inequities, or school accountability to address inefficiencies by measuring and holding schools responsible for student learning outcomes. Each of these interventions produces its own set of incentives, many of which are unanticipated by policymakers. For example, if an accountability system measures some outcomes (e.g., academic achievement) but not others (e.g., civic mindedness), it will divert efforts to the measured tasks, possibly worsening outcomes on important dimensions that are harder to measure.

A key theme of the lecture is that economists can first elucidate the incentives associated with a particular set of interventions and then evaluate their casual impacts. To illustrate this point, Professor Cullen spoke in more detail on several studies she conducted on educational interventions in the state of Texas.

One study focused on the incentives for primary and secondary school administrators to game an accountability system to attain higher ratings. School principals can manipulate their schools’ standardized test performance by limiting the set of students that takes the test, such as by deeming poor performers as having learning disabilities to exempt them for medical reasons. Cullen and her collaborators used the specific structure of the accountability system and schools’ student achievement distributions to calculate potential ratings returns to excluding additional low performing students. They found that changes in the share of students exempted from test-taking closely matched changes in the incentives across schools and years.

Professor Cullen noted a problematic aspect of the policy in this case is the reliance on pass rates, which penalizes schools that serve disadvantaged student populations with lower achievement levels. She suggested a better measure of principal (and teacher) performance would take account of the case-mix of a school and focus on value-added for student performance, so that every student has a chance of demonstrating learning success.