Arne Duncan’s speech yesterday at the American Enterprise Institute. The U.S. Secretary of Education, in “The New Normal,” describes the “transformational change” necessary for a K-12 school system that “still adheres to the century-old, industrial-age factory model of education”:

A century ago, maybe it made sense to adopt seat-time requirements for graduation and pay teachers based on their educational credentials and seniority. Educators were right to fear the large class sizes that prevailed in many schools.

But the factory model of education is the wrong model for the 21st century. Today, our schools must prepare all students for college and careers–and do far more to personalize instruction and employ the smart use of technology. Teachers cannot be interchangeable widgets. Yet the legacy of the factory model of schooling is that tens of billions of dollars are tied up in unproductive use of time and technology, in underused school buildings, in antiquated compensation systems, and in inefficient school finance system.

And on fiscal constraints for a country that spends more per pupil than almost any other country in the world:

Doing more with less will likely require reshaping teacher compensation to do more to develop, support, and reward excellence and effectiveness, and less to pay people based on paper credentials.

Districts currently pay about $8 billion each year to teachers because they have masters’ degrees, even though there is little evidence teachers with masters degrees improve student achievement more than other teachers–with the possible exception of teachers who earn masters in math and science.

Or consider the debate around reducing class size. Up through third grade, research shows a small class size of 13 to 17 students can boost achievement. Parents, like myself, understandably like smaller classes. We would like to have small classes for everyone–and it is good news that the size of classes in the U.S. has steadily shrunk for decades. But in secondary schools, districts may be able to save money without hurting students, while allowing modest but smartly targeted increases in class size.