October 19, 2010

Basic economics for Edu-Pundits

Those who favor government running the education system often seem to think that government is somehow immune form economic and political forces.  They often believe that by having the government run the education system, we’ve somehow managed to avoid the common problems of free enterprise.  For example here’s Downes:

I think the point being made is that education is not something that is simply bought and sold, as a commodity, but rather something a society does to advance its own objectives. That it is, therefore, something too important to be left to the whims of the marketplace. And that the content of an education cannot be determined merely by economic pressures, but by the wider set of values of a society as a whole.

Most societies have decided that the management of education is too important to be left to private enterprise, that there would be too many poison pills to swallow, and that society would be irreparably damaged as a result. That even if private enterprise were to be able to manage education more efficiently, the product offered would be harmful to society.

The fostering of an educational resources regime where publishers and academics produce, and everyone else consumes, at once promotes their business objectives and undermines our social objectives and disempowers learners as a whole.

Implicit in this argument is the belief that government acting as both regulator and service provider is somehow immune from market forces, political forces, and self-interest such that it will inherently use education resources more effectively, provide education services more effectively, and serve society’s objectives better than free enterprise would.

More specifically, does eliminating profits and the risk of losses improve outcomes?  Does eliminating competition improve outcomes?

It’s basic economics.  Once you strip away the lofty rhetoric, it’s easy to see that our education system suffers from common maladies that plague other areas of the economy and for the same reasons.

There’s nothing inherently different because government is providing the education services.  If a private company was offering education services under the same conditions, the services provided would be equally bad and the the prices equally steep.  And, most importantly, the outcomes would be equally abysmal for the same students being under-served in the present system.

Unlike Downes and others of like mind, I am not willing to sweep the bad outcomes under the rug by blaming the failures on outside forces like poverty.  The majority of people who favor the present system, like Dick , recognize that reform is needed.  But, they are mistaken in believing that the present system can be reformed in a way that improves outcomes.

To understand why requires a brief overview of basic economics which I’ll provide in the next post.

In the meantime, feel free to present your arguments, pro and con, on the wonders and failures of the present system and why you think I’m wrong or right.  I’ll address them.


Dick Schutz said...

Hey Ken. The US is a federal system of government. Remember? We the people? We the people is us, you and me and every other citizen. The government isn't them, something other than us.

We constitute a public, not a market. Downes error was to buy into the "marketplace." The "education marketplace" is a figment of the imagination.

Point of clarification: I don't for a Federal minute favor the "status quo." I do respect the Constitution of the United States, and I don't believe that borrowing metaphors from economics is productive in reducing the cost and increasing the benefits of the el-hi enterprise.

The discipline of economics has a bearing on schooling, but so do the disciplines of the other social sciences. Plucking one notion "free market" out and using it all over the place is akin to a little kid with a hammer.

There was an article in the New Yorker in 2009 that didn't receive much notice. It's about health care, but it can be extrapolated directly to education.


Who is running the show doesn't matter that much. It's what the performers are doing that counts. That's what constitutes the elements of a system.

The elements of instruction--the parallel to health care practices--remains a black box. That's no way to run a pool room, a health system or an education system.

KDeRosa said...

Dick, the public may be paying for education and the government is us, but actual people are providing the education services. And, those public-sector people act in their own self-interest just like people in the private sector. And, those people are not immune to market forces and economics.

Education is provided in a market. It's just a competition free market with no concern with profit or losses by design. But it's still a market. Monopolies, Oligopolies, and cartels all operate in markets, reduced competition markets.

The discipline of economics has a bearing on schooling, but so do the disciplines of the other social sciences.

Which are they? And, how and why do they override economic principles. I'm not necessarily disagreeing with you here.

Who is running the show doesn't matter that much. It's what the performers are doing that counts

I thought I made this point as well. The distinct is not the who but whether competition exists.

Healthcare suffers from similar problems as education, but healthcare does have a remnant of competition in place. The market is distorted (mostly as the result of foolish government intervention and regulation) , competition is low, incentives aren't aligned, and the regulation is poor.

The elements of instruction--the parallel to health care practices--remains a black box.

The real question is how do you propose cracking that black box in the absence of market forces or what the public perceives as the equivalent of fighting a war or sending a man to the moon (the only situations where people didn't need competition to achieve a difficult goal)

Roger Sweeny said...

During the Reagan years, Michael Kinsley said the White House needed more people who understood markets and fewer people who worshipped them. He was, of course, right. We also need fewer people who demonize them.

Markets exist in many forms. Some are obvious and easy to analyze. Some don't look like markets at all. Analyzing them as markets doesn't tell you everything you want to know about them--and it may actually obscure some important things. It may also just seem icky.

It sounds icky to talk about a "marriage market" but it's true that, other things being equal, you are more likely to find a mate you like if you make more money, are more attractive, etc. You can legitimately talk about supply of and demand for marriage partners.

Of course, that's not the whole story.

Teachers and other people in education care about what they percieve as the public interest, but they also care about money, security, power, and changing the world to something they'd like better.

Just because economics tells us unpleasant things doesn't mean we can reject it. That's as stupid as saying, "I love you, baby, and I don't want you to get pregnant. Therefore, I don't have to use a condom."