It’s Not Personal, It’s Economics

If you've read some of my recent posts, you may either suspect…or  be quite sure… you have stumbled upon an anti-public school radical. But my goal is not to be anti- anything, nor is it to sow seeds of dissension. Rather, it is to try to isolate the discussion a bit into one that is actually about the economics of delivering education as a service. It might be tough to keep feelings out of it, but maybe if we could, we would take a look at whether or not the mechanism is actually the one that will deliver best.

“Hold on a second…in this series of posts, you gave personal stories!” Yes, I did.

We start by examining the end product. Then we step back and look at where the end product is coming from, how it’s being delivered, and the system as a whole.

 Ultimately, this is about about the service being offered to the kids. What's working? What isn't?

If we go back to the shoe example in this post, we can look at the mechanism for delivering the service or good without our feelings getting in the way (unless you feel very passionately about steel-toed boots). 

The need, in our fictional but hopefully-relatable story- are for foot protection, which hopefully contributes to productivity, safety, and health. In our story, the government decides that meeting these needs is for the social good (we will set aside for the moment whether or not the boot manufacturer contributes to any campaigns or whether the road workers who like the boots vote) and assume intent is all for the social good. 

As we saw, once the government requires that all people be taxed to pay for the boots, and only the boots, and then provides them for free to everyone, manual laborer or not, the market changes. The market no longer can operate as competitively as it could without the free option.

 Creative shoe makers and businessmen will likely still make and sell different sorts of shoes, but the landscape for competition won't be the same as it would be if they were competing only with each other and not with ‘free’.

In economics we say that people decide how to spend their money based on what will maximize their “utility per dollar” -  that just means getting the biggest bang for your next buck.  The benefit someone gets from a shoe, or sandwich, or a school, or whatever… is weighted against how much it costs and what benefit they could have gotten for that “buck” if they spent it elsewhere (usually intuitively…even I don't write it down and do a math equation!) . The cheaper something is, or the more beneficial it is, the more bang for our buck we will get. 

So, to get back to schools… or shoes…, winning the game of most-bang-for-your-next-buck is going to depend on what people value and how much money they have. If you like math, it looks like this: benefit/ next dollar.

Economically speaking, in order for people to not choose the free option, the boots, or schools, provided by the government will have to either be so unsatisfactory that people begin to shift any dollars they have to alternatives,  or the people will shift to viewing the option such that they don't consider what is being delivered as doing the job at even a basic level (not teaching the kids to read, not protecting feet while enabling walking) 

Barring this level of extreme failure - good-enough education, or…heaven forbid…childcare or sports or some other service that isn't even education…could carry the decision - when the cost is free. 

And that's the key point. The benefit people get from “free” can actually drop pretty darned low, or get pretty adulterated, before people will shift their money from something else they could spend it on to one of the choices on the market that they have to pay for.

In fact, even the private schools, or private shoe stores, can get away with being only marginally “better”.

In our shoe example, this would mean only the people who are really suffering from those ill-fitting free boots might shift to buying sneakers. And, if the boots are bad enough,  those sneakers don't actually have to be that great to still make sales. 

Now…is this really the best mechanism by which to deliver something as valuable as education?!  it doesn’t seem like a system that really drives each competitor to do its best.

Of course, the other facet of this, is how people perceive education.  If someone never saw anything but boots in their lives, they might get really defensive of their free government boots, even if they fit rather clunkily and weigh them down. They'd think a rallying cry for better shoes was a personal attack on their boots and them for wearing them.

But if they knew that their boots could not only be better, but that there are a vast number of other sorts of shoes that could be made besides boots, they may let down their defenses and realize the discussion and the questions were just a critical evaluation of whether the entire system is really the best one .