The Market for Education: Part 1

Way back when I was a youthful 19 years old, I took a class at my community college in Microeconomics. I took it for the admirable reason that I needed the credit and it fit in my schedule.

I like connections, the big picture, and ideas. For some reason, economics graphs intrigued me. I think it was because I could see the story. When this happens-  that happens. When this changes, that changes. At least we think so, theoretically…

I then took Macroeconomics and, interested in educational systems even then…(don’t leave, I’mg going to make this highly relevant!), I wrote a paper in that class about Thomas Jefferson’s proposed plan for schooling in the brand new baby United States.

 After I transferred to the  Nutrition program that I’d been aiming for and decided I didn’t like it, I switched to the tiny Economics department and ended up somehow getting a BS, peppered with various Political Science classes, and then an MS a few years later. I still teach it part-time online, because it pays better than this does 🙂

If you are still with me, it’s because you are wondering what this has to do with schools, right? Well, it has a lot to do with it. 

In economics we like to talk about free markets. Free markets are those places you can go and choose what you want or need from a variety of choices, and, we like to believe, when the government stays out of it, that prices signal value back to providers, providers see needs and are incentivized to innovate, and the “invisible hand” creates efficiency. Now, it’s considerably more complicated than that, but that’s the jist of it. Basically, see a need, fill a need, reap the reward for the risk you take (that’s the entrepreneur); have a need, ‘vote with your dollars’ on what best fills it (that’s the ‘consumer’), and that’s the "Invisible Hand” at work.  

Let’s say you are in the market for - shoes- most of us have been at various times in our lives- you have a particular fit, style, and function that works best for you. At a basic level, you need your feet covered. But you also need them covered by the right sort of shoe. Maybe for work, they need to be nice and match your pants. Maybe for walking, they  need to bounce just right and not make your left hip and right shoulder hurt. 

You are constrained by your ability and willingness to pay for the shoes,yes, but you know what you need so you go on the hunt for the right shoe at the right price. So does everyone else.

Now, if you didn’t value shoes because you thought that going barefoot was healthier, or maybe you grew up like Mowgli or Tarzan and it never occurred to you to wear shoes, you would never go shoe shopping. You only purchase things you value. There would be no market for shoes then. (Although there's a very good case to be made for the salesman who can convince a whole jungle of Tarzan’s that they do indeed need shoes…)

I’m getting to schools now, I promise. Way back in Jefferson’s day, there was no Department of Education. From what I recall from that paper I wrote over 20 years ago and which I now can’t find, Jefferson believed that most Americans were not Tarzans and they did, indeed, think shoes…education…was a desirable thing to have.

 But he also thought that uneducated people were a drain on society and therefore ‘society’ ought to make sure that all kids had access to enough education to make them functional citizens. His proposal, as nearly as I can remember, (to the state of Virginia,I might add, not to the Federal government) involved a plan to have tax-funded schools serving all kids for about 3 years. This would allow them to become literate at basic reading, writing,  and arithmetic. He also wanted them taught the basics of history and civics. The goal, again, was citizens who could function in society (this was the newborn period of the Industrial Revolution and he was a big believer in agrarian life). He believed that there should then be a system where the most gifted academic students would be chosen to continue their education on the tax dollar. The other students would be at the mercy of their parents’ ability to pay for schooling. The underlying premise - consistent with his libertarian leanings toward individual and state freedom- was  that society only owed its citizens functional literacy. 

You might not agree with Jefferson, but the informing beliefs behind his proposal (which was never adopted) are rich for discussion. But maybe I digress…let’s get back to shoes.

Let’s say that the government decided that it owed all citizens basic foot coverage and decided it would tax all citizens so that no child should ever be left barefoot because there would be a shoe store in every town with free shoes for all children. This sounds like a pretty good idea. Nobody goes barefoot, society cares for the most vulnerable. Fewer injuries, more ability to work and commute, more productive citizens,  etc… 

Let’s extend the thought experiment a little more. Let’s say there was a basic shoe made in each size from infant to adult. One shoe. It covered your feet. And they were free. I mean, you have to pay the tax, but they are free. 

Now, some enterprising person comes along and realizes that a lot of people wear the shoes from the government store, but they don’t fit very well. They have blisters on their heels and they make them limp.They certainly can’t run or dance in them very well. 

 They realize they can start making shoes that fit differently and are different colors and fits and functions. So they open up a private shoe store. But only people with extra money can afford them, and some people don’t think that’s very fair. It seems that if we all have to pay for the shoes and wear them, the rich people shouldn’t get to just opt out. The rich might not even care that the government shoes are not that great for everyone else because they get to just buy different ones. Then the shoes might even get worse and worse. 

Now, the government realizes that the government road workers perform best if they have steel-toed boots. So they make ALL the shoes steel-toed boots. This is even worse, because now the children who love to dance and the runners and the pregnant ladies and the office workers all have to wear steel-toed boots, or, they have to get money somehow and to buy the nicer shoes at the private store. 

What a dilemma, huh? Now, everyone is arguing.  The poorest kids at least have shoes. They might not fit, but they aren’t barefoot.  The average kid also has shoes because they are free and good enough. If they are lucky they have an extra pair also from the private store. But, now some of the poorer families wonder why they are stuck with the boots that don’t fit. They limp around, hurting, and wish they could have a choice. But how will they ever get one?

What would happen if the government had never entered the shoe market? Well, it’s hard to say. If enough people really value shoes, it’s pretty likely shoes of all shapes, sizes, quality, colors, and prices would be available. But some people might not value shoes and then those people will go barefoot. There might  be a Salvation Army or something that raises funds to make sure the most vulnerable can get shoes.  There would  likely be vast incentive to innovate shoes for each need. Ballet shoes, walking shoes, working shoes, pretty shoes, running shoes, tennis shoes, blue shoes, red shoes, high-heeled shoes, winter boots. There’d be no competition with ‘free’ because there would be no shoe tax and no government shoe store. How might that work out?   

To be continued in Part 2….