The state of Iowa is currently doing education in about the most inefficient way possible. We need to start considering the possibility that although perhaps the government is necessary to help pay for education, it doesn’t make sense to have the government itself actually running the schools. In education, we have a service where there should be an extremely competitive market to supply it: lots of people could start schools because the start-up costs for a school are low and thus the market has very low barriers to entry. A very competitive market is exactly the sort of situation where the free market works best. Unfortunately, the government’s involvement in education has turned the education market into a virtual monopoly, which is exactly the sort of situation that produces goods and services that are expensive and of poor quality.
Why do we use tax money to provide education in the first place? That is, we don’t have the government pay for our haircuts or tennis lessons or getting our car fixed, so why do we have it pay for education? The argument for the government subsidizing education is that education has (in an economist’s terms)positive externalities associated with it while haircuts, tennis lessons, and fixing the car do not have positive externalities associated with them. Positive externalities are benefits to third parties that are not part of an economic transaction. That is, even a taxpayer who doesn’t have kids who go to school benefits from education in a number of ways and so the people of Iowa are actually better off (happier) if we use tax money to help people afford school. The benefits to the taxpayers include lower crime rate (because educated people don’t have to resort to crime to support themselves), better decisions at the voting booth, and the happiness that comes from a belief that one’s children have the opportunity to move up the economic ladder.
Now, if we agree that education has positive externalities associated with it, and so the state would be better off if education were subsidized, the next question to ask is how should that subsidy take place? We have two models for providing goods and services to people who cannot afford them that I will call: The Food Stamps Model and The Education Model. I want to argue that if you want to have government involvement in providing a particular good or service, the Foods Stamps Model is a much more efficient method than the Education Model. Let me explain what I mean:
The Food Stamps Model. There are some people in society who cannot afford food, and our response to this dilemma is to provide them with food stamps that they can take to a privately owned grocery store so that they can buy some food. What we do not do is have a government-run grocery store that provides free food to the poor. There is a good reason for handling the problem by having people go to a privately run store. The reason is that private grocery stores have competitors meaning they have to compete on price, cleanliness, efficiency, and location in order to be successful. Those private businesses who cannot offer consumers what they want go out of business. Thus, the market provides feedback to those providing a service which forces them to provide the service in the way that their customers want. The reason that communism is always such a miserable failure is precisely because those providing goods and services did not have to compete, and as a result, had no incentive to please their customers (because there are no other service providers their customers could go to). By giving poor people the means to go to a privately run grocery store we a) provide the poor with food and b) get all the benefits of market competition.
The Education Model. The education model is that the government both pays for and also produces a good or service. That is, not only does the government pay for the schools, but government employees administer and work at the schools. There are a few private schools that compete with the public schools, but the huge competitive advantage that government schools have over private schools (namely, the government schools are free) means that private schools do not provide very much competition for the government run schools at present.
The easiest way for us to improve education quality is to change from using The Education Model to subsidize education to using The Food Stamps model instead. What we should do is attach a certain amount of money to the child to pay for the child’s education. The child can use that money at any school (including homeschooling and parochial schools) and may even use it at current public schools if the child’s parents wish. However, the current “public schools” will get their budgets entirely from the money that was attached to the children who attend them (i.e., they are funded on the same basis as their competitors). Such a model allows the government to help pay for education while still getting all the benefits of a highly competitve market.
The funding of college education should proceed in the same way as K-12. If we want to subsidize Iowa citizens to go to college (because of the positive externalities), then the best way is to attach the money to the student, rather than giving money directly to the Regents schools. The student can then use that money at any accredited college in Iowa. The result is that Iowa State, the University of Iowa, and Northern Iowa have to compete for student dollars with Drake, Grinnell, Simpson, Coe, Clarke, Central, and every other accredited college in the state. Students are not the top priority at the Regents schools right now, but they would quickly become the top priority if the Regents schools were forced to compete on both price and quality with a large number of other schools.
There is also, however, an excellent philosophical reason for providing genuine competition to the public schools. When I hear the government is about to do something, I ask myself “What would Thomas Jefferson think of this?” In the case of education, what would Thomas Jefferson think of a system of compulsory education in which what the children are going to hear is determined by a board of government officials, and those lessons are implemented by a group of government employees? He would be appalled, of course, as would most of the Founding Fathers. In a society of free people who wish to remain free, the last institution that should be determining the content of education should be the government. Among a free people, it should be the parents who decide what sort of education their child is to receive.
Here is a good article in Reason discussing the arguments made in the new movie, The Cartel, which is a documentary about the public school monopoly.
Below is a John Stossel special about the problems caused by having a government run monopoly in education: