Category Archives: Education

Where Markets Beat Government — and Vice Versa

I checked out Perry’s site the other day, and ran across this post on Wal-Mart. It looks like Wal-Mart is opening its doors again in New Orleans, while Congress is still pointing fingers. It got me thinking: why is it that we see for-profit businesses flocking to the area, while FEMA is still trying to figure out where to park their beautiful trailers?

I originally wanted to issue a snark-filled rant on why government is inefficient, bloated, and ineffectual. But this, combined with Massachusetts’ insanity, calls for something a little better. I’m not an anarcho-capitalist. I realize that there are places where government can get necessary things done that the market cannot. It is only when we ask it to do things it is not suited for that we run into problems.

Bear in mind, this is an off-the-cuff treatise, so I welcome comments pointing out all the places I am wrong.

I see there being a few major types of services provided by the government and markets:

1. Distributed provider, distributed user: This would fit the mold of most day-to-day interactions. When you go to buy lunch, you have a wide range of choices. Purveyors of those products can sell to anybody; there are few long-term interactions.

2. Single-provider, distributed user: This would fit things such as roads, sewers, police, military, courts, etc. In these types of interactions, there action between the provider and the user is often severed. In the case of roads/sewers/etc, it is common that an individual homeowner or driver could not contract with a provider to build a new sewer system or road to service them. Often, maintenance of these services are paid for by some sort of taxation, and only occasionally by a true “user fee” arrangement. Courts, police, and military are even more so, because there is not often a true link between what police or courts do for those who aren’t currently the victim or perpetrators of crimes, but they offer a sort of “blanket of protection” for everyone. Again, the link is fairly severed between provider and user.

3. Specialty provider, specific user: This is a tough category. In this, I place things such as medical care, which often is difficult to procure in a true competitive environment (outside of general-practitioner care), and is highly tailored to the specific user. There may be 3 hospitals in a close area, but only one specialist in the field you need. This may also include education and other services, where the relationship between a specific provider and user is difficult to break. For example, when you put your child into a school, you don’t want to have to change that school without good reason, because of the relationships your child generates with classmates/teachers/etc. Last, it includes such things as insurance, where acute costs are very high and risk may need to be pooled.


The first case is a place where markets always beat government, hands down. Government action, nearly by definition, is one of monopoly, and monopolies are known for poor efficiency. They don’t innovate to serve their customers, they don’t bring costs down through competition, and they have no reason to do either. This one is so obvious that it needs no further discussion.

The second case is the poster child for government action. This is the one agreed upon by everyone except the anarcho-capitalists. There is a little point of distinction on things like roads (the “pure” libertarian will ask for them to be privatized), but I’m going to gloss over that. I chose sewers but left out other utilities for a reason, as well. Without getting too heavily into it, there are certain “common carrier” services that form a bit of a gray area. Electrical or gas service doesn’t lend itself quite to competition very well, due to the extremely high infrastructure costs in service. Georgia’s take on natural gas, however, is one where the actual distribution of gas is centralized, but you have your choice of “service company” to sell you that gas. It blends some of the benefits of competition without the drawback of requiring multiple companies to lay redundant infrastructure. But in most “common carrier” utilities, some sort of government action is required, as local government is typically granting monopolistic licenses to providers. The cases of courts, police, and military, however, are specialized enough where we leave government to provide these directly. This is the one case where we grant a monopoly on initiating force, and choose to keep that power in the hands of government we control with our vote.

So I think we can all agree that communist Russia showed us how dangerous it is to let the first case be provided solely by government. And I think we can look post-communist Russia to see how lack of infrastructure and legitimate courts/police/military to protect the rule of law will lead to anarchy and rule by the strong.

But the third case is problematic. This is a case where it is easy for politicians to advocate government action, and easy to dupe unsuspecting voters into agreeing to it. Usually, they play to emotions. It is always hard to watch people go without adequate medical care or education. It is far too easy to go from watching this to thinking that it simply shouldn’t happen, and therefore the government should take over and provide the service. But while this is different than the first case, it is still not a place where government monopoly works. Our current educational system is evidence of that. In the case of medical care, nobody wants to see people lose their entire livelihood due to high medical costs. But the proper way to pool risk is with insurance. Just as we would not ask the government to provide flood insurance, car insurance, or homeowners insurance, medical insurance is not for the government to pay. It would help, of course, for the government to end its policies which make it nearly impossible for individuals to provide their own coverage reasonably cheaply, but that’s a whole different debate. Again, look at education. Education would be much better provided in this country if we returned to a competitive market, with parents paying for school directly, and (at best) a safety-net program to help the poor. When even the NYT is realizing that vouchers work, it is obvious that we need to change our strategies.

As I said, there are times when government action is the best way to get something done. Those cases are few and far between, and in all of them I suggest making the services controlled as locally as possible, to allow a “market in governments” to form. Just as people choose which business to patronize, and should be able to choose which school to patronize, the experience of federalism and local control allow people to choose which local government to patronize. This will allow people to choose local government based upon the ability of government to provide necessary services, and allow competing localities to learn through competition how to be more efficient. You can ask states like Massachusetts (the only state in the union to lose gross population year-to-year) just how important this is.

But where government action is not efficient (almost everywhere), we need to make sure our policies are designed to facilitate the working of a market, not impede it.

Teacher’s Unions: The Enemy Of Education

Reading Brad and Eric’s posts on education earlier today brought to mind this post I wrote recently:

Today’s Wall Street Journal has a piece cataloging the ways in which teachers unions in Florida and Wisconsin are acting to prevent any efforts to reform education in a way that will actually help students.

First in Wisconsin:

Milwaukee’s Parental Choice Program, enacted with bipartisan support in 1990, provides private school vouchers to students from families at or below 175% of the poverty line. Its constitutionality has been supported by rulings from both the Wisconsin and U.S. Supreme Courts.

Yet [Wisconsin Governor Jim] Doyle, a union-financed Democrat, has vetoed three attempts to loosen the state law that limits enrollment in the program to 15% of Milwaukee’s public school enrollment. This cap, put in place in 1995 as part of a compromise with anti-choice lawmakers backed by the unions, wasn’t an issue when only a handful of schools were participating. But the program has grown steadily to include 127 schools and more than 14,000 students today. Wisconsin officials expect the voucher program to exceed the 15% threshold next year, which means Mr. Doyle’s schoolhouse-door act is about to have real consequences.

“Had the cap been in effect this year,” says Susan Mitchell of School Choice Wisconsin, “as many as 4,000 students already in the program would have lost seats. No new students could come in, and there would be dozens of schools that have been built because of school choice in Milwaukee that would close. They’re in poor neighborhoods and would never have enough support from tuition-paying parents or donors to keep going.”

In other words, Governor Doyle is fine with forcing poor students in Milwaukee to stay in underperforming, sometimes dangerous, public schools in order to placate his NEA supporters. Given the clearly beneficial results that the school choice program has had, this is scandalous:

A 2004 study of high school graduation rates by Jay Greene of the Manhattan Institute found that students using vouchers to attend Milwaukee’s private schools had a graduation rate of 64%, versus 36% for their public school counterparts. Harvard’s Caroline Hoxby has shown that Milwaukee public schools have raised their standards in the wake of voucher competition.(emphasis added)

In other words, school choice has had precisely the impact that its supporters predicted it would. Its made education better at all levels and hopefully settle the education debate because many people think that the arts should be included in the STEM bracket which has a big effect on funding so I’ve heard but I digress. The fact that the Governor and the teachers union would even think of being opposed to expanding this program demonstrates, quite plainly, that they don’t care about improving education. They care about preserving their power, and school choice is a threat to their power base.

Meanwhile, in Florida:

The unions scored a separate “victory” in Florida three weeks ago when the state supreme court there struck down the Opportunity Scholarship Program. Passed in 1999, the program currently enrolls 700 children from chronically failing state schools, letting them transfer to another public school or use state money to attend a private school. Barring some legislative damage control, the 5-2 ruling means these kids face the horrible prospect of returning to the state’s education hellholes next year.

The decision is a textbook case of results-oriented jurisprudence. The majority claimed the program violates a provision of Florida’s constitution that requires the state to provide for “a uniform, efficient, safe, secure, and high quality system of free public schools.” Because “private schools that are not ‘uniform’ when compared with each other or the public system” could receive state funds under the program, the majority deemed it unconstitutional.

And thanks to a teachers union who thought nothing of using its vast funds to bankroll this lawsuit, the students of Florida are victimized once again.

The Journal’s closing paragraph says it best:

What the Milwaukee and Florida examples show is that unions and their allies are unwilling to let even successful voucher experiments continue to exist. If they lose one court case, they will sue again–and then again, as long as it takes. And they’ll shop their campaign cash around for years until they find a politician like Jim Doyle willing to sell out Wisconsin’s poorest kids in return for their endorsement. Is there a more destructive force in American public life?

When it comes to education, I can’t think of one.

This was originally published at Below The Beltway in January and titled Teacher’s Unions Don’t Care About The Grade

Previous Posts On This Topic:

Covering Up A Failing Grade
Handing Out A Failing Grade

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The Education Monopoly

The current paradigm in this country is that education for our children is provided by public institutions, paid for with tax money. Not only that, but that education by institutions controlled, either directly or indirectly, by the state is mandatory for all children through the end of high school. I’m positive that some of you will point out to me that children can be educated by home schooling or private schools and thus my claim is wrong. I’m not wrong, but I’ll come back to that in a moment. This is a situation that, in the world of business, we would call a monopoly.

In economics, a monopoly (from the Greek monos, one + polein, to sell) is defined as a persistent market situation where there is only one provider of a particular kind of product or service. Monopolies are characterized by a lack of economic competition for the good or service that they provide, a lack of viable substitute goods, as well as high barriers to entry for potential competitors on the market.

The public education system is actually a coercive or state monopoly, which means that means of force (or in this case, the threat of force) is used to coerce the consumer to adhere to the monopoly and to prevent competition. In the United States (as in most Western nations) the consumer (the student and his parents) have no choice, they must attend school. And the school must be accredited by the state. Thus only schools which the state approves can exist and do business. If you believe that the public education system is not coercive, imagine trying to tell your local school board that your child is not going to attend their schools, nor any other accredited school, be it public or private, but that you, as the parent, will take personal responsibility to ensure that your child is appropriately educated. I would suggest that the next thing that will happen is that you will receive a court order to have your child attend school. If you refuse that order then you will be arrested and child placed in protective custody.

The basis for doing this is that all children should be educated to a certain minimum standard in order to be competitive in society after childhood and able to function as adults. So far, so good and a concept I can agree with. The concept is further extended to declare that education is a sure and certain means to combat poverty, crime and tyranny. Yet again, I won’t argue. In fact, just the opposite, I agree wholeheartedly. Now we get to the meat of the matter, and where I diverge from the publicly held conventional wisdom. The argument that favors gathering tax money from me and funding public schools that your child must attend (or an equivalent “private” institution) is that the aforementioned reasons for education and benefits to the society and the individual means that the state should intervene to ensure the positive outcome desired.

I disagree with this position for two reasons. The first is the obvious position of a libertarian. Coercion by the state is wrong. But there’s another reason, and I believe this one is more compelling for those who are not necessarily as likely to believe state coercion is always wrong as I am. The reason is simple really. The state’s coercive monopoly in education is a worse choice for promoting the goals we enumerated in the prior paragraph:

  • The individual is socially competitive
  • Able to function at a minimum level of sophistication and knowledge
  • Combating poverty and crime
  • Safeguarding against tyranny

The problem is not so much the consumer (students and parents) in a monopoly, as it is the monopolistic entity. The monopoly has no incentive to innovate, improve efficiency, or lower cost. The reason for this is that there is no competition. At the risk of this not being fully understood, I’m not going to go into the details of why this is so. Earlier I linked to a Wikipedia article on monopolies that explains the phenomenon quite well. It should be obvious, once you recognize this, that it is not the wealthy and privileged who are hurt by such a situation, but rather the poor and unprivileged since competition drives innovation (better products), efficiency (products delivered more effectively), higher quality (differentiates the product) and lower prices. The answer provided to monopoly by the socialist (or statist to use libertarian parlance) is government intervention and/or control.

By looking at the telecom market in the United States we can understand that state intervention distorts the market. During the years that AT&T was a state enforced monopoly telephone service was provided at a certain basic level to all who would pay the price (not all that high) that AT&T charged for that service. But there were no additional services (voice mail, call waiting, caller ID, multiple lines and much more). Today, I pay little more (I pay less after adjusting for inflation) for my residential phone line in a competitive market than I did for my phone line in a monopoly, yet the services I get are much better than I did then. And that service is ubiquitous because we all see the value in it, thus we are willing to pay a reasonable price for that service. By 1970 a natural monopoly existed in the United States in the automobile market. The “Big 3” auto manufacturers (GM, Chrysler, Ford) sold somewhere on the order of 85% of all cars sold in the USA. Low quality, high price and lack of innovation was an accepted fact in the automobile market. Today, with a dozen or so manufacturers competing in the US auto market, that situation is changed. The large increase in cost is due to a combination of much better features than previously available and government safety and environmental regulations (i.e. distortion of the market by government intervention).

Would anyone reasonably suggest that we return to the days of the AT&T or “Big 3” auto manufacturers monopolies? Of course not, we see the benefits to us for products that are nearly universally in demand. We see the fact that we can exert control over the market for these products and we see that the suppliers are working to attract our business with innovation, quality, price, features, efficiency, etc.

I propose that we should remove government intervention and control from our “education system” and make it an education market. Given the universal desirability of education I suggest that we will not end up with a less educated population. Parents would be able to afford education for their children due to their reduced tax burdens. Since the market would almost certainly dictate a lower price per year than the current price we pay per student there should be a net economic benefit (the net difference between current cost and market cost). It is almost certain the situation could not be worse than our current situation. I’ve read far too many studies that show that our real literacy rate, as opposed to the high school graduation rate, today is below 80% in the adult population. You can see how the United States literacy rate compares with other countries around the world at This is despite the fact that all children are now required to attend school until they receive a high school diploma or GED. And most of that illiteracy is concentrated among the poor and unprivileged of our society. If we, as a society, decide that the poor need some assistance to pay for their education then we could certainly provide scholarships and tuition assistance through public and private organizations. And still our total cost for education would be lower than it is today, through the market mechanisms. Not only that, most of the other problems we decry on a regular basis, poor teachers, lack of innovation and so forth, would be dealt with on a competitive basis. A school whose students had poor records after graduation would not attract more students.

An interesting case study is the situation of education in North America prior to the American Revolution. By and large there was no “public education” as we understand the term today. Not only that, the American colonies were 95% agrarian, with a much lower demand for education than our current industrial society transitioning to information society. Yet the colonists had the highest literacy rate in the Western world (which is to say in the entire world), higher even than Great Britain, which was about to launch the Industrial Revolution. Education was recognized as desirable (and thus in demand) and there was a free market for education. This resulted in good quality and low cost. It should also be noted that the United States had one of the highest standards of living by the early 19th century and that the high literacy rate almost certainly contributed to the rise of American political philosophers like Thomas Jefferson, Benjamin Franklin, Alexander Hamilton, Thomas Paine and so on, and ultimately to the American Revolution. The bottom line is that the free market applied to education will be more beneficial to those who most need the education than the current state monopoly.

Update 2/23/2005: Micha Ghertner over at Catallarchy posts on school choice based on policy analysis done by the Georgia Public Policy Foundation. The article clearly supports my position, with real evidence, that the poor and unprivileged would most benefit from an education system freed of government monopoly. Go read it and see what I mean.

I originally wrote this and posted this at Eric’s Grumbles almost exactly one year ago.

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Threat of Teachers Unions

Neal Boortz made a bold statement on his show the other day. He said “the teachers unions are a greater long-term threat to freedom and prosperity than Islamic terrorists”. I’m guessing he came under some fire for that one, because the very next day, he was talking about it again. He said he’d given it a lot of thought, really examined the implications of his statement, and stood behind what he said.

Now, that’s a pretty strong statement, and one that I agree with. Before you all think I’m crazy, I point out the words “long-term”. In the short term, conflict with Islamic terrorists is a direct threat to our freedom and prosperity, and one that needs to be taken very seriously. On the bright side, however, it is one that we’re taking very seriously. We understand the stakes in the conflict, and we are determined to defeat the terrorists. Furthermore, as the Islamic world begins to liberalize and democratize, the threat will diminish significantly on its own.

But the threat of the teachers unions is considerably different. Only a minority of people consider them to be a threat in the first place. Most people in this country think that the unions have education of students as their primary goal, when it is obvious to anybody paying attention that they act in the interest of teachers, often to the detriment of students.

They fight any implementation of standards or testing, because they wish to resist accountability. They fight every program that will increase educational choice for families, because it will lead to a reduction of their bargaining power. They wish education to be handled at the government level, because the government is much easier to lobby and fight than a distributed network of privately-managed schools.

They push endlessly for two specific goals, higher funding and lower class sizes. Higher funding will directly increase teacher salaries. Lower class sizes create a need for higher and higher numbers of teachers, essentially forcing shortages. Hence: higher teacher salaries. It keeps going. They push for a requirement of a “teaching credential” before they push for a requirement that teachers are experts in their subjects. They want to make sure that bright, knowledgeable folks with teaching talent are not allowed to teach unless they have a teaching “credential”. What does all this amount to? Like any cartel, they seek one thing above all: to remove competition. Lower class sizes and credentialing requirements ensure that existing teachers have a strong bargaining position when the union fights for more benefits.

But the biggest problem eclipses all of the above. Their threat to our freedom is not that of newsworthy attacks on human life, but the incremental destruction of human individualism. Boortz explains it much better than I do, when he points out the fact that the government is the actor in our world that we give a monopoly on the power to initiate force. That is an awesome power, and its application must be feared and curtailed whenever possible. But the people we ask to teach our children feed at the trough of government! You will never teach children to fear the application of government power by sending them to government schools. When the teachers unions are helped by a greater concentration of power– as that gives their lobbying much more effect– they will by design support greater government power. And where government power increases, human individualism recedes.

The teachers unions benefit greatly from a public that believes in the idea of collective action, be it union action, government welfare, or simply the “world community”. They benefit greatly from the idea that kids fit into cookie-cutter molds, and if one dares to exhibit individuality, they should be immediately muted with high doses of ritalin. The teachers who benefit from power in government, from keeping children from growing up to question teachers unions, and who prefer the orderly medicated classroom to one that they must keep orderly by inspiring and motivating students, are doing damage to the very fabric of this country. They are creating a nation of citizens who don’t question authority and who don’t have a love of truth and learning. Even worse, they’re creating a nation of citizens without the tools (i.e. logic) to understand the very forces pulling on the levers of their psyche. A nation filled with that sort of citizen is doomed to rot from within.

What will happen if the current situation is continued to exist? What will happen if teachers unions, who have the public on their side (after all, everyone loves and reveres teachers!) continue to stifle competition and standards? Well, I would argue that we’re already seeing the effect, in the inability of schools in much of the country to turn out graduates with a meaningful diploma. I’ve said before that I moved to Georgia partially for the schools, but that is because I moved to an area of Georgia populated by concerned parents who demand accountability from the local schools. Where I moved is somewhere that I might not be ashamed to send my future children to public schools. But my community is an exception in this state, where the schools lag behind the rest of the dullard states in this nation. The situation is bad here and across the country, and it is getting worse.

The teachers unions are not in the slightest bit interested in fixing the problem, except to the extent that it keeps their necks off the chopping block another year. Much like politicians, the status quo is more than suitable for them as long as they don’t awaken the sleeping giant that is the American public. To beat them, we will need to shine a light not only on the results of their actions– the absolutely atrocious education that children in our schools are receiving– but on the fact that the teachers unions are the root cause behind those results. Unions in this country have long received unjustly favorable media treatment, and everyone loves to be on the side of teachers. But unless we can point out the specific ways that teachers unions are harming our children, we won’t stand a chance of beating them.

I’ll be frank. Terrorists setting off a nuclear device in a major American city are a more pressing concern for me over the next 10 years than the actions of teachers unions. But assuming that we can avoid that nightmare scenario, I worry greatly about the world my children will grow up in if we can’t find a way to fix the problem those unions have caused.

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