A reader responds to an earlier post on the question of whether schools can operate successfully as a market:

The reader comment you include in your post points to one of the essential conflicts underlying the whole school “reform” debate. The conflict is this: what system produces better outcomes – community decision-making, or market competition? The answer, of course, depends a lot on what kind of outcome you are trying to get.

In the marketplace, businesses strive to offer products and services that are sufficiently attractive to consumers to gain them business but cheap enough to ensure an economic return to the owners of the business. (This, as others have pointed out, is the key problem with for-profit educational entities, since even legally their first responsibility is to their shareholders and not their “customers,” the students. It’s an unavoidable conflict of interest.) Private firms do not maximize quality; they balance quality and cost to maximize profit under current market conditions. This is how the system works, and in many domains it works pretty well.

However, there are conditions under which the market does not produce goods or services in the type or amount that society desires – economists call these “market failures.” Classic examples of this are public services like police, fire, and, yes, education. Even things like electric, water and gas services are typically either publicly owned or else operated as a heavily regulated public utility. Education is usually cited as a market failure because there is a public benefit to universal education that would not be given value in the private market. Education would not be as high-quality for most families nor as accessible if it were operated solely by the private market. Education also brings long-term societal benefits that are hard to measure financially and would not be incorporated into a private firm’s economic calculation.

To hear many education “reformers” speak about this topic, you would think that “market failures” were simply a figment of the liberal imagination. Sadly, they are the ones who are deluded.

Another facet of this debate is the question of competition – and competition need not only be among private firms. In the market, competition is presumed to generate the balance between cost and quality desired by consumers. This depends on two things:

1) Consumers have sufficient, accurate information to decide which products most fit their needs; and

2) Consumers can switch from product to product, provider to provider, without much disruption.

Neither of these things hold in the field of education. Parents, and students, have valid opinions about schools, but they are not able to judge what the ultimate impact of a school will be on themselves twenty or thirty years down the road. This is why long-term reputation is important for schools, since we must rely on a history of other people’s children to judge what is likely to happen to our own. Research shows that even standardized tests – at least as currently conceived – do not accurately capture the impact of a quality education on children. (See the Perry Preschool study, the High/Scope program.) So the “grades” we have been giving schools are based on narrow criteria and do not offer the kind of information parents really want – will this school help my child live a fulfilled and comfortable life?

The reader quote addresses the second point. Market competition does not have its greatest impact by inducing firms to change their products or services; it accelerates the rise of firms with desired products and encourages the closure of firms that fail to please customers. Schumpeter called this the “creative destruction” of the free market. This may be ok for toothpaste manufacturers, or cell phone companies, but does the constant turnover of schools and education providers really end up helping individual students? I think that most researchers would say that this greatly damages a student’s chances for success. It also upends families and communities.

Finally, the last problem with the competition model is that outcomes are determined solely by those who are participating in the market at that moment. But we already recognize, as a country, the important public benefits of education. The reason behind democratic governance of public schools is to allow the entire community a say in the running of an institution that affects the entire community. This public aspect is entirely missing from the “reform” argument, for reasons that have more to do with ideology than with educational benefit.