A common objection to calls for greater market accountability is that schooling is an industry with many potential sources of market “failure”. I put it in quotes because the true meaning of this widely cited, apocalyptic sounding term is “failure” to achieve perfection (100 percent efficiency), which means the best possible mix of output (different instructional approaches) at the lowest possible cost. So, falling short of a very, very high standard, even a little bit amounts to “failure”. I will discuss the grounds for market accountability “failure” to achieve that high standard, but beforehand we need to recognize that massive political accountability failure to achieve that 100 percent efficiency high standard, or even just fall short of it just a little bit to achieve address objectives like equity and social cohesion, is NOT theoretical. We have decades of evidence for 50 U.S. school systems of what politically accountable collective decision-making by overwhelmingly well-educated, well-intentioned public officials yields; persistent “Nation at Risk” schooling outcomes in every state. The political process is unable to even formally specify the roots of the low performance problem, much less muster the political will and wisdom to address them. In a future blog post, I will describe the characteristics of the political process that make it a “sausage factory“.
The grounds for fearing some inefficiency from market accountability-driven schooling potentially include difficulty obtaining long-term financing, social spillovers, and inadequate information from which to make choices. I said, “potentially include” because the significance of some of the alleged grounds for market failure are controversial. For example, under-consumption of schooling from families’ and society’s perspective is likely, if funded privately as they arise, because it is difficult to borrow money against the future earning power, much less social capital, of your children. In other words, families may have several children in school at once, prior to their peak earning years, which can make it difficult to finance tuition out of pocket. When families can’t spread those schooling costs beyond the schooling years, they may be forced to settle for less schooling, or cheaper schooling than they could otherwise pay for, long-term. School choice with shared public-private financing of schooling costs spreads out those costs — you pay local property taxes and state taxes that finance schooling your entire adult life — without creating a public finance monopoly or price control. School choice with shared financing, with a high minimum public per-pupil funding level, addresses the equity concern as well as possible without futile, devastating attempts at forced equality, and the price control that arises from ill-conceived “free-only” subsidized schooling policies.
Nearly all markets suffer some inefficiency from ill-informed purchaser decision-making. Mis-information-driven market “failure” is likely to be especially small, especially nowadays with the internet as a central repository of easily accessible information. With schooling being a repeated, high cost purchase, parents have an incentive to access available information, and schools have strong incentives to build and maintain strong reputations.
Schooling is not a public good, but as a “merit good” there is another potential basis for under-consumption of schooling. According to some, the foregone courses would the ones that are especially important to the general public, but E.G. West’s Education and the State disputed that assumption. West, joined by James Tooley, Milton Friedman, and others, argued that the key citizenship skills are the basic literacy and numeracy skills that all families will purchase for their children. Under-consumption in the absence of subsidy, according to that analysis, will occur for the marginal earning-related courses.
So, market failure in a strictly private school system is unlikely to match the scope of the political failure we have been witnessing, and we can address the major concerns with shared public-private financing.