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. This despite the fact that all children are now required to attend school until the 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.

Security executive, work for Core Security, veteran, kids, dogs, cat, chickens, mortgage, bills. I like #liberty #InfoSec #scotch, #wine, #cigars, #travel, #baseball