Education: Reforming the State Monopoly

Our current education has been centrally managed to the point where it is in shambles. Expenditures per student have rapidly increased at all levels of government, mostly state and local, but there has been little to no increase in scores. Politicians tell you their “education reform” will work this time. When they boast how it did work, they only do so because part of their reform involves lowering standards, but they call it “equal opportunity”. Actual education reform is a big issue for a lot of people, yet the mainstream solution is the continuation of more bureaucracy, central planning, and unions.

Our education system should be centered on freedom and use bottom up decision making that starts with parents. This does not mean I am opposed to government funded schools. Milton Friedman, my favorite economist, argued that education carries a substantial and unquantifiable level of “neighborhood effects” on the economy and society which justifies government spending through taxation. However, he never advocated for government administrated schools, only government financed.

The major difference here is the “good” being exchanged is “created” by a private institution. Ideally, a family would receive an annual sum to pay for their child’s education. The family could use that sum at any institution of their choosing. As a result, school competition would become a more pertinent influence in the market.

Currently, parents face a troublesome decision. If they are on the brink of affording a higher quality private school, they have to pay the entire switching cost (tuition) for their child to attend while also being taxed to finance a public school. Thus, the actual cost of the private school is tuition plus tax for public schools. They are, in practice, still paying tuition for public school while also paying tuition for a private school.

If the government were to give every family a lump sum to be used at any school, the families would be able to send their child to a higher priced school without doubling down on tuition. The family can use this lump sum at a higher priced school and only pay the overages. For example, if the lump sum is $5 and the private school’s actual price would $6, parents would only have to pay $1 out of pocket as opposed to the entire $6 plus taxes used on education.

This may sound beneficial to the upper class, but it’s not. There are many middle class families that would see their child at a better school or at least one that fits their values. However, if you cannot afford pricey tuition, you are compelled by State decree to attend one of their indoctrination camps. Furthermore, families in troubled urban communities would have more free choice to move their child out of their likely broken neighborhood school. State decree prevents any family of any wealth from pursuing their child’s education unless they can afford the high switching costs. There are horror stories of bright young children being put at risk simply because they have no choice in their school or what they learn.

So who will fund this lump sum plan and set basic educational standards? Definitely not the federal government. Funding and standards need to be as local as possible to limit government inefficiencies and maintain a significant degree of community input. The question then becomes how much funding? Currently, the cost to tax payers per student is around $13,500 and has increased at a rate of 200% since 1970 compared to near zero gains or drops in test scores [1]. In fact, these two numbers together point to the root problem: government administered schools not delivering results. At a capital investment growth rate of 200%, it is rational to expect there would be a slight or even consistent increase in test scores.

That said, $13,500 per student may honestly be an insufficient level of funding; although I highly doubt it based solely on government operational failures. If education is strictly local level, it would be much easier to determine a fixed subsidy because there is more information on needs and costs. Furthermore, municipal governments tend to be more responsive to their community, particularly on issues like education. To the contrary, a politician who spends half their time in D.C. can hardly make a local voice heard when it comes to sweeping education policy. In such an attempt, they could easily be out voted.

The second half of education involves teachers. Currently, teachers have their pay scaled incrementally for raises. Tenure is a policy rife with failure. Unions are more concerned with teachers than kids. However, this is not a rag on teachers, but rather their unions and politicians. Teacher pay has increased at about 90% since 1970 with, again, near zero test score improvements [1]. The average public school teacher makes about $56,000 per year plus lengthy benefits [2]. Again, this may be a perfectly feasible salary, but certain policies disrupt labor markets.

Teachers are assessed through test results, which is probably the biggest problem. They have inexplicably received consistent pay raises [1] while results have not changed. While there are qualified teachers, stagnant results are likely not from their competency. Instead of being assessed by their value or merit, they are assessed based on arbitrary standards created by politicians and how well they can spoon feed that for children to regurgitate. In practice, that is what happens when using standardized test scores as a performance metric.

If a teacher successfully increases the student test scores, they will likely get a raise. However, it is unlike traditional labor markets. Most employers will give raises based on the relative performance output. In public education, a teacher can only hop from one salary to the next. Thus, if a teacher has a class with little chance of producing the test scores to earn the raise, the incentive to improve the student’s intelligence (educate them) becomes relative only to the extent of a raise. I know teachers are greatly invested in successfully educating their children, but feelings don’t maintain in the long term. In fact, I speculate that many teachers are frustrated with the regimented State education system.

Even in this proposed reform, the average salary could very well be maintained. The end result would shed bad teachers and maintain those who qualify based on merit, not politically set standards. It would also allow schools to offer more competitive salaries for more qualified teachers, and that subsequently makes the labor market more appealing to qualified candidates who forego the current conditions. Teachers should be cautious of union promises. Like all unions, they are easily susceptible to political con-games. In education, this translates into State mandated programs (i.e. Common Core) and institutional support for said programs. Nothing pays like government guaranteed funding.

At this point, the needed reforms will be a very long, uphill fight. Unions, bureaucracies, and special interest groups have sunk their teeth into the system. The best thing for education would be completely shutting down the Department of Education and their generous spending habits of $66 billion per year [3]. We need to repeal ineffective standards like Common Core and No Child Left Behind. Children should be educated by the people who have a vested interest in their success – parents and teachers; not politicians.

[1] http://www.cato.org/blog/public-school-spending-achievement-media-coverage

[2] http://nces.ed.gov/fastfacts/display.asp?id=28

[3] http://www.downsizinggovernment.org/education

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