There Is No “Free Market” in Education, And Why That Matters

Any time someone starts talking about the free market in K-12 education I immediately know that they don’t know what they are talking about.  And as a hack economist myself, I know that public education is nothing like a free market—for good reason.

Stick with me.

There is no “free market”

Economists like competitive markets as a way to deliver the right amount of what people want, that whole supply and demand thing.  Well-functioning markets rely on good information, basically free/costless choices (so-called “transaction costs”) and competition.  So “consumers” have a wide range of choices, they know the quality and value of them, and they are basically free to choose between options who are competing to give the buyer the best deal.

The ideal is something like buying rope on Amazon.  You have a lot of reviews and reliable information about quality, you have multiple suppliers competing on price, and it’s basically costless to choose option A or option B or nothing.

Now let’s look at K-12 schooling.  Everyone has to go to school by law, so whether you want to consume it or not you are forced to.  And many of the actual “consumers”, kids, would probably say they would rather not go to school at all.  So even if they don’t want a rope they have to buy it.

Schools are usually assigned by residence, with widely varying quality within and across districts.  And everyone pays for schools through taxes, whether they have children that attend or not.  So all public schools “cost” the same—nothing—or an exclusive rent or mortgage depending on how you look at it.   So the price (which is free) may or may not have any relationship to quality.

Pretty far from the supply and demand graph that every economics student studies, where supply and demand meet to set the price.

Questions of Quality

School quality is also notoriously hard to determine.  The state itself struggled to even determine an accountability system.  Understanding the likely outcome of schooling when you put your child in kindergarten is very difficult—and indeed there are a range of outcomes; academic, social, developmental, all of which are hard to measure and isolate.   Outcomes also may ultimately depend more on your child’s “fit”, the teachers they get, and the overall stability of the school and its leadership, or what they brought from home.

For a segment of families that can choose neighborhoods or private schools there is some potential competition between schools to attract them.  But for most families in the Flatlands in Oakland, not so much.  Housing is tough to find and expensive, and most families I see are just trying to hold on to where they are living now, or potentially leaving Oakland.  They go to the school where they are assigned, or choose between a couple of neighborhood options.

And remember how easy it was to push the button and order rope from Amazon, how low the transaction costs were.

In Oakland where most students have to provide their own transportation to school, those transaction costs can be huge, and vary widely based on family resources.  Some students already spend hours daily on buses, while others are driven to school out of neighborhood, or have high quality walkable options—so the ability to bear these costs varies widely and inequitably.

Education is also plagued with one of the bugaboos of economics—externalities–when my private transaction has positive or negative effects on third parties not involved.  Imagine the polluting factory, who passes health care costs on to unknowing third parties—that cost is external to the sale of their product.

We reap societal benefits from an educated citizenry.  In pure economic terms—we are more productive.  And on the flipside there is also a huge economic, and more importantly, social cost, when we fail to educate children.  In a post-industrial world, these young people will have few viable prospects.  Their lives will be hard.

So even for most economists—they would argue for intervention in the “market” for education.

Free markets don’t exist for good reason

Most of us have never seen a free market and we would run if we did.  Its ugly head rears occasionally, when drug prices spike or Epi-pens triple in cost while productions costs decline.  The “free” market tends to devolve into a few big players conspiring to fix prices or shysters selling water in the desert for the price of your house deed.  Hence anti-trust laws, and host of legal interventions in the market.

Legitimate takeaways

There are still important ideas we can use from Economics 101.

Parent demand is probably a pretty good indicator of quality or a cue that we might increase the number of that type of seat.  And I do believe in extending public school choices for parents who can’t hustle or move to better schools or better fits.  Look at the rates of choice at middle and high school transitions—within and out of district– in the Hills, less than half of children in the “Northwest” go to a public middle schools and just over a third go to a public high school.  They have the ability actuate choices and they do.  All parents should get more practical choices within the public sector, and students who need the best schools should get preference.

We also should, with humility, evaluate whether we are spending money well.  This is easier said than done, but we really do need to look at how we strategically spend money, and do our best to be sure we put our scarce funds where they matter the most.  Money is scarce and schools could all give you a laundry list of legitimate needs, so we need to be smart, and do our best to analyze the effects investments.

Beyond choice policies and spending, we also need to pay more attention to students left behind—who aren’t choosing—increasingly concentrated in schools of default.  What some might call, “the externalities” but we call our kids.  The so called “charter movement” and districts that have embraced more choice based policies tend to not account for these students—and we need to.  Somebody needs to.

A final word of advice

So the next time someone who hasn’t been to a public school, or hasn’t experienced the range of quality and inequality, starts edsplaining about the beneficence of the ”free market” in education, please refer them to an econ 101 textbook and politely tell them to frack off until they have done their homework.

What do you think?

More Comments