Public vs. Privatized Education: A Puzzling Tug-of-War

by Cathy Huang:

Economists often cite the shapeless term “education” as a commodity that is bought and sold by players in various world markets. In doing so, one can stipulate education’s positive effects on society as well as the push and pull factors in its changing supply or demand. Federally, economists use their education research findings to persuade bureaucrats to initiate or re-shape education policy. Thus, in today’s society, education is labeled as either a “public” or “private” good by economic definition and distinct camps have been formed which pit those who favor a government-controlled schools against those who believe in the benefits of varied, private institutions.

I won’t assume that my readers have an understanding of economics, but it’s pretty simple. Basically, governments look for ways to quantify everything so they can properly allocate their GDP and keep track of activity. When it comes to that vague but all-important concept of “education”, governments use the economic term “commodity” or “public good”. This implies that education is both non-rivalrous and non-excludable (people don’t have to compete to get a basic education and allowing one more person to be educated doesn’t cost someone else that spot). But can we really reduce such a shapeless and many-faceted institution to the level of household items plucked off retail shelves? While it’s true that education IS a commodity and IS bought and sold (the buyers being the taxpayers and their children, the states the sellers), labeling it a public good is too generous. Education is becoming more dependent on OER’s, or Open Education Resources, which are disseminated virtually free of cost via Internet, TV, radio; webcasts are now the primary source of education for many developing nations. However, scarcity is also an economic cornerstone: there will always be too many people and not enough teachers, schoolhouses, books, etc. Therefore, we can conclude that education is NOT a pure public good and the combined efforts of the best economists around the world won’t yield definitive answers as to how to fix educational gaps or how to quantify education’s positive externalities.

Most parents in the United States are satisfied sending their children into the public school system, but some fear that the student-teacher ratios are too high and that their children won't receive adequate attention. (TYG, Creative Commons:Wonder Works)

And if all that was too confusing, just chew on this: if we study education using the common economic models of supply and demand, we ultimately reduce its trade down to an individual consumer level. The supply and demand curves of goods shift according to individual consumer tastes, but should education be evaluated by an individual? By, say, a parent who believes he or she knows what’s best for his or her child? Or is it instead a good that belongs to society? People who believe the latter often push for public, government-sponsored education that is more uniform and one-size-fits-all.

Others believe that students and their parents should be able, if they want, to shop around for the “best” education out there. But while privatizing education provides competition and greater variety, it also allows schools to escape the scrutiny of domestic ministries or departments of education. If students are getting what they pay for, so to speak, then the school itself has no obligation to report back to or comply with some higher federal standard.

Most developed and democratic nations today adopt a hybrid of the two approaches. In the United States, for example, primary and secondary education is offered publicly free of charge but private schools and home-schooling options that comply with state and federal guidelines are also allowed to profit from students who want an alternative to what the government provides. Post-secondary education in the U.S. is moving in the direction of privatization. The college market is rapidly growing and highly competitive, with the top private U.S. universities setting the standards. In addition, non-governmental organizations and individuals such as Bill Gates make private contributions to the federal government to support public programs. Gates, who donates nearly $200 million each year to improve public education, sees no harm in mixing private and public spending. But Chester E. Finn Jr., president of Thomas B. Fordham, an education think tank argues that “when you team up with the government, you compromise your ability to be critical of the government, and sometimes you compromise your ability to do controversial and maybe unpopular things with your money [that might lead to progress],” Gates’ private donations have rendered no verifiable benefits for individual students. Other nations across the world have found effective ways of splitting education costs with supra-national sources such as the World Bank through “demand-side financing” which provides families with financial assistance so that they can purchase educational services in the private sector (rather than having governments own and operate schools). This system has been proven to be work in places such as the Dominican Republic and Pakistan. So around the world, hybrid private and public systems operate to varying degrees of success.

It doesn’t make sense for individual countries to immediately favor one option over the other. We can see that in Ethiopia, a floundering, nascent public schooling option would benefit to learn from existing private systems instead of driving them out to step up a government monopoly. And while the U.S. leads the world in elite, post-secondary education options, its primary and secondary schools still suffer many disparities that prompted the Bush administration to issue “No Child Left Behind”. It seems a bit too idealistic to suggest that governments and private institutions work together to find some happy medium of a classroom. At the end of the day, one must ask fundamental questions such as:

-Should education be considered a marketable commodity?

-Does its distribution and organization depend on individual or societal needs?

-Is it the government’s role to establish basic educational frameworks and requirements?

Further reading:

The Global Education Industry James Tooley (Institute for Economic Affairs, 1999)

Market Education: The Unknown History Andrew J. Coulson (Transaction Publishers, 1999)