Wednesday, July 17, 2013

Moving to a free market in education could lead to much higher costs

In between dealing with personal business this summer I've been teaching myself economics and reading a bit in the socioloy of education, and a news story today connects to both.

Health Care and Education: competition in excluding people
There are a lot of similarities between health care and education. One significant similarity is that some people are much more difficult and expensive than other people to educate or keep healthy, so there are huge economic incentives to simply not serve those people. In health care, what this means is that private health insurance companies have often been essentially competing with each other, not to get customers by providing better service, but to not get the customers who are unhealthy--exactly those who most need it.  The same is true in education.  The children who most need a high quality school are exactly the children that schools in a market system would be doing their damnedest to exclude, and that many if not most charter schools are excluding (Bruce Baker, at schoolfinance101, just wrote a piece about this phenomenon in some of Newark's most highly touted charters, which are dropping young black men from their grade cohorts at amazing rates--up to 75%). 

The economic truth of this dynamic--that there are huge costs and inefficiencies in a market system that allows competition in excluding people from your services--can be seen really clearly in health care. The dynamic is clearer in health care than in education, because in health care the US has for many years had a "market-based" health insurance system.  As compared to other developed countries, all of which have some form of government-imposed universal health care, the US spends close to twice as much on health care, with worse results. This is an amazing argument for socialized medicine, and by extension for socialized education. 

Universal = Inexpensive
The same dynamic can be seen in the remarkable news, reported in today's Times, that health insurance premiums in New York are, now that Obamacare has required everyone to get health insurance, going down by at least 50%.  New York State used to have a system in which health insurers were required to take anyone, but not everyone was required to buy health insurance.  This is in some ways analogous to a school "choice" system in which not everyone has to go to the local public schools.  What happens is that the most able students get siphoned away by charters, private schools and other districts, and the core local schools are left with the most expensive and difficult cases.

The Ed Reformers want to move from a more efficient, more socialized system, to a less efficient, more expensive "market" system.  What will happen is the reverse of what is happening under Obamacare.  We will go from having, like every other developed country in the world, an education system that offers reasonable and safe schooling for all, to having an education system that is as dysfunctional as the US health care system has been: not only completely excluding 15% of the population, but costing more for everybody else.

Horace Mann knew this a long time ago Here's what the wise Horace Mann, Nathaniel Hawthorne's brother-in-law, said over a hundred and fifty years ago, when he was the Secretary of the Board of Education in the great state of which Leafstrewn is just a muddy puddle: 

"Now surely nothing but universal education can counterwork this tendency to the domination of capital and the servility of labor... Education, then, beyond all other devices of human origin, is a great equalizer of the conditions of men,--the balance wheel of the social machinery."

Horace Mann's words raise a number of questions about the purposes and effects of education. I'll write about these questions a bit over the next few weeks.

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