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We don’t need no (free) education! (Or do we?)

February 17, 2011

Waiting for SupermanEveryone is talking about the costs and problems of education these days. The kids who need it most can’t get it and university costs are skyrocketing. Two documentaries came out last year (Waiting for Superman and The Lottery) following families in their attempts to get better education for their kids via local charter schools and the struggles they encounter in that quest. Waiting for Superman was the most popular of the two. Needless to say, education is just as much of a hot-button topic as ever. However, decades ago, economist Milton Friedman and author Robert Heinlein popularized the phrase “there ain’t no such thing as a free lunch” or TANSTAAFL in Heinlein’s The Moon is a Harsh Mistress. Likewise, there is no such thing as a free education. Someone is paying for it, so what is the cost?

The free-market approach to education

Most people discussing what they consider more free-market solutions to education want to see more competition in the education market. This is something touched upon in the documentaries mentioned above. More charter schools means more choice, and if students had the ability to move freely between school zones, this would hurt the “business” of the worst schools in the area.  Another problem brought up in the documentaries is the fact that unionized teachers are infamously hard to fire. In the long run, this raises the costs of keeping people on the payroll and it keeps the public paying for teachers who may be ineffective.

Austrian economists, the hyper-free marketeers that they are, go further than simply asking for more charter schools. They say the entire education system needs to be privatized in order to become truly solvent. Austrians see public education as another bubble. A recent article by Joshua Fulton at the Mises Institute uses Egypt and Tunisia as an example:

Fifty-Seven percent of young Tunisians entering the labor market are college educated. This is while only 30 percent of Americans earn a college degree by the time they are 27. Recent Tunisian college grads have an unemployment rate approximately three times higher than the national average of 15 percent. This is up ninefold from 1994… Of Tunisia’s GDP, 7.2 percent is spent on education, more than any European or North American country beside Denmark and Iceland, which also spends 7.2 percent of its GDP on education.


In Egypt, enrollment in tertiary education increased from 14 percent in 1990 to approximately 35 percent in 2005. Yet this has not helped the unemployment rate among recent grads. The national Egyptian unemployment rate is 9.4 percent, comparable to the United States, but the unemployment rate for people between the ages of 15 and 29 is 87.2 percent. College graduates, largely because of their age, have a ten times higher unemployment rate than for those who did not attend college.

To Austrian economists, all public education is unsustainable and we do not get back what we put in. Earlier today Mises writer Douglas French blogged that the University of Nevada Las Vegas is bordering on bankruptcy and the state is looking at introducing a law that would allow the school to fire tenured professors. Music to the ears of an Austrian economist.

Why public education is good–i.e. what we are paying for

There are a lot of unknowns in the world of education. It is not an industry built primarily on turning a profit, so gauging the success of the industry as a whole in terms of what society gains from it is hard to tell. Arnold Kling at the EconLog blog writes:

Educators do not know what, if anything, actually adds value. For all we know, test scores are determined by the backgrounds (mostly genetic) of the students, with remaining differences that are random and irreproducible.

People have unrealistically high hopes and expectations for education, health care, financial services, and government. Studies by economists tend to raise doubts about the validity of those hopes: educational experiments almost never show a durable, reproducible gain; as Robin Hanson emphasizes, health care economics is notorious for cross-sectional studies showing that more care does not lead to better outcomes; money managers perform worse than index funds; and government’s failures are well documented.

Even with such poor gauges of success, Nobel Prize-winning economist Paul Krugman claims:

In the 19th century, America led the way in universal basic education. Then, as other nations followed suit, the “high school revolution” of the early 20th century took us to a whole new level. And in the years after World War II, America established a commanding position in higher education.

So our education system used to be really something! What happened? According to Krugman and every international test meant to gauge the knowledge of countries’ youths, the U.S. is lagging these days.

Even so, the primary argument for public schools still stands: society’s return on investment (ROI). Even with his gloomy outlook at our education system’s current state of affairs, Krugman does not want to eliminate public education. This is because it is assumed that we as a society benefit by having giving education access to kids who would not otherwise have it. They turn around and give back to the economy far more than what we paid for that individual to go through school, the argument goes.

There is no reason to dispute this happens, but there is also the possibility that some individuals make for a bad investment. The Center for American Progress did a recent study analyzing this specific topic. It comes complete with an interactive map for many of the nation’s school districts. What it found is that some districts get a better return on investment than others. The good news is that there may be a means of fixing bad educational ROI without spending more money:

An Arizona school district, for example, could see as much as a 36 percent boost in achievement if it increased its efficiency from the lowest level to the highest, all else being equal.

Whatever the solution to our nation’s educational woes, it is clearly a debate that is without an easy answer and not likely to die down any time soon.

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