Education

Education is the transmission of knowledge and skill, and on the Austrian account it is a service like any other, subject to the same economics. What makes it a standing subject of dispute is not the teaching but the financing and the compulsion: in most countries the service is paid for by people other than its recipients, supplied by a geographic monopoly, and attended under legal obligation, and each of those three features has consequences that are studied separately here.

A service, not a special case

The argument for treating education as an exception usually runs through positive externalities. A literate population is said to benefit everyone, including those who did not pay for anyone's schooling, so that education is undersupplied by a market and must be provided by the state.

Two replies are standard. The first is that spillover benefits do not distinguish education from most goods: a well-run bakery benefits the neighbourhood, and nobody concludes that bread must be nationalised. What matters is whether the producer can capture enough of the return to make production worthwhile, and the historical evidence is that in education he plainly could.

The second reply is the one that reaches further. Establishing that a market outcome falls short of an imagined optimum does not establish that a political process will come closer, and the same free-riding that is supposed to defeat private provision operates on the voters and officials who are meant to supervise public provision. The task of making sure the state supplies the right quantity and quality is itself a good nobody has much private incentive to produce. See public goods for the general form of the argument.

Before compulsion

The premise that mass literacy waited on compulsory state schooling does not survive contact with the record. Literacy in Britain and in the American colonies was already high and rising through the eighteenth and early nineteenth centuries, supplied by fee-charging schools, church schools, charity schools, apprenticeship and the household, at prices ordinary labourers paid out of ordinary wages. Compulsory attendance laws arrived after the trend was established, not before it.

Murray N. Rothbard made the further point that compulsion has an object beyond instruction. A law that requires attendance necessarily specifies where, and so puts the state in the position of deciding what a child is taught and by whom, which is a power over the formation of opinion that no other licensing regime carries.

Inputs, outputs and Gammon's law

The measurable pattern in state schooling is that spending rises and results do not. Milton Friedman applied to it the observation he took from Max Gammon's study of the British health service, that in a bureaucratic system an increase in expenditure tends to be matched by a fall in production, so that such systems behave like black holes, absorbing resources while emitting less. He said explicitly that the law had impressed him most in American schooling, where input on any measure had risen for decades while output, whether counted as students, schools or quality, had gone down.

The Austrian explanation is not that public employees are lazy. It is that a bureau has no profit and loss test, so it cannot tell an improvement from an expense, and the calculation it needs to make is the one the institution is built to prevent. Ludwig von Mises's Bureaucracy is the general treatment; schooling is a case of it.

Vouchers and the disagreement about them

Friedman's proposed remedy was the voucher: fund the pupil rather than the school, and let parents choose. It keeps tax financing and introduces competition among suppliers.

Rothbard and much of the Austrian tradition opposed vouchers, and the objection is worth stating because it is not the obvious one. The concern is not that vouchers cost money but that money carries conditions. A private school accepting public funds becomes subject to the accreditation, curriculum and non-discrimination requirements attached to those funds, so the effect over time is to extend state control into the independent sector rather than to relieve the state sector of it. On this reading a voucher is not a step toward separating school and state but a mechanism for absorbing the alternatives.

The competing view is that the counterfactual matters: an independent sector serving a few percent of pupils is not a check on anything, and a voucher that enlarges it buys more freedom than it costs. The disagreement is empirical and unresolved, and it is a live one between Chicago and Austrian economists rather than between defenders and critics of markets.

See also

• Public education
• Private school
• Home schooling
• Public goods
• Gammon's Law
• Bureaucracy
• Externalities
• Milton Friedman

Links

• Bureaucracy by Ludwig von Mises, 1944
• Education: A Bad Public Good? (pdf) by Jane S. Shaw, The Independent Review, Fall 2010
• Education at Wikipedia