The Free Market, Public Education System and Profit Incentives

Politics / US Politics Jan 18, 2010 - 04:32 AM GMT

Historically, it has long been a self-evident truth that the most efficient, productive, and fastest, way to produce goods and services to best serve the consumer desires is to allow a entity to have a profit incentive i.e., unhampered markets. Without such an incentive all three (efficiency, productivity, and speed) will deteriorate and will become submarginal i.e., public education, Amtrak, and the U.S. Postal Service to name just a few. In many cases without a profit incentive, the only incentive today is the bailout incentive i.e., Fannie and Freddie, etc.

If entrepreneurs are not allowed to, from free market business activity gain profits when they have the foresight to take advantage of it and to incur a loss when their judgments are proven faulty, it becomes impossible to decide upon how to best serve consumer desires. In a free market, if consumers see no gain from buying goods and services from one entrepreneur, they have the right to buy from another. If their desires are not meet businesses will more than likely go bankrupt or incur losses and produce less and the land, labor, and resources which would have been used up unprofitably, will become available for another entrepreneur who may serve consumers better than one who cannot. To survive you must be the fittest!

Government thinks otherwise. Advocates of public education fail to realize that education was far better before government believed they had to take control it. Literacy rates were much higher from privately schooled children than publicly school ones, and still are. Many presidents of the past promote public education, yet hypocritically their own children attend private institutions. All one has to do is look at the fault lines and they will realize that Chinese and Indian children are far better equipped going into college than American children are. If only the education system had a profit incentive in which meeting consumer (in this case, children and their parents) desires, schools can compete with one another and tout that “my school offers better education than another”. If competition is allowed, institutions will go out of their way to insure quality education with an affordable price; otherwise consumers will be happy to shop around, which gives all the more reason to offer better services. Since parents hold quality education for their children close their hearts, a firm offering education would be particularly sure to offer better quality than another. Checks and balances do in fact work.

Many would worry that the free market education system would turn into a monopoly, profit greedy business. This wouldn’t be possible under a free society, monopolies theoretically can only exist with government aiding them, and if education becomes unsatisfactory, the parents could turn to another institution. The possibility of a one firm providing all the education is not likely. There is no way of telling if public education funds are efficiently put to use due to no profit incentive. If the schools aren’t properly financed, throwing more money at it doesn’t solve much, and how much would to too much or too little be? The margins for wasted taxpayer money are incalculable. Under private institutions, they will have to offer and maintain quality education first before major profits are realized, rather than public education with no incentive, rather forcing children to attend.

Money is not the root of all evil. It’s surprising that many people fall into this type of deception; these same people would have us also believe that guns kill innocent children or that since money was created by men, all men must conclusively be evil also. Money certainly isn’t “everything”, but it is quite important. If there ever were another better way to produce goods and services in more efficient, productive, and speedier manner, the profit incentive will fall to the way side and a new system will emerge, so long as government does not suppress it. If one reads history thoroughly, they will find out that many problems of the past are present today.

By Viresh Amin

viresh_amin89@hotmail.com

An Austrian economic, Libertarian, and Anarcho-capitalist writer.

© 2010 Copyright Viresh Amin - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Comments

18 Jan 10, 13:29

education systems

The article by Viresh Amin extolls the virtues of private education vs public education. He states that under a private system students perform better. Technically he is correct, but let's look a little deeper here. Students in private schools generally come from families with a higher socio-economic class and all research has shown that this is the single most important indicator of academic success. Strike 1

Private schools have the luxury of being able to reject or expel "difficult" students while public schools do not have that options. "Difficult" could be students who are disciline problems, have special education needs etc.It costs more to educate and counsel these students than it does for students who are academically motivated. Private schools may not even offer counseling services. These students with special needs can cost up to $100,000 a year to educate depending on their needs. Right now the public school system is pickling up these costs. Private schools do not and simply push these students back into the public system unless the tuitions are exorbitant for these students.

It was the public school system that built the prosperous middle class and the great wealth of this nation throughout the last century by providing universal education access for all children. If we dismantle this and it turns out to be a mistake, it will take an entire generation to rebuild.

If we divert funds from the public education system to the private schools, the private schools will cherry pick their students and of course they wil be able to point to their wonderful achievement scores. The public schools will be left with the most "difficult" students with even less money than they currently have. The public schools will become the dumping ground for the large masses of our children.

In this scenario, we will have setup a 2 tier education system, one for the haves, and another for the have nots. Anyone with any foresight would quickly recognize that this wil create social problems that will ultimately affect the productivity and prosperity of the nation. It is a recipie for disaster. In regards to this, there is an old saying, "be careful what you wish for, you may get it". A 2 tier education system would threaten the very democracy our founding fathers worked so hard to leave us.

If the federal government met its commitments to pay for these special needs students, (which it does not) the public school system could stop shifting funds from the general students to pay for the special needs population and do more for the masses of our children.

I will also state that the public system needs to address the issue of poorly performing teachers and schools. The teacher unions need to stop blocking efforts on this issue and work constructively to find a solution. The forming of the "blue line" where these unions blindly support teachers simply because they are members needs to be changed or ultimately the solution will come from the outside and will probably not be what is best for education.

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