Public Schooling: Cost-Based Analysis

Public and political discourse regarding education touches upon many elements, including but not limited to classroom size, diversity quotas, extracurricular activities, and common core versus state-based curriculum. All too often, however, is the issue of costs left by the wayside. In our world of scarcity, the number of services we can provide for our society is ultimately limited, and when increases for the public budget go to certain public goods, by necessity resources from other sectors (other public goods and/or private income) have to be diverted.

Taking this into account, public policy recommendations for dealing with public schooling fall under a new light. It becomes clear that, when managing our resources, there is a limit to the amount that we can spend on education if we as a society value the vast amount of other public and private goods that we consume on a daily basis. Instead of seeing education as a moral right that has to be extended to everyone at every time in society, a more realistic approach that takes into account the costs and benefits of providing education can follow.

The question then arises, what is the optimal amount of education that should be provided to a society? To answer this question, it is important to understand the nature of knowledge in a market and planning context, and how this knowledge comes to be known. Firstly, under the Austrian tradition of economics, the knowledge required for effective planning in an economy is of a tacit nature, as coined by F. A. Hayek. What this means is that the information about individual’s preferences can only materialize in a voluntary transaction between two consenting parties in a market context.

The reason for this is due to the nature of subjective valuation of goods and services. Since individuals have their own personal valuations of products, means, goals, etc. and these valuations can only be known to the rest of us when said individuals demonstrate these preferences, the necessary knowledge for effective central planning is inherently unknowable beforehand, which is when it is needed for central planning to work.
The way this relates to public schooling is as follows. Since public schools are a public good provided for by the state, and since the provision of goods and services by the state happens without consideration for the subjective valuations of its citizens, it by default cannot provide the right amount of public schooling in accordance with its citizen’s desires and valuations of other goods and services.

This means that public schools will either be underprovided or excessively provided. Either outcome is less than desirable for a society since underprovision means that children are being denied the opportunity to learn and develop specialized skills, whereas excessive provision means that countless opportunities in different markets, fields, and public goods are being forgone and diverted towards public schooling.

There is a solution to this issue, however. In order for the proper amount of schooling in a society to take place, it is necessary to hand over the reigns of schooling to the private sector and cease intervention in said market. By doing so, individuals can demonstrate their preferences voluntarily and devote the optimal amount of resources towards the schooling of children, balancing the need to provide opportunities to future generations with the equally important demands and needs of countless other markets.

In a free market of education, the division of labor will lead to more efficient schooling, accompanied by ever-changing schooling practices that are able to apply the newest techniques for teaching children thanks to the pressure of competition and the reward of profits and the cost of inefficiency. The schooling environment will be a dynamic one, constantly improving in order to satisfy the demands of consumers, while striving to reduce the costs of education in order to undercut competitors and grow the customer base.

Compare that to the bureaucratic public schools, where instead of being driven by profits, schools are driven by public funding. The goal is to gain more funding, which is granted independently of market performance. Shielded from the pressure of competition, bureaucracies are slow to adopt new methods and the latest innovations that their market counterparts have provided. This, in the long run, hurts not only the sectors of the economy whose resources are diverted into this less efficient sector but the very children subjected to the public schools, who are deprived of the opportunities a free market in education would be providing them. The choice is clear, it is up to us to free the education market, for our children and countless generations to come.

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