Misunderstanding Markets

Kevin Carey continues the fine tradition of correcting the misuse of business metaphors in writing about education reform.  By the way, I think some metaphors from business are incredibly useful, but misusing them creates a good deal of confusion and strawmen.  Read the whole thing, but the part about markets is the most important to accentuate:

There’s no “market” for Race to the Top funding. No goods and services are being exchanged, no pricing mechanisms are at work. There’s nothing inherently market-like about using test scores to evaluate teachers or turning around failing schools. Both of those policies can be–and will be–pursued without using markets of any kind. And while there are certainly market elements in the charter school concept, that’s proven to be less important than anticipated. Successful charter schooling turns out to be mostly about giving non-profit organizations the ability to run public schools autonomously, across district and state borders and free from bureaucratic constraint. That can happen within a market environment, but markets aren’t necessary for it to work.

Bingo.  Markets set prices close to marginal production costs and allocate scarce resources. None of the ideas above have anything to do with the efficiency of resource allocation.  The only reason we tend to associate the policies above with “market-based reform” is that we also tend to conflate the concepts above with “business-like reform.”  Kevin again:

More broadly, there’s nothing inherently “business-like” about paying your employees based on how well they do their jobs, or allocating resources to the people you think will use them most effectively, or shutting down organizations that chronically fail. This feeds into a kind of private sector chauvinism which holds that public enterprises are inefficient and low-performing whereas private firms operate at maximum efficiency, more or less by definition … Or to look at it another way: when Michelle Rhee decides to fire teachers who don’t show up for work, or hit children, or have sex with them, she’s not running DCPS “like a business,” she’s running it “like a rational person.”

All important to keep in mind.

One Response to Misunderstanding Markets

  1. Creech says:

    All this is good. But I would add a nuance here.

    In most places, chartering enables islands of excellence, if school leaders are willing and able to take advantage of the autonomy that it affords. That’s important, because it busts myths about the educability of poor kids and the supposedly rational nature of how school districts are run.

    But where chartering reaches a critical mass, and a market takes shape that does allocate scarce resources –i.e., children and the per pupil funding that attaches to them — then all actors, and not just the ones with the autonomy are suddenly confronted with the possibility of diminishment and even eventual bankruptcy if they cannot make themselves more appealing to parents.

    That’s a pretty potent dynamic. It doesn’t lead to Pareto-optimal edunirvana (because good information about schools is hard to find), but it can lead to a lot more willingness by school and labor leaders to engage in the hard conversations you talk about.

    For as good a piece of evidence of what I’m talking about as there is, here’s George Parker, president of the Washington Teacher Union, having his Ron Gettelfinger moment in 2007:

    “The charter school enrollment is increasing. Public school enrollment is decreasing. We are now a competitive school district where student achievement may very well determine [the union’s] existence.”

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