I was reading the overview to the new public policy analysis by Cato called ‘The Public Education Tax Credit’ when a simple though struck me. I haven’t read their piece yet so this may touch on some topics they cover.

One of the rallying cries for public education proponents is that schools do not spend enough on students. Teachers are constantly out of money for classroom activities, field trips are shortened or canceled, class options have to be cut. Many people falsely use educational spending-per-student as a litmus test to determine the adequacy of the education.

However this type of measurement is flawed, and any proponent of existing, static, public education, where parents are forced to send their children to a limited number of schools (if not a single school) touting it is misleading the bodies attached to the ears listening. Here’s why:

A government-run, public education system is largely a monopoly controlled by the state. Bureaucratic systems lacking any significant competition have no larger incentive to perform spectacularly. It is rare that any school system truly stand out and above mediocrity. As is the nature of any given bureaucracy, the larger it grows, the less efficient it performs. This happens for a wide variety of reasons but largely due to simple economic constraints and laws thought of by men long retired to the daisy pushin’ industry.

Competitive markets can also have players of equal clout, nearing monopoly powers. However any given business is driven to outperform the competition. There is a constant process of innovation. Complacency kills; things that do not perform are cut as if they were fat from meat. Microsoft’s long ride on the “monopoly” train has only increased its exposure to competition making the company dominant in some areas yet spread thin in many areas. While Microsoft charged ahead on the desktop, they were blown out of the Internet pool by many upstarts who were not encumbered by the internal bureaucracy in Microsoft. Yahoo stole the search show-pony only to be eclipsed by Google. If Microsoft is to survive, it must adapt to the marketplace of today rather than the marketplace of yesterday. These constraints are not present in government-run monopolies.

Competition also has interesting effects on prices. In most cases, prices are driven down as more competition enters the market. When you leverage technology and labor resources to gain any advantage over a competitor, you seek to increase your margin and reduce costs. Any intelligent advantage you can eek out to make your product more profitable will be taken. The key tenet is that you have to drive for efficiencies wherever you can without sacrificing your share of the market and increasing your share everywhere possible.

Business management theory has evolved to recognize quality as a key motivator of clients. Where there may exist some difference in pricing, quality becomes an intangible factor of costs. Public institutions can not compete in this same way. Private schools, while they do exist, are and will remain secondary to the Public system until some form of educational freedom is extended to parents.

Another key example is the technology sector. Early CD players cost a small fortune. Yet as the technology improved and the market expanded, the price was largely driven down. While there surely were poor CD players on the market, they were eclipsed by players from competitors who drove through on quality. This offered high-quality equipment from many vendors on a downward price spiral to the point where CD players were a commodity item costing no more than $20 - $30.

Don’t read this the wrong way - $0.00 spent on schools is a bad thing as there will always be some costs associated with it. However using per-student spending as a measure of adequacy is  grossly misleading when spending is unlinked from quality and competition.