Wishing Upon a Superstar

The Clark County School District chronically fails its mission because it is a government monopoly, protected from market forces.

By Doug French
  • Tuesday, August 9, 2005

University Chancellor and TV station mogul Jim Rogers believes the way to fix the Clark County School District is to hire a “superstar” as superintendent to turn the dysfunctional district around.

The District—now fifth-largest in the United States—is legally responsible under state law for educating over 70 percent of Nevada’s public school students. Rogers rightly thinks the education product being produced in Southern Nevada is suspect.

This is confirmed by the state education department, which reports that more than two-thirds of schools in the Clark County School District failed the “adequate yearly progress” standards of the federal No Child Left Behind Act for the 2004-05 year.

This year 205 Clark County public schools are listed as failing, up considerably from last year’s 141.

Being a businessman, Rogers understands that talented individuals make the world go around—at least in the business world. Thus, he reasons that the school board should find the most capable person available and pay them up to $600,000 per year. In fact, Rogers and a handful of his community leader buddies will supplement the salary out of their own pockets. No career education bureaucrats need apply. Rogers is looking for the entrepreneurial management type from the private sector.

But will a $600,000 silver bullet fix the school district? No.

One fundamental problem is that the Clark County School District is a self-perpetuating governmental bureaucracy, where—as bureaucracies as diverse as NASA and the CIA have amply shown recently—screw-ups not only are not punished, but rewarded instead with even bigger servings of taxpayer pie.

Another problem is that the school district is a state-granted monopoly—monopoly here understood as the absence of free entry into a particular line of production. While a few private schools exist, they’re too few to challenge the district’s state-granted market power. Remarkably, as the district has under-performed, the more the state has legally expanded the district’s monopoly domain.

Economist Hans Hoppe explains: “Any monopoly is ‘bad’ for consumers because, shielded from potential new entrants into its line of production, the price for its product will be higher and the quality lower than with free entry.”

Mark Skousen, discussing the views of Chicago School economists, amplifies the point “that government is frequently inefficient and underperforms due to the power of strong vested interests and a lack of incentives and property rights.”

Rogers admitted recently, in an interview with Jon Ralston, that he doesn’t know how to fix the school district or whether it even can be fixed; he just wants the best person money can buy to tell him what the answer is.

However, contracting with a manager for more than half a million dollars per year for five years does not provide the proper incentives. To attract entrepreneurial talent, market incentives must be in place.

Entrepreneurs, in investment analyst Sean Corrigan’s words, “make progress through discovery; they are naturally weeded out, good from bad, by the market process itself; and, best of all, the reach of the profitable is subsequently reinforced at the expense of the unprofitable, who therefore cannot continue indefinitely to misallocate scarce resources.”

A superintendent, superstar or not, who makes a deal for a large salary, only has incentive to do the least amount of work possible to keep his or her job. Instead of innovating, the superintendent will focus on politics, public relations, increasing the school budget and damage control. There is no system of profit and loss in place to lead to Joseph Schumpeter’s “creative destruction” and weed out bad managers and failed ideas.

Poor student performance will be explained away, as always, with the usual excuses—too many minority students, not enough money, too much growth, transient population and uncaring parents.

Entrepreneurs, conversely, take risks; they’re not guaranteed big salaries. Economist and speculator Richard Cantillon said it best: “They may be regarded as living at uncertainty.”

The great economist Ludwig von Mises pointed out the common problem of the state and school district many years ago: In flight from market dynamics, neither can calculate. “Socialism is the renunciation of rational economy,” wrote von Mises.

Thus, Chancellor Rogers could put in millions of dollars and hire Jack Welch or Bill Gates if he wants. But five years from now, the story of failure will only continue.

Rogers should direct his energy and money to breaking up the school district—as an interim step toward removing the state from the education business all together.

Doug French is executive vice president of a Southern Nevada bank and a policy fellow of the Nevada Policy Research Institute.

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