Education and Monopoly

By Dennis Schiffel
  • Monday, April 5, 2004

Concern over student achievement and the adequacy of our public schools is widespread. Blame for poor performance is directed at teachers, administrators, teaching methods (learner-centered teaching), breakdown in discipline, inadequate funding and various and sundry other reasons.

Whatever beliefs one may have about the problem, surely there must be some agreement that teachers, administrators and parents all share the common goal of improving student achievement. Yet, despite good will and well-intentioned efforts, institutional roadblocks still impede improvement. For example, educators can do little about the breakdown in student discipline in public schools because of the expansion of “students legal rights.” Richard Arum's book, Judging School Discipline, provides an in-depth examination of this issue and the consequences of ignoring Supreme Court Justice Powell's warning on giving children the right to challenge their teachers in court.

But perhaps the most important institutional impediment to improved public education is monopoly. Starting with the Sherman Act in 1890, numerous federal and state laws have banned private monopolies and anti-competitive behavior. The federal government established an anti-trust division in the U.S. Department of Justice and a Federal Trade Commission to enforce these laws. Why did they do so?

Economists note that monopolies tend to pay less attention to costs, are slower to innovate, charge higher prices and restrict consumer choice. These effects have little to do with evil intent or weak ethics by business managers. They are largely the result of lack of competition. Thus, laws have been passed to change institutional arrangements—monopolies and anti-competitive behavior are to be prevented.

Looking at educational arrangements whether in the U.S. or Nevada, we find that public schools are a virtual monopoly funded by the taxpayers. Yes, there are parochial and private schools, but they tend to be religious in nature or expensive. In any case, if you pay to send your child to a private school you must still pay taxes to support the public schools even though you don’t use their services.

Because the schools are pretty much local monopolies, we should expect what economists predict for any other monopoly enterprise—slow innovation, less attention to cost control, lack of choice and lack of accountability. It is by far the latter two that are most important.

Take lack of choice first. If you are unhappy with the services of your doctor, dentist or auto repair shop, you can take your business elsewhere. If prices are too high in your opinion at one store, you can go to a competitor. Not only do you have choice, but your choice along with that of others signals the service provider that he or she needs to improve or suffer loss of business.

No such mechanism exists in Nevada’s public schools. You cannot easily change the school to which your child is assigned if you think it is inadequate. You will find some difficulty in changing your child’s teacher if you are not satisfied. Yet, you cannot stop buying the educational product or service being offered by the public school monopoly: you still must pay your taxes. So, lack of choice implies lack of accountability.

Because of the value of an educated populace, it would probably be unwise to not provide public funds for education in some way. But providing public funds does not require a public school monopoly.

Lacking choice, are there other mechanisms for promoting accountability? School boards made up of elected representatives might be one solution. But this remains an indirect approach—not much different than the boards of directors on monopoly companies. And though once upon a time, schools were local matters, we now have a federal Department of Education and huge school districts. The effect of this growing institutionalized bureaucracy is to make schools less accountable to students’ parents and taxpayers.

Once bureaucracies are established, interests become vested and change is resisted. After all, change is intimidating, and vested interests such as teacher unions are comfortable with their influence under current arrangements and have political muscle. But such vested interests exist only to protect their own interests, not students’.

None of these considerations suggest bad faith by anyone associated with Nevada’s public education system. Rather, they suggest that institutional arrangements are affecting the behavior of educators and the response of the education system to parents and taxpayers.

Improved performance will require change. Open-choice public schools and vouchers for all students to use at public, private or religious schools would all improve choice, accountability and student achievement. 

Dennis Schiffel is a former senior associate at the National Science Foundation and a policy fellow of the Nevada Policy Research Institute.

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