Should public schools be privatised? Day 6

Day 6

[Introduction] [Day 1] [Day 2] [Day 3] [Day 4] [Day 5]

Andrew Leigh:

Dear A.N.,

What a brutal final paragraph! So if I don’t support your plan, I guess that makes me a conservative who doesn’t care about teacher quality. Few arrows could have better found their target.

I’m pleased that you and I have found common ground on civics, at least. I began by claiming that public schools provided a common crucible. You said that public school civics was in crisis. But since neither of us could provide empirical evidence, we weren’t willing to stand fiercely by our claims (incidentally, I think this is why people like John Quiggin and I enjoy arguing with you so much more than we enjoy arguing with many people on the right of the political spectrum). Perhaps one day, policymakers will have some believable causal estimates of the impact of school type on some set of ‘good’ civic indicators. In the absence of that, only the firebrands will be able to stay passionate about that one.

So now we’re left with the more traditional economic arguments. You take the view that privatised public schools will be more efficient and more equitable. I think the opposite is true on both counts. Whether it’s for political or economic reasons, companies like Edison Schools that have set up to run large numbers of schools have done very badly. According to their Wikipedia entry, their costs are higher than the public system, and they have still failed to make a profit in all except one quarter of their existence. A result like this makes me concerned about the viability of such a model in Australia. If private schools have one-third of the market when they get 55% of the government funding, can we really be confident that they could make a viable go of it in the rest of the market with 100% of the government funding? Shocking as it may sound coming from an economist, I think there may be some things that governments do better than markets, and one of them is running schools.

On the equity argument, I don’t think that the high use of a public service by the rich automatically suggests we should privatise it. My guess is that roads are used more by the rich than the poor, but I think the government has a core function in roadbuilding. National defence and policing are also of more benefit to the rich, since they have more to lose from civil unrest. But that doesn’t make me think that privatising them would help the poor. The good burghers of Rose Bay would find it much easier to set up their own private police force than those in Rooty Hill.

Related to the equity argument is the question of peer effects. You say that “Unlike the public school lobby, I don’t think kids should be conscripted into providing peer effects for their classmates.” Unlike either of you, I think the answer depends on whether peer effects are nonlinear. If the benefit that high-ability kids bring to low-ability kids is much larger than the cost that low-ability kids impose on high-ability kids, then perhaps we would want to dragoon high-ability kids into underperforming schools. (I’m reminded here of a comment that my thesis supervisor Christopher Jencks once made about neighbourhood effects: ‘it’s odd that policymakers spend a lot of time thinking about how to subsidise poor people to live in middle-income suburbs, when it might be cheaper to pay a few rich people to live in poor suburbs’.)

But I still haven’t removed your most wounding barb – that my nihilistic position leaves me as a conservative who doesn’t care about teacher quality. And I guess that here I can only fall back on my faith that governments eventually do the right thing. It took most of the twentieth century before the progressive side of Australian politics finally realised that surrounding ourselves with high tariff walls hurt the poor more than it helped them. Part of the challenge was that organised labour represented producer interests, while consumer interests were disparate and disorganised. It took a succession of tariff board reports, industry restructuring plans, and a lot of talking before a Labor government finally took action. When it comes to education policy, I think the same is true today. The voices of teachers are much more forceful than those that advocate for children’s interests. Sometimes, what’s good for teachers is good for kids. But not always.

You’re right that those looking for bold ideas on teacher quality have not exactly been deluged by innovative proposals in this campaign. Nonetheless, to simply sell off all schools would effectively give up on education policymakers. By contrast, I’m still optimistic enough to believe that just as economists’ ideas prevailed in the domain of trade policy, the same can happen in education policy. As Keynes famously wrote, “the ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else.”

Thanks for the discussion. It’s been a pleasure.

Yours, idealistically,


5 thoughts on “Should public schools be privatised? Day 6

  1. AL – I never really explained how I would privatise the schools. Because the scope for profit is limited (though I can’t see any good reason to prohibit for-profit schools), and the existing private school providers won’t want to expand quickly enough – a reason I don’t want the conventional voucher scheme – some way would have to be found to quickly remove public schools from state control.

    The most likely initial arrangement is something like what ‘public’ universities already have, legislation creating them as self-governing entities, but without government representatives. The physical assets could be put into some trust-like arrangement, which would have government representatives. If the school was completely wound-up, the assets would return to the state. However, with the trust’s agreement the assets could be used in mergers or other deals with other schools. We want to ensure more efficient use of the capital invested in the school system, rather than schools being kept open just for political reasons.


  2. “We want to ensure more efficient use of the capital invested in the school system, rather than schools being kept open just for political reasons.”

    It would be interesting to see how that principle would work in large parts of regional Australia, with many of the pokey 1 or 2 classroom schools. Do you want parents sending their 6 year olds 1.5 hrs on a bus every day because it’s “more efficient”?


  3. Perhaps one day, policymakers will have some believable causal estimates of the impact of school type on some set of ‘good’ civic indicators.

    “Good” civic indicators? Yep – debating what are the objectives of a political system would be useful – not only teaching the current system, but stimulating debate on what changes are desirable – and possibly increasing engagement in referenda.


  4. Andrew L, I have two main comments.

    First, I’m not sure how you conclude that schooling is just one of those things that government does better than the private sector. On the basis of one firm’s experience in America? AN pointed out earlier that the Catholic system has a lower cost per student than the public system. Incidentally, I’m also not sure how you arrived at the observation that private schools have one-third of the market and 55% of the government funding. Do you mean government funding from all levels?
    Moreover, if you are concerned about efficiency, costs have to be considered alongside benefits. Even if private schools cost more per student (and it is likely that many do and would under a more liberalised system), many parents may be willing to pay higher costs for even greater benefits.
    The case for privatisation or deregulation is also not just about short-term costs and benefits, but about dynamic efficiency – reducing the scope for government failure in the longer term. Examples include the failures that might arise with centralised decisions regarding the formation, location and closure of schools, curriculum development, teaching approaches and emphasis, etc. While it would have been possible to argue against privatisation of many firms or deregulation of many industries, such as the CBA/banking, Telstra/telecoms, SECV/power, Qantas/airlines, etc on the basis of a static view of economies of scale and higher private sector costs of capital (indeed, John Quiggin has done so), how do you account for the dynamic inefficiencies of government ownership, such as massive over-building of power stations in the 70s and 80s, various State Bank fiascos, mollycoddled airline and bank staff and so on?

    My second main point is that you write optimistically about the filtering through of economists’ ideas into education policy within the current system, using trade policy as an analogy. But economists are not educationists (or exporters or importers) – their role is not to advocate any particular type of educational style, just as it was and is not to advocate business investment in any particular type of industry (in the early 90s, it was the “Shutdown” brigade that pushed for tariff retention and for Australia to develop industries such as food and minerals processing, not economists). Just as economists’ key contribution to the protection debate was to argue for its removal, the key contribution of economists to education policy would be similar to what AN has been proposing – to wind back centralised control and allow decentralised decision-making to flourish. So what role are you proposing, exactly, for economists in education?


  5. It’s strange that AndrewL uses trade as an example of the government eventually doing the right thing. The right thing they did (and should do in education) is get out of the way!

    Education is important, so AndrewL believes the government should run it. Thank god AndrewL doesn’t believe that groceries are important! 🙂


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