Privatisation and education

by John Quiggin on October 19, 2009

My still-in-progress book (outline here) will have a chapter on privatisation. That reminded me of some thoughts on school privatisation and for-profit education that I thought might be of interest here. The near-total failure of the for-profit education ventures that proliferated in the 1990s is striking and to some extent mysterious. In part, I suspect that the whole enterprise (at least as regards school education) was based on a misdiagnosis of the problems of the public school system, focusing on organizational factors, rather than the more intractable effects of steadily growing inequality. The limited success of the charter schools movement would point in that direction. But I argue below (from a piece I wrote for Campus Review in Australia a couple of years ago) that there are more fundamental problems with the for-profit approach. Your thoughts appreciated.

To the extent that there was any coherence to the higher education policies of the Howard government, it was derived from the idea that universities should become more like ordinary commercial businesses. Managerialism and market liberalism are at one in their rejection of notions of professionalism and the idea of autonomous academic disciplines. Both managerialists and market liberals reject as special pleading the idea that there is any fundamental difference between higher education and say, the manufacturing and marketing of soft drinks. In both cases, it is claimed the optimal policy is to design organisations that respond directly to consumer demand, and to operate such institutions using the generic management techniques applicable to corporations of all kind. They should compete on the basis of price (fees) as well as quality, and tailor their offerings to market (student) demand. The laws of economics would then ensure an efficient outcome.

This theory seemed beautiful to the ideologists of market reform, but it failed to account for an ugly fact. For-profit education has been a consistent failure in all times and places. The limited exceptions relate to areas of vocational training with little or no general educational components.

The market euphoria of the 1990s produced a large number of for-profit educational ventures, most of which quickly failed. Rather than conduct a post-mortem on the departed, it is instructive to look at some of the survivors.

Edison Schools was founded in 1992 and was widely viewed as representing the future of school education. Its plans were drawn up by a committee headed by John Chubb, the co-author of the most influential single critique of public sector education in the United States (Chubb and Moe 1990).

The period since then has been one of decline. Edison has lost numerous contracts, along with its stockmarket listing and has largely abandoned new bids to operate schools, focusing instead on a variety of peripheral educational services, such as testing and the provision of course materials. Even operating in a highly favorable political and financial climate, Edison was unable to deliver on its promise of transforming the school sector, and seems unlikely to survive as a school operator in the long run.

The University of Phoenix, founded in 1976, has been widely represented in Australia as a successful challenger to traditional universities. Such claims are exaggerated to say the least. Although the University does compete with traditional providers of undergraduate university education, its record in this area is exceptionally poor, with a graduation rate of 16 per cent (“the percentage of first-time undergraduates who obtain a degree within six years”). The performance of online programs (6 per cent) is even worse.

Alarmingly in the context of discussions of FEE-Help, the University of Phoenix has been subject to persistent accusations of rorting the government-subsidised student loan system. It was fined $10 million for illegal recruitment practices in 2004. A shareholder lawsuit based on the same issue recently led to a jury award of $280 million against the University’s parent company, Apollo Group, and further litigation under the False Claims Act is continuing.

The most prominent Australian venture into for-profit higher education is U21Global, a joint venture of the Universitas21 alliance of universities, of which the most prominent driver has been the University of Melbourne. Launched in 2001, it projected enrolments of 60 000 students, and annual revenue of $500 million by 2010. As of 2008, U21Global claims 1600 students, many undertaking short courses aimed at professionals. No financial reports appear to be publicly available, but it seems unlikely that the $US50 million invested in the venture will be recovered.

The failure of for-profit education reflects fundamental characteristics of education that make models based on competition and consumer sovereignty inappropriate as a basis for policy. Because the benefits of education are hard to assess in advance, and only realised over a number of years, short-term market incentives are ineffective or perverse. Only a long-term commitment to academic standards and professionalism can maintain the quality of education, and such a commitment cannot be driven by managerial skill or direct incentives.

{ 48 comments }

1

P O'Neill 10.19.09 at 12:58 am

At the minimum there will need to be a distinction between primary, secondary, and tertiary. The issues that face private operators in each seem different. For one thing, tertiary institutions can select their students, for better or worse. It’s a lot more complicated in the lower tiers, since they’re usually working with some kind of mandate as part of their operation.

One that strikes me is that Edison and the many charter school operations seem to have had a very poor idea of how much running a school costs. You’d think (as perhaps as they did) that it’s just a matter of adding salaries to building costs, materials etc, and you’d know whether or not you can make money pretty quickly. Yet the actual experience seems filled with ex post cost shocks.

2

Nathan 10.19.09 at 1:48 am

Smaller scale for-profit education has been a success going back further than public schools have been around. Many educated people earn money as private tutors, and services like Sylvan Learning centers provide educational services at a profit. I recently read an article about parents banding together and hiring tutors to teach their children as a sort of professional home school.

It seems the biggest mistake that Edison and Phoenix make is trying to mimic the public institutions which are not at all interested in profit.

3

Thorfinn 10.19.09 at 2:03 am

For-profit education has been a consistent failure in all times and places.

Sweden seems to have figured out how to make for-profit education work.

4

Nick Cowen 10.19.09 at 2:05 am

What about the University of Buckingham in the UK? Or Kunskapskolan and Bauer in Sweden? I think you are missing out on rather a lot of private actor successes in education systems, although it should be acknowledged that they only have a marginal impact on overall standards.

5

Thorfinn 10.19.09 at 2:07 am

Upon more reflection, it’s also fairly successful in developing countries–see A Beautiful Tree and the LEAPS study in Pakistan.

6

Ohio Mom 10.19.09 at 2:26 am

I have two sets of thoughts on privatizing schools. I’m writing from the perspective of a mom of a special needs middle-schooler.

The first is, it has only been since the late 1970s that my child’s civil right to a free, appropriate public education in the least restrictive environment has been recognized. There is quite a bit of research showing that special needs children do better throughout their lives if they can be included as much as possible with their typically developing peers (separate is not equal). Private schools are notorious for “cherry-picking.” Most do not want the expense and trouble of educating special needs children (and it can be hard and expensive to do well). So when public schools are privatized, one of my child’s most important civil rights is essentially abrogated.

The second is, while we’ve always had some private schools in the United States, operating parrallel to the public school system, this idea of privatizing schools is very radical in that it aims to remove a whole level of local government, the school board (the roles and responsibilities of the school board are outlined in the state consitution, just like the roles and responsibilities of city and county governements are). My city has privatized garbage collection; if for some reason I’m made unhappy with how my garbage is collected, I can bring my complaints to my city council. Or, I could help elect someone new, who I think would be more responsive to my complaints, or even run myself. But if I am unhappy with my local privatized school? Who do I complain to then? Democratic accountability no longer exists.

7

Marc 10.19.09 at 2:48 am

For-profit education for the rich might actually have a good track record. It actually helps that particular system to have the masses be poor and to have educated tutors available to work cheaply for the wealthy, after all.

8

David Wright 10.19.09 at 5:42 am

What about Harvard and Yale? Don’t they count as successful for-profit education suppliers? What about tutoring services for middle class Americans?

JQ’s post appears to fault for-profit systems for not solving the problems of lower-class schools, but it seems crazy to expect that any form of school organization could do that, in the absense of functioning families and pro-education social norms. At least voucher systems allow a few children of functioning families with pro-education values to escape from school populations that might otherwise overwhelm their influence.

In the U.S., of course, the voucher debate is highly ideologically charged. I do not know what it is like in Australia. But in many European social democracies, voucher systems are accepted across the ideological spectrum. Try asking a German leftist if the state will shift its payment for his child’s education to a private school. “Of course!”, he will say, “why would it not?”

9

John Quiggin 10.19.09 at 6:27 am

“What about Harvard and Yale? Don’t they count as successful for-profit education suppliers? “

Umm, no. That’s why they, and nearly all private universities, are called “not-for-profit”.

10

David Wright 10.19.09 at 6:52 am

JQ: That’s a fair criticism, but ultimately a nit-pick. You yourself move back and forth rather freely between “private” and “for-profit” in this post, and indeed that is mostly justified. The non-profit status of Harvard and Yale is mostly a matter of tax law and accounting rules; it should not be taken to mean they are run like charities primarily for the benefit of some under-served group or cause. They are, indeed, quite dogged in their pursuit of cash and lavish in the remuneration of their executives.

11

John Quiggin 10.19.09 at 7:27 am

“You yourself move back and forth rather freely between “private” and “for-profit” in this post, and indeed that is mostly justified”

Umm, no again. The word “private” doesn’t even appear in the post, and I make it pretty clear, I think, that in referring in the title and opening para to “privatisation”, I’m talking about handing over to for-profit operators, not public funding of non-profits.

12

David Wright 10.19.09 at 7:59 am

Harvard and Yale are not recipients of “public funding of non-profits,” except in the widest sense that they recieve research grants and their students are eligible for government-subsidized loans (which would be true if they were for-profit corporations, too). If Harvard and Yale were to be reorganized as for-profits (which is in fact legally possible), do you think they would fail in the way that Edison has? Or do you agree that Edison’s failures have to do with the market segment they serve, not just their articles of incorporations?

13

Dan S. 10.19.09 at 10:12 am

One that strikes me is that Edison and the many charter school operations seem to have had a very poor idea of how much running a school costs.

Or what it required. One of the most glaring examples was here in Philly, where Edison fired a bunch of non-teaching assistants from one of the schools it was given, apparently thinking that all those folks sitting around in the hallways were just so much profit-sucking deadwood. Of course (and entirely predictably for anyone w/ local or specific knowledge, such as ‘hey, these are the folks handing a lot of the basic security&surveillance in a very troubled school!’) , the school obligingly erupted into violence.

14

Dan S. 10.19.09 at 11:34 am

On a certain abstract level, it’s the magical market fairy version of the “Hero Teacher” narrative.

15

soru 10.19.09 at 11:52 am

If Harvard and Yale were to be reorganized as for-profits

If that was a pure legal fiction that changed nothing of their ethos and behaviour, no.

If they took the meaning seriously, and changed correspondingly, so that, say, they only had high standards to the degree demonstrable by market research as required to maintain brand values, then I would certainly expect so. Certainly, once they realised how little truth is required in advertising, any remaining for-education institutions would be leaving them in the dust in objective educational terms

To pick an example in another market segment that has much less ambiguous evaluation criteria, are there any recent examples of a for-profit army winning a war?

16

Witt 10.19.09 at 1:18 pm

JQ’s post appears to fault for-profit systems for not solving the problems of lower-class schools, but it seems crazy to expect that any form of school organization could do that

Although that is exactly what for-profit providers like Edison, and their gung-ho supporters among education reformers and policymakers, promised. Repeatedly.

On a certain abstract level, it’s the magical market fairy version of the “Hero Teacher” narrative.

Yep.

IMO the bottom line is that profit-making businesses are essentially focused on delivering the bare minimum that their customers demand, for the maximum price that they can get away with. The challenge in providing for-profit K-12 education is that: a) the “customers” are three separate groups with often competing interests: parents, elected officials, and the existing public school system; and b) the parameters of the “bare minimum” are not well agreed-upon, even by the courts.

To take just one aspect of the latter issue: See Ohio Mom’s point above. Is a for-profit school obliged to accept all comers? If so, that includes children with disabilities, English language learners, children with disaffected or unavailable or incarcerated parents, children in foster care, etc. etc. That is: Human beings in all their variety, not a cherry-picked assortment of academically focused young people with high social capital.

You can’t plan in advance how many of these children will enroll, nor easily calculate how much it will cost you to provide them with appropriate services. More to the point, if you exclude these students, you are either institutionalizing a new tier in the already-unequal education system, or committing yourself to a serious tapdance of creating plausible deniablity that that’s what you’re doing. (Like the charter — albeit not for-profit — school near me where the student body just happens to have a single immigrant student, in a neighborhood with an 11% foreign-born population. )

And there are a host of other ways in which local school boards, state educational departments, and the federal government act to alter the definition of the “bare minimum” frequently and often unpredictably.

Which is to say: There are a host of reasons to dislike for-profit education, but one critique that doesn’t rely on a value judgment is that there is an inherent conflict between the goals of a for-profit business, and the environment of democratic public education.

17

Chris 10.19.09 at 2:31 pm

If Harvard and Yale were to be reorganized as for-profits (which is in fact legally possible), do you think they would fail in the way that Edison has?

Well, for one thing, people who donated to them would no longer receive a tax break. (And who wants to donate to a for-profit corporation anyway? It produces far less social glamour, or even self-satisfaction at one’s own benevolence.) This would probably have a significant effect on their revenue stream. On top of that, instead of merely balancing their budget they would be expected to pay dividends to shareholders and that money has to come from somewhere.

I’m not sure where they would start cutting first, but it seems ridiculous to suppose that they would suddenly develop a deadwood-seeking missile that they just had no incentive to care about before.

JQ’s post appears to fault for-profit systems for not solving the problems of lower-class schools, but it seems crazy to expect that any form of school organization could do that, in the absense of functioning families and pro-education social norms.

I tend to agree, but in the US at least, the pro-privatization side of the debate assumes (without bothering to provide factual argument!) that it will in fact do those things. It’s based on a devil theory of education: bad teachers are the only source of school failure, so since private businesses are more flexible and can fire them without interference from those nasty evil wicked unions, they will obviously do better.

This is of course a load of crap, but it’s normally presented more sympathetically than I have done, and with the right spin, it can be a pretty convincing load of crap, especially to parents desperate to find some fixable cause outside their intractable poverty or other in-home problems. (Meanwhile, US liberals are trying to actually address the damn poverty — but that’s just not enough of an instant payoff to demagogue easily, even if liberals were inclined to Straussian public deception tactics.)

18

Alex 10.19.09 at 3:43 pm

It is always very strange to observe people claiming that changing the terms of business of such-and-such an institution will lead, in and of itself, to huge efficiency improvements. As a rule, improvements in productivity would be welcomed under any form of ownership, and are *hard* to achieve. Both private and public sector organisations spend huge amounts of time and effort to wring out marginal gains in productivity, and frequently fail to achieve them. Productivity improvements are often counterintuitive, require significant capital expenditure, and are often difficult to demonstrate conclusively.

This is similar to one of my points in this post on libertarianism; because improving an organisation’s efficiency is always difficult, uncertain of success, and incremental, it’s intellectually dubious to make strong claims based on the assumption that efficiency gains will be certain, nontrivial, and worthwhile relative to their cost.

And the mechanism of action isn’t fantastic either; it basically boils down to the assumption that there are certain, nontrivial, and cheap improvements in total factor productivity that aren’t being taken simply because of a lack of will. If there was more opportunity to earn/more risk of being fired, people would just Clap Harder, and the rework rate on the production line would fall by 20%. (In fact, what’s likely to happen is that they’ll put in more hours or run the line 20% faster, which increases output but not efficiency and may lead to a pile of corpses.)

In the specific example, it’s really very unlikely that there are such potential efficiency gains because the industry in question is education, a labour-intensive service whose production process is heavily dependent on implicit knowledge and whose outcomes are uncertain. It’s pretty much the classic case of Baumol’s cost disease, with the added twist of not being amenable to most of the standard production engineering methodologies. How, exactly, do you apply statistical process control to a class of 25 randomly selected 8 year old kids’ physiological, neurological, and psychological development?

19

Sebastian 10.19.09 at 5:19 pm

“Well, for one thing, people who donated to them would no longer receive a tax break. (And who wants to donate to a for-profit corporation anyway? It produces far less social glamour, or even self-satisfaction at one’s own benevolence.) This would probably have a significant effect on their revenue stream.”

Well sure. But that sounds more like great PR than substantive difference in how they are run.

20

Harry 10.19.09 at 5:48 pm

I think that in k-12 education it is not at all difficult to identify inefficiencies (I’m responding to Alex’s smart comment here), and even to propose ways that they could be eliminated (I’d go so far as to say that there is something like a consensus on some of these). Not with certainty, but with some non-trivial level of reasonable confidence. The problem is that no-one seems to know how to get these ways implemented. I suspect that defenders of the for-profit model think that its much easier to set up new schools well than to change existing schools (which is why Edison simply had no advantage when it came to managing existing schools). There’s probably something to that, but there’s no evidence that the track record of for-profits is better than non-profits, or even that non-profits are better than government-sector schools.

21

Witt 10.19.09 at 6:04 pm

I think that in k-12 education it is not at all difficult to identify inefficiencies (I’m responding to Alex’s smart comment here), and even to propose ways that they could be eliminated (I’d go so far as to say that there is something like a consensus on some of these).

I am really curious about this. Can you give an example or two (or link to one of your older posts, if that’s easier) about what you mean? In my experience there is very rarely even a partial consensus on what constituents an inefficiency, much less how to address it.

22

ad 10.19.09 at 6:38 pm

The failure of for-profit education reflects fundamental characteristics of education

May I infer that private non-profits were more sucessful than private for-profits? Because you do not give any examples that I could see of successful non-profits set up at about the same time.

23

Zeba 10.19.09 at 6:51 pm

Are the Swedish schools actually working ? I’d be very grateful if someone could point me in the direction of some research about this. I’ve asked Swedish colleagues and they are far from enthusiastic about the voucher system operating there, but they don’t seem to know about any research whether pro or anti the system. There doesn’t seem to be a figure who is exploring the Swedish system in any depth like Pasi Sahlberg and colleagues did for Finland.

In th UK, there is little evidence to suggest that the Academies/Colleges that have been set up achieve much more than well-run state schools with greater local authority involvement and less autonomy. Currently, I would say they are the closest we get to charter school status, although I believe that Cameron is intending to introduce much greater freedom to set up new schools opening the way to more charter-type schools.

As a teacher and a parent, I have deep ambivalence about parental choice. I believe it leads to division and increased social injustice. On the other hand, as a parent, I damn well want the freedom to send my children to a decent school. I would say that in all the major anglophone systems which contribute the greatest volume of data and information to educational management theory and debate, there are such inequalities in the school system that it is almost impossible to see a way through to making all schools provide an identifiably competent educational service to the students they serve.

Additionally, the chief difficulty with managerial and market liberal policies is that the students seem continually to come last in the list of actual “customers”. Neither policy makers nor school managers address with any honesty the key issue of making sure that students of all ability levels are educated. Hence the shamingly high percentage of US and UK citizens who are functionally illiterate and innumerate. If we can squeeze them through the hoops of standardised assessment, that seems to be regarded as some form of success.

24

Harry 10.19.09 at 7:20 pm

OK — just about everyone (except the people providing/running the services) agrees:

1. Teachers spend too little time collaborating/observing one another
2. Districts (esp urban districts) manage the job application process unnecessarily badly
3. Principals are mis-prepared; they learn how to manage budgets but learn nothing about what consitutes effective spending
4. In-service training is usually wasted because districts impose their own agendas, when what teachers need is collaboration time (see 1)
5. Articulation between middle and high school is badly managed nearly everywhere
6. (there’s less of a consensus on this) The career path for principals is not well designed, and tends not to attract, indeed to repel, potential instructional leaders who would manage teachers as instructors better

Just to say that I agreed largely with Alex’s point; none of this should be taken to imply that we can move to a more efficient equilibrium without investment (though even the investments that are made to make this happen seem amazingly badly managed to me — I’m working on this right now, but for the moment, Elizabeth City’s book Resourceful Leadership is a terse but detailed and rather devastating account of how one of the Gates small school grants was managed).

25

Chris 10.19.09 at 7:31 pm

Are the Swedish schools actually working ?

I think it’s going to be hard to measure that because Swedish society is working, which will make the schools have better outcomes whether they do anything different or not. Sweden has a higher minimum wage and stronger social safety net programs than, for example, the US or UK; that means that hardly any Swedish children grow up in the conditions of grinding poverty, insecurity, and stress that are routine in US inner cities. That, in turn, is reflected in the peer groups in their respective schools.

There’s no need to resort to better teaching methods or school administration methods to explain the resulting outcome gap.

26

Steve LaBonne 10.19.09 at 7:41 pm

Thank you, Chris @25. I fully understand the need to avoid just giving poorly performing schools a get of of jail free card, but decades of right-wing propaganda in most of the anglophone countries have virtually removed the massive socieoeconomic dysfunctions of those countries from having any place in “respectable” discourse about educational underperformance, and that urgently needs to change. It’s pretty hard to successfully renovate your living room if you just ignore the elephant standing in the middle of it.

27

Chris 10.19.09 at 7:47 pm

1. Teachers spend too little time collaborating/observing one another

Compared to what? Teachers already put in a lot of unpaid overtime; where do you expect to find more time in their time budget? Which of their current activities do you think they should spend *less* time on? Or do you just expect even more unpaid overtime from an already underpaid profession? A for-profit system might indeed wring that out of them, but I’m not sure you would like the results in the longer term.

In general the list looks like a collection of unspecific cheap shots at people doing their best under highly adverse circumstances, but maybe that’s just because of its shortness. It’s also unrelated to the public/private ownership question, absent some questionable theories about the magical wisdom of markets/inevitable ossification of governments or similar junk. (In other words, even if those improvements really are lying on the table now, there’s no guarantee a different ownership structure would capture them, let alone without introducing systematic inefficiencies of its own, let alone with net benefits that exceeded the costs of transition.)

28

Chris 10.19.09 at 7:59 pm

I fully understand the need to avoid just giving poorly performing schools a get of of jail free card

I’d be more sympathetic to this view if it came backed by evidence that “poorly performing schools” actually meant something other than “schools full of students who, for reasons outside the schools’ control, are performing poorly”.

When someone is studiously ignoring the elephant in the room, I’m even less inclined to credit their claim that it’s the mouse that is causing the floor to shake. Mouse-centric theories of floor shaking are going to have to be backed by a heck of a lot of evidence.

29

Harry 10.19.09 at 8:39 pm

Chris — ask the next teacher you meet how much value there was in their last in-service. Many will reply that they’d have been better off grading papers. Or, if you have the trust of a teachers union leader, ask them what they think of the way that principals are selected (if you don’t have their trust, they may not give you the honest answer).

Where could the time for collaboration/observation come from? Well, in the first 3-5 years teachers (in middle and high schools) spend an inordinate amount of time developing curricular materials from scratch rather than adopting and adapting those of their more experienced colleagues, because there is too little collaboration. Or, slightly larger class sizes would facilitate slightly lower numbers of hours in the classroom to free up time for collaboration and observation. I’ve been married to a teacher for 18 years and know only too well how much unpaid work they do, but also how rare high quality management is.

In general the list looks like a collection of unspecific cheap shots at people doing their best under highly adverse circumstances, but maybe that’s just because of its shortness. It’s also unrelated to the public/private ownership question, absent some questionable theories about the magical wisdom of markets/inevitable ossification of governments or similar junk.

You didn’t read what I said in #20, did you? The list was a very quick response to Witt’s question in #21, which I just responded to directly because this is so far a short and easy-to-read thread. I’ll elaborate at some point.

30

Tony Hollowell 10.19.09 at 8:40 pm

One of the fundamental problems is that “going to school” is not the same as “getting an education”.

School is a unique “product” because the education you receive is highly-dependent on how the customer (student) uses and interacts with it. If you just show up to school, you aren’t getting an education, no matter how much your parents paid or how well-structured the managerial system.

This dynamic between the quality of the product and customer-usage is one contributing factor to its erratic response to free-market theory.

31

Ohio Mom 10.19.09 at 9:48 pm

I think we should remember that there *are* some fabulous public schools — my family, for example, lives in the prototypical affluent American suburb, and our school system does an excellent job with all sorts of students. We’re known for special ed (that’s why my family moved here) AND for gifted ed, we have kids on free/reduced lunch (admittedly, not a large contingent), and kids from dozens of foreign countries who are learning English. In the elementary and middle schools, time for teacher collaboration is built into the weekly schedule (can’t speak to the higher grades until my kid gets there); the principal of the middle school is a regular adjunct at the local university (he says he recruits all the best students for jobs at his school, and the ones I’ve seen support his claim); there’s a full complement of support personnel, such as guidance counslors, intervention specialists for the kids who need extra help, teacher’s aides, etc.

Yes, American innercity schools are in trouble. These schools are underfunded and then they are blamed for not being able to counteract all the ills of poverty. I know next to nothing about rural schools, so I can’t comment on them. But American suburban schools compare well with any in the world. The wheel is already there to use as a model, no need to totally reinvent it. Unless you are a neoliberal and it suits your purpose.

32

Alex 10.19.09 at 10:40 pm

I also think there is a problem of cognitive bias here. The viewpoint the great majority of people have on school is that of a former pupil – they hugely outnumber the teachers, for a start, and the number of current pupils who are seriously consulted is so tiny that in relation to the number of former pupils, they don’t exist.

We were all very young then. We were encountering the public sphere, and the disciplines of work, for the first time. No wonder that we resented it, and imagined we could easily do better. Who remembers school and thinks Bloody hell, they were so well organised? Instead, we imagine that our successes are all our own work, thanks to the fundamental attribution error, we imagine that everyone else is thicker than we are, thanks to the Dunning-Kruger effect, or we blame the teachers because they were the physical manifestation of the system, thanks to the salience heuristic.

But we keep the idea that we knew better further into our lives, and as most of us have no further experience, there is nothing that challenges it. It sits there like a jewel set in a ring of rationalisations, the ones that protect us from the knowledge of our responsibility for our failures, the ones that protect us from the knowledge of society’s contribution to our successes, and the ones that protect us from the knowledge that our society lets people down. Everyone wants to put one over on the teachers at last.

On the other hand, education really is like industry in one way.

The car industry used to think it was best to run the production line flat out, and fix the cars that failed quality control in rework. This meant they maximised the utilisation of the machinery, and let them use unskilled workers on the line and only use craftsmen for the complicated job of reworking. This turned out to be a really bad idea; with the pressure to up production and cut costs, inevitably more and more cars went into rework, more and more money went on doing the job over again, and as they got more complex, the worse the quality after rework got. Toyota, famously, came up with the idea of lean production – stop the whole line every time anyone sees a problem, and keep it stopped until the fault is resolved.

If you do a bad job in education, it really does cost a hell of a lot to solve the problems later on, and they are rarely solved – at best brought down to a roughly tolerable level. Most of all, to the pupil. But society pays as well. Something like a majority of people in British prisons are functionally illiterate, and something like a majority have at least one mental illness.

33

Marty Plotkin 10.19.09 at 11:11 pm

The arguments put forth in John’s original post, which I agree with, apply equally well to a large range of human enterprises. Examples include raising children, conducting basic scientific research and managing the natural environment for the common good. In all of these cases, the benefits of the enterprise do not accrue specifically to the people who bear the cost; the outcome is not manifest until years after the choices are made; and the actual work requires a level of personal commitment (love?) that can’t be elicited merely by incentives. Such enterprises thrive in cultures where virtuous behavior is prized for its own sake, and where people consider themselves bound by inter-generational contracts to look beyond their own personal gain. For-profit institutions can benefit from existing within such a culture, but they cannot as such create it themselves. All of these enterprises require us to nurture and sustain the kind of culture that makes them possible. Privatization doesn’t help.

34

Tim Wilkinson 10.19.09 at 11:21 pm

Only about 10% of Swedish voucher schools are private/for profit. Maybe that’s the most that can be supported by using selection to outweigh the drain on resources fr ability to travel, parental information (e.g. as a consequence of not being permanently shagged out from overwork/constant worrying about the rent etc), admissions criteria disguised under permitted religious constraints

35

harry b 10.19.09 at 11:24 pm

Good grief. I sat through the whole of school in thrall to the people teaching me, never once imagingin I could do it better, or that it could be done better. Only with great effort can I look back and think that, in fact, I must have been smarter than some of my teachers (but I can’t specify which). It taken me decades to take seriously the critiques of the system that I do, now, take seriously. I’m obviously not typical.

36

Witt 10.19.09 at 11:24 pm

OK —just about everyone (except the people providing/running the services) agrees:
1. Teachers spend too little time collaborating/observing one another
2. Districts (esp urban districts) manage the job application process unnecessarily badly
3. Principals are mis-prepared; they learn how to manage budgets but learn nothing about what consitutes effective spending
4. In-service training is usually wasted because districts impose their own agendas, when what teachers need is collaboration time (see 1)
5. Articulation between middle and high school is badly managed nearly everywhere
6. (there’s less of a consensus on this) The career path for principals is not well designed, and tends not to attract, indeed to repel, potential instructional leaders who would manage teachers as instructors better

Well, first off, thanks for taking the time to answer my question. I’m a layperson; this is not really my field, and I was having trouble figuring out what you were talking about.

Your first parenthetical clears up a lot of confusion. If you include school boards/local politicians and union officials in “the people providing/running the services,” then it makes much more sense to me. I was imagining that there was some consensus that all of those parties shared, which was extremely difficult to picture. A few follow-up thoughts on specifics:

1. Teachers spend too little time collaborating/observing one another

As a commenter above pointed out, if you say this, many people will hear it as “Teachers should work more hours.”

2. Districts (esp urban districts) manage the job application process unnecessarily badly

I doubt whether it is “unnecessarily badly” so much as it is “valuing protectionism and fear of litigation more than other possible values.” Again, I don’t doubt that you could get everyone outside the current educational system to agree that the application process is badly handled, but there is enormous investment in the status quo. My major interaction with the system has come while advocating on behalf of candidates whose credentials didn’t quite match what the state dept. of ed was expecting; it was not a reassuring experience.

3. Principals are mis-prepared; they learn how to manage budgets but learn nothing about what consitutes effective spending

My arm’s-length experience in an urban district is that principals have next to no control over their budgets. It doesn’t matter if they know how to manage a budget or gauge effective spending; they have as much real influence as a single police officer does on the city’s homicide rate.

4. In-service training is usually wasted because districts impose their own agendas, when what teachers need is collaboration time (see 1)

This reflects my observations completely. I would add that “impose their own agendas” often includes “in reaction to liability concerns,” resulting in CPR or multicultural awareness or any one of a number of moderately to extremely important — but not usually well-executed — topics.

37

br 10.20.09 at 12:47 am

” The failure of for-profit education reflects fundamental characteristics of education that make models based on competition and consumer sovereignty inappropriate as a basis for policy. Because the benefits of education are hard to assess in advance, and only realised over a number of years, short-term market incentives are ineffective or perverse. “

You may be quite right that for-profit won’t work, but your general argument about why this is so – encapsulated in the preceding quote – seems quite weak. The benefits of all long term investments are hard to assess in advance. If anything, the income benefits of education are better documented and more certain than most other investments. Especially in higher education, most of these returns also accrue to the individual making the investment, so that there are limited externality issues. This is why students in the US take on large debts to get an education. If you are factually correct that for-profit providers have not done well financially, then that remains a bit of a mystery. In fact I was thinking of buying stock in some company in this sector. So at least your blog post will do some social good – by stimulating me to dig into the financials of this sector a bit more deeply.

38

Ohio Mom 10.20.09 at 12:57 am

I don’t know how the economic downturn has affected them, but a couple of years ago the stocks of for-profit colleges were doing extremely well. Which gives an indication why the thought of privatizing schools is so attractive to some. Well that, and busting a union.

39

Joshua Holmes 10.20.09 at 1:22 am

At least at the college level, for-profit colleges fail because they misconceive what college is: a signaling mechanism. Renaissance literature is a fine subject, but knowledge of it doesn’t prepare you for anything in the regular world. However, that you study it at Yale instead of the University of Phoenix says a lot about you, your intelligence, your connections, your breeding, etc. Someone hiring a Yale grad is hiring that Yale background, not their command of useful knowledge (to wit, George W. Bush).

40

Map Maker 10.20.09 at 4:12 am

” In my experience there is very rarely even a partial consensus on what constituents an inefficiency, much less how to address it.”

Bingo. I can measure productivity very easily – expenses divided by students. Educational spending has been growing quite rapidly by that measure. Output improvements? Depends who asks and who they ask. Even holding aside the recent New Yorker article about the AFT and NYC public schools, big city public school systems are a business and they aren’t in the business of serving the poor.

41

Alex 10.20.09 at 9:16 am

I can measure productivity very easily – expenses divided by students.

And wrongly; that’s a measurement of activity, not of results.

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Chris 10.20.09 at 1:31 pm

@41: Indeed, if that’s your measure of productivity, then you can’t estimate efficiency at all; you’ve defined it as unity. Cost should be the *denominator* of the efficiency calculation, not the numerator.

#37:
You may be quite right that for-profit won’t work, but your general argument about why this is so – encapsulated in the preceding quote – seems quite weak. The benefits of all long term investments are hard to assess in advance.

And private companies do so well in other areas that call for long-term investments: infrastructure, national parks, health care… oh wait. Two of those are almost always public and the third is in crisis in the one major country where it is run by the private sector.

Especially in higher education, most of these returns also accrue to the individual making the investment, so that there are limited externality issues.

This is completely not true. Crime is only one example of a major public externality of the outcome of education. Investing in the education of people who have no resources to invest in their own educations pays *huge* returns, but usually not to the investor directly. That’s why it’s a public good.

Also, there are large information asymmetry issues. The student, almost by definition, doesn’t know what he really needs to learn, and accordingly relies on the teacher to set the curriculum. There are no money-back guarantees for leaving out difficult but important subjects, so there’s nothing effectively restraining the teacher from dumbing down the curriculum to attract more students except his professional ethics (and maybe institutional reputation, which is a long-term investment the for-profit sector will generally neglect). For-profit companies are good at overruling or eliminating people’s professional ethics and replacing them with the profit motive.

If you are defining “work” = “make a profit”, you may have difficulty understanding John’s point.

43

Anthony 10.20.09 at 3:44 pm

Joshua @39 – private for-profit schools don’t offer Renaissance Literature. They offer MBAs, or engineering technology programs. The latter are generally moderately useful, if the school actually provides the instruction they claim to, but they often get students who couldn’t get into similar programs at moderately selective state schools, and thus drop out without finishing, or worse, finish without having actually learned the material an employer wants. The MBA programs tend to be third-rate, but many employers don’t care that much about the prestige of an MBA program, especially when considering existing employees for promotion; there is also some useful networking – you don’t meet the next generation of Wall Street Masters of the Universe, but you do meet professionals in similar fields to your own, with similar levels of experience and aspirations, in your geographic vicinity.

44

ad 10.20.09 at 6:33 pm

Only about 10% of Swedish voucher schools are private/for profit.

And quite a few of them are private NON-profits. Set up at about the same time. Which means you can use them for comparison with the private FOR-profits in order to look for the differences between FOR-profit schools and NON-profit schools.

You could also make a comparison of private NON-profit schools with state (presumably non-profit) schools. This comparison might be a little iffy though, as the state schools are presumably older than the private schools, and I suspect age has advatages for a school. It gives the school time to build a reputation.

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br 10.20.09 at 6:51 pm

Chris’s point about educational externalities is more true at primary school level (although even there one wonders if some school systems might inculcate more criminality than they subtract). At the tertiary level, though, which is what Qiggin’s post was more about, I think the evidence suggests that students capture most of the returns.

46

Thorfinn 10.21.09 at 12:22 am

I see that 60 percent of Sweden’s private schools are for-profit; 10 percent of all schools are private. Here’s a study on Sweden, finding positive effects of competition. There was a recent article in The Economist on the Tories’ planned school liberalization; the Swedes seemed to think that the for-profit schools were essential to their success.

Sweden has a higher minimum wage and stronger social safety net programs than, for example, the US or UK; that means that hardly any Swedish children grow up in the conditions of grinding poverty, insecurity, and stress that are routine in US inner cities.

And of course charter schools do better for this population. DC’s charter experiment was positive. Hoxby’s analysis of New York’s lottery-based charter program has shown gains for charter school students there as well. Voucher programs in Chile and Colombia seem to have been successful too (though non-profit if I remember).

It’s possible that for-profit higher ed is less promising. But keep in mind they cater to a non-traditional student body that has worse graduation rates and few alternative options.

47

Tom T. 10.22.09 at 3:44 am

#38: “I don’t know how the economic downturn has affected them, but a couple of years ago the stocks of for-profit colleges were doing extremely well.”

Proprietary colleges are counter-cyclical; some number of people, when they lose their job or are in danger of losing it, return to college for additional credentialing. They are doing quite well right now.

As a possibly interesting aside, the money-losing Washington Post keeps itself afloat by having bought Kaplan University as a cash cow.

48

Carl Teglund 10.22.09 at 12:40 pm

Hi guys, I am a Swede plus I study comparative and international education. First of all, we don’t have minimum wages in Sweden. It doesn’t work that way in my country. The Union and the Organization for Entrepreneurs meet up and decide collective agreements for Swedish workers. With the blessing of the State. To go against these agreements is then against the law.

Second, 60 percent of our private schools actually operate as for-profit companies. Some are chains, such as Kunskapsskolan, but many are smaller, local private schools. Third, the average profit margin of these schools is about 4 percent, and nearly 80 percent of the profits are reinvested in the schools.

Our system is great, I think, and has many advantages. One disadvantage, some would say, however is that the society has been more segregated. This would mainly be the reason of that the responsibility of the schools lay in the hands of the municipality, and the State has no real power over the schools as such. Because of that different municipalities have a different approach towards private and independent schools there is an inequality to the supply of private independent schools for the Swedish population. That is a big minus.

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