kitchen table math, the sequel: Feeding the Beast

Wednesday, April 22, 2009

Feeding the Beast

Public education financing is a classic Faustian bargain. In return for allowing government's taxation authority to spread the cost of educating our children across the entire population we have largely given up the right to purchase the education of our choosing. The consequence of that deal is an unimaginably large and unresponsive gomonpoly that not only ignores its customers but has the temerity to make it illegal not to consume its services (unless you're wealthy enough to pay for both it and its replacement).

Without this deal with the devil, you could pay for your child's education and be relieved of the tax burden that spreads the cost while enabling the monster's existence. I'm not convinced most people would sign up for such a system but imagine for a moment that they did. This would restore the ability to choose your service provider but our society would be left with the one intractable problem that started the whole push for public education to begin with, what to do with the kids without the resources (parental resources) to pay their own way?

As a society we've made a clear choice that it's unacceptable to leave kids behind. Even if you accept the immorality of such a proposition you certainly wouldn't want your communities to be overrun by a subculture with zero education and no means to provide for themselves as adults. Vouchers attempt to address this by leaving the financing system in place while creating a group of people who approximate those wealthy folks that can purchase what they want because they can afford it. Vouchers, as appealing as they are, don't address the problem. They put a band-aid on it. Public education's financing scheme is the root of the tree and as long as parental control is coupled to public financing, parental control will be insignificant.

It seems an insoluble problem, to maintain public financing for equity and cost sharing, while at the same time breaking the public (government) control over the system. But is it? Governments have a legitimate interest in ensuring that all citizens have access to suitable education but they have no more legitimate interest in running the system than they have with running the local Beauty Salon that they license. The problem to be solved is how to maintain our societal interests in equity and cost sharing (a financing issue) while returning control to the consumers.

What makes capitalism work is the tension between profit and value. Companies that maximize profit, at the expense of value, don't survive. Companies that maximize value at the expense of profit, don't survive. Survival goes to those organizations that navigate their offerings to a sweet spot; enough profit to satisfy stockholders (with increasing equity or dividends or both), and enough value to satisfy customers (with high quality products that meet their needs). Public education financing today is not concerned with survival. Profitless, it grows by coercion of a few elites. Valueless, it only satisfies the elites, not the consumers.

Here's a way to solve it. Think of an ideal future point. Every consumer (parent with children in the system) has enough school cash to buy the service that meets their value proposition. Every producer must struggle to find that sweet spot (they are allowed to thrive or die). Government uses their power of taxation and regulation to ensure that the cost is spread and minimal standards are met (products are safe and perform as advertised).

In this future state all schools are private entities. They can be non-profit or profit making. Profits have no constraints. They can be used in any combination to increase equity stakes (by growing), or be distributed to share holders (as dividends). The taxing authority converts school tax revenue to school cash. School cash can only be spent on a school. Everyone who pays taxes gets school cash. There would be a range of value propositions for consumers as well as the tax paying non-consumer and there would be a range of value propositions from producers. Let a free market sort out the sweet spots and let the shareholders manage their companies.

Parents, as consumers, spend their school cash at the schools where they place their kids. Everybody else is an investor, spending their school cash to purchase a stake in a school. The 'investors' have no restrictions on which school they invest in. For a school to survive it would have to attract enough parental consumers and stake holder investors to be attractive for every round of investing. A viable school would have to satisfy both the parental expectations on education, and the investment expectations of their shareholders. Neither the parents nor the investors have enough school cash (alone) to make a school viable. Investors would have an interest in the educational value because without that value there wouldn't be enough parental consumers to make the investment work. Parents would have an interest in the investment value because without that value there wouldn't be enough investors to meet the additional revenue requirements.

Would this work?

How could you get there from here?


SteveH said...

I don't think it has to be that complex. Education is so bad for many students and the cost per student is so astronomical, that it won't take much to do a better job. You can send a child from one of our urban public schools across town to one of the fanciest private schools in the state for less money.

The only practical way I see getting there is via charter schools. They have a certain amount of momentum. Unfortunately, they are still being fought tooth and nail in many parts of the country. In our state, only schools with "different" carters get approved by the public education administration. We have to win the war over pedagogy and control. We surely don't have public education to save money.

Robert Cox said...

I have no idea of this would work. It makes my head hurt to think about it. But, I wanted to let you know I was mesmerized reading it. It is really some brilliant, provocative thinking which I thoroughly enjoyed reading. I intend to share it with people in my community in New Rochelle. Not because I expect New Rochelle to ever embrace such an approach but just to show people it is possible to think about education in a completely novel way. Thanks for sharing this.

Robert Cox
Managing Editor
New Rochelle's Talk of the Sound


Paul B said...


Sorry about any damage I did to your head and thanks for the compliment. Too often we let the status quo frame the debate. When that happens you've lost before the opening bell.

I like to get outside of the car and run beside it to see what it really looks like.

VickyS said...

I have identified the same problem, articulated in pretty much the same way. On this we are agreed: nothing short of a complete and utter overhall of the existing system--at the most fundamental level--has a chance of working for more than just a kid or two, here or there. But I could never imagine a real solution. I find this proposal tantalizing. If we could only conjure up Ayn Rand and find a little secluded valley to test it!

VickyS said...

What I really think is key here, in identifying the problem (and as a direct result, the need for such a radical solution) are the fundamental issues of (1) compulsory education and (2) state control of school certification. Choice exists at a certain level (district vs. charter vs. private vs. homeschool). But at another more fundamental level, what choice there is is only that which is allowed by the public school system, since it controls not only access but also credentialing on both the teacher and institutional level. Charters start to compete too successfully? Cap their number or choke off their funds. Worried about competition from privates? Make sure any support for vouchers is squelched. Don't want free-thinking teachers in your classroom? Require massive ed school indocrination prior to licensure. What more money or want to protect ed-related jobs? Fail more students and assert that even more money is needed to assist them. There is no end to the opportunities for manipulation.

So. The system is incapable of repair.

No don't get me wrong; like everyone here I am doing my best to repair the system in my own little back yard.

But really? I help a kid or two, here and there. And that's a good thing. It's worth my time. But turn my back, and what little successes I and my counterparts achieve slip away.

To really change things, we need to start over from scratch.

Allison said...

We cannot possibly get from here to there without discontinuities. The US government's current administration is ending democratic capitalism as we know it, and putting government in charge of manufacturing, finance, energy, and healthcare sectors of our economy. We aren't about to suddenly get the 500 billion sector already in their hands away from them.

We are better off going back to asking why we're here.

Education is compulsory because we decided over a century ago that society had to fund education in order to make parents give it to their children, and that such funding was better for society.

Now, we no longer have to convince many parents that education is necessary, at least through the age of 15. So now, it's an entitlement. Education as an entitlement means it's not the parents money to spend. It's the state's. The taxing authority needs to define what constitutes a school, not the parents', because it's the state's money.

If anything counts,if any value proposition counts as a school, then we are back to saying that a madrassa that believes the US should cease to be a republic gets taxpayer funding. Sowing the seeds of a society's destruction seems in fashion these days, but it's not a good use of resources, because inevitably, it means that the value of compulsory education is meaningless (not to mention that people will still complain.)

The "any value proposition will do" proposition is one that destroys the meaning of education. If the state can't define what's an education, then it has so business subsidizing it.

Now, practically speaking, the real problem with your idea is that the taxing authority still has to make decisions about how much money to dole out. We're back to a place where we'd need to ration outcomes. We can't control educational costs anymore than we can health care costs without rationing. The "free market" solution only works where there are different prices for the various demands; but the taxing authority cannot possibly give one school 10x the per pupil expenditure of another. The state will crowd out the private market again in this case, and still won't be able to afford all of the demands unless you ration.

No one has yet noticed that rationing is the inevitable outcome for controlling educational costs--they are too busy thinking It's For The Children! But we will get there.

Now, having been a naysayer, are there other solutions? Moving away from the school model entirely methinks. Perhaps separating the link between schooling and childcare is the real way to get into creative destruction or a disruptive technology.

Parents want the educational entitlement as much for its intellectual value as for its taking care of the "what do we do with our children all day since we're not allowed to put them to work." What if they could work instead? What if there was some other way to break the need for a school institution?

Studies flirt with paying kids to go to school. Well, what if kids did have jobs, and jobs were the places where they did education? Employers would have different goals in hiring--some would be able to hire the least expensive ones and turn them into valuable producers, etc. Could it be done without exploitation?

As in, you went to work, you did something, and a portion of that work day was spent learning liberal arts? Or what if what you did during the day was study, demonstrate proficiency, and then move on?

Paul B said...

Vicky S:

You're right about the credentialing issue. This is the gummints firewall against competition. I think there's a hole in the firewall though.

Imagine that you set up an information service on the internet and charged a subscription fee for access. Imagine that your targeted customer is the parent on the fence about taking their child 'private', a parent who has seen their child sinking, perhaps one who is already paying for tutoring. Imagine that your information service is a math remediation process and that it employs teachers to engage with the clients using messaging, email, net meetings, etc. Maybe it's the Swedish model.

It's not a school, just information purchased by parents who still have their kids in a public school.IF you could do that with an appropriate value proposition. And, IF you could turn these kids around it would be very disruptive. I can see the protest signs now, "My town couldn't teach my kid math for $25,000 per year so I did for just $40 per month.

I think this is a serious hole in the wall. Tutoring, for example, seems to be totally unregulated. I just hang out a shingle on Craig's list for tutoring jobs. I think if a child is enrolled somewhere, anywhere sanctioned at least, they'll leave you alone. How could they attack you?

To attack you, they would have to open the Kimono and admit their system is not doing the job, else you wouldn't have a market.

You could call your service The Galt Center for Mathematics Understanding. Need to register that,

Paul B said...


The pricing is certainly problematic isn't it? I've thought of a couple solutions (not very deeply).

One solution could be a backwards looking model. The taxing authority could issue school cash with no face value. At the end of a school term (maybe one fiscal quarter), costs are collected, aggregated and divided by the number of taxpayers. Then the value gets assigned to the school cash and they send out tax bills.

Remember this is an end state and I have no clue how you would get there, but I think once you had stability this would be workable with no rationing and no capability to do so.

Another way would be to set some value based on experience and make it formulaic, say one standard deviation above the mean cost and the mean could be something like a three year running mean. People would be free to pay, out of their own pocket, above that if they so choose. Once the system reached stability, the taxpayers are driving the mean, independent of the taxing authority by virtue of their purchasing and investing decisions.

I want a solution where the parent who wants their child in an edifice with marble walls and 50 sports teams can find that but also pays for some delta to get it. I also want the parent who believes in the basics to be able to find that and benefit in some way by making that cost saving decision.

There needs to be a minimum standard with abundant choices about how to get it.

goy said...

How did the Swedes (of all countries!) achieve this? It was a while ago, but perhaps there are some strategies there to be leveraged.