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Gene Glass: Why Markets in Education Don’t Work

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The distinguished education researcher Gene Glass reads this blog and occasionally comments. Yesterday I quoted a short statement by Margaret Raymond, director of CREDO, the Walton-funded evaluator of charter schools, who stated publicly that markets don’t work well in schooling. We can speculate on why markets don’t work: parents don’t have enough information, information is distorted by marketing and propaganda, test scores are the wrong information, etc. If you believe that society has a fundamental obligation to provide good schools for all children, the market is the worst delivery mechanism because it exacerbates inequity. The one thing the market can never do is produce equality of educational opportunity.

Gene Glass responded to the post with this comment:

Wikipedia describes Kenneth Ewart Boulding as “… an economist, educator, peace activist, poet, religious mystic, devoted Quaker, systems scientist, and interdisciplinary philosopher. “ Indeed, Ken Boulding was all of those things and many more. At the University of Michigan in the 1950-60s, he founded the General Systems society with Ludwig von Bertalanffy. Born in Liverpool in 1910, he was educated at Oxford (Masters degree).

His textbook, Economic Analysis (1941) was virtually the introduction to Keynesianism to American academics. He never obtained a doctorate, though surely he never felt the want of one due to the many honorary doctorates he received. In his long career, he served as president of the Amer. Econ. Assoc. and the AAAS, among other organizations. He died in Boulder in 1993.

I was very lucky to be situated at the University of Colorado when Boulding left Michigan in 1967 to join the Economic Department at Boulder. I had joined the faculty there in 1966. Within a few years the word spread that this new fellow in Economics was someone to listen to. Twice, in the early 1970s, I sat through his undergraduate course in General Systems. The undergraduates had no idea how lucky they were; I was enthralled. Boulding was a Liverpudlian, and that coupled with a pronounced stammer made listening to him lecture extremely demanding. But somehow the effort produced greater concentration. I can recall so many of the things he said though more than 40 years have passed. “”The invention of the correlation coefficient was the greatest disaster of the 19th century, for it permitted the subtitution of arithmetic for thinking.”

From 1969 through 1971, I was editing the Review of Educational Research for the American Educational Research Association (AERA). In the office, I enjoyed a few small privileges in connection with the 1971 Annual Meeting. For one, I could invite a speaker to address the assembled conventioneers. I invited Boulding. An expanded version of his talk was published in the Review of Educational Research (Vol. 42, No. 1, 1972, pp. 129-143). I have never read anything else by an economist addressing schooling that equals it.

Here is the merest sampling of what he wrote:

Schools may be financed directly out of school taxes, in which case the school system itself is the taxing authority and there is no intermediary, or they may be financed by grants from other taxing authorities, such as states or cities. In any case, the persons who receive the product-whether this is knowledge, skill, custodial care, or certification-are not the people who pay for it. This divorce between the recipient of the product and the payer of the bills is perhaps the major element in the peculiar situation of the industry that may lead to pathological results. (pp. 134-135)

Boulding originated the notion of the “grants economy” in which A grants a payment to B who delivers a service or product to C. Of course, this turned on its head the paradigm used by most economists, who imagine C paying B for services or products. When Boulding referred to this grants economy underlying schooling as leading to “pathological results,” he was referring to the fact that the schooling industry is “not normal,” i.e. does not follow the course of classical economic models. In the years ensuing since Boulding’s early forays into this notion, the grants economy has become increasingly important to understanding a nation’s economy.

Boulding was considered a bit of a rebel. David Latzko wrote of Boulding that “The narrow bounds of the economics discipline could not contain his interests and talents.” Perhaps this accounts for why many traditional economists have not followed him where reality leads. Perhaps this is why Dr. Margaret Raymond could pronounce so recently that “And it’s the only industry/sector [schooling]where the market mechanism just doesn’t work.” In fact, the “market mechanism” fails to work in many sectors.

But back to Dr. Raymond. Margaret Raymond is the head of the Hoover Institution’s Center for Research on Educational Outcomes. As key researcher in charge of the first big CREDO study of charter schools that dropped on the charter school lobby with a big thud: charter schools no better than old fashion public schools, some good, some really bad. And then more recently, CREDO under Raymond’s direction conducted a study of charter schools in Ohio, a locale that has known its problems attempting to keep charter schools out of the newspapers and their operators out of jail. What did this second CREDO charter school study find? Charter schools in Ohio are a mess.

All of this bad news for the charter school folks caused Dr. Raymond to go before the Cleveland Club and confess thusly:

“This is one of the big insights for me. I actually am kind of a pro-market kinda girl. But it doesn’t seem to work in a choice environment for education. I’ve studied competitive markets for much of my career. That’s my academic focus for my work. And it’s the only industry/sector [schooling] where the market mechanism just doesn’t work.”

Of course, it is positively absurd to think that schooling is the only “industry” in which free markets just don’t work. And Dr. Raymond didn’t give up entirely on the free market ideology for education — she would probably have to find a professional home outside the Hoover Institution if she did. She went on to tell the Cleveland Club that more transparency and information for parents will probably do the trick.

Frankly parents have not been really well educated in the mechanisms of choice.… I think the policy environment really needs to focus on creating much more information and transparency about performance than we’ve had for the 20 years of the charter school movement.

So parents just aren’t smart enough to be trusted to make choices in a free market of schooling, and they need more information, like test scores, I presume. I’ll leave Dr. Raymond at this point, and recommend that she and her associates at the Hoover Institution spend a little more time with Kenneth Boulding’s writings.

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