Private Education - A Bad Idea?

By Sam Vaknin
Author of "Malignant Self-love: Narcissism Revisited"


I am not too impressed with the level of public education. But is private education the solution?
In economics textbooks, education often appears as a "public good." Contrary to common misconceptions, public goods are not "goods provided by the public" (read: by the government). Public goods are sometimes supplied by the private sector and private goods - by the public sector.

Pure public goods are characterized by:

I. Nonrivalry - the cost of extending the service or providing the good to another person is (close to) zero.

Most products are rivalrous (scarce) - zero sum games. Having been consumed, they are gone and are not available to others. Public goods, in contrast, are accessible to growing numbers of people without any additional marginal cost.

II. Nonexcludability - it is impossible to exclude anyone from enjoying the benefits of a public good, or from defraying its costs. Neither can anyone willingly exclude himself from their remit.

III. Externalities - public goods impose costs or benefits on others - individuals or firms - outside the marketplace and their effects are only partially reflected in prices and the market transactions.

The usual examples for public goods are lighthouses, national defense, the GPS navigation system, vaccination programs, dams, and public art (such as park concerts).

The list above proves that public goods are not necessarily provided or financed by public institutions. But governments frequently intervene to reverse market failures (i.e., when the markets fail to provide goods and services) or to reduce transaction costs so as to enhance consumption or supply and, thus, positive externalities. Governments, for instance, provide preventive care - a non-profitable healthcare niche - and subsidize education because they have an overall positive social effect.

Education used to be a private good with positive externalities (positive social impact and benefits to the community at large.) Thanks to technology and government largesse it is no longer the case. Education is being transformed into a nonpure public good.

Consider the abovementioned three criteria for a public good as they apply to education:

Technology-rich education is nonrivalrous: the cost of educating one extra person is (close to) zero. Like its traditional counterpart, it has positive externalities. Technology-rich education can be replicated and disseminated virtually cost-free to the next consumer through the Internet, television, radio, and on magnetic media. MIT has recently placed 500 of its courses online and made them freely accessible. Distance learning is spreading like wildfire. Webcasts and podcasts can host - in principle - unlimited amounts of students. The cost of downloads and even DVDs is close to zero.

In this sense, modern education, disseminated via modern technology is a public good.

Yet, all forms of education are exclusionary (they exclude people), at least in principle. It is impossible to exclude a citizen from the benefits of his country's national defense, or those of his county's dam. But, it is perfectly feasible to exclude would be students from access to education - both online and offline.

This caveat, however, equally applies to other goods universally recognized as public. It is possible to exclude certain members of the population from being vaccinated, for instance - or from attending a public concert in the park.

Other public goods require an initial investment by the would-be beneficiaries. One can hardly benefit from the weather forecasts without owning a radio or a television set - which would immediately tend to exclude the homeless and the rural poor in many countries. It is even conceivable to extend the benefits of national defense selectively and to exclude parts of the population, as the Second World War has taught the Jews and Roma all too well.

Nor is strict nonrivalry possible - at least not simultaneously, as Musgrave observed (1959, 1969). Our world is finite - and so is everything in it. Economic scarcity applies universally - and public goods are not exempt. There are only so many people who can attend a concert in the park, only so many ships can be guided by a lighthouse, only so many people defended by the army and police. This is called "crowding" and amounts to the exclusion of potential beneficiaries (the economic theories of "jurisdictions" and "clubs" deal with this problem).

Nonrivalry and nonexcludability are ideals - not realities. They apply strictly only to sunlight. As environmentalists keep warning us, even the air is a scarce commodity. Technology gradually helps render many goods and services - books and education, to name two - merely asymptotically nonrivalrous and nonexcludable. We still have a long way to go.

Conclusion:

Even private education is rendered a public good through the use of technology. When governments license and accredit higher-education institutes they must insist on a high level of technology in all aspects of the educational process. They must also force private providers of education to give back to the community via technologies such as the Internet.

Bibliography

Samuelson, Paul A. and Nordhaus, William D. - Economics - 17th edition - New-York, McGraw-Hill Irian, 2001

Heyne, Paul and Palmer, John P. - The Economic Way of Thinking - 1st Canadian edition - Scarborough, Ontario, Prentice-Hall Canada, 1997

Ellickson, Bryan - A Generalization of the Pure Theory of Public Goods - Discussion Paper Number 14, Revised January 1972

Buchanan, James M. - The Demand and Supply of Public Goods - Library of Economics and Liberty - World Wide Web: http://www.econlib.org/library/Buchanan/buchCv5c1.html

Samuelson, Paul A. - The Pure Theory of Public Expenditure - The Review of Economics and Statistics, Volume 36, Issue 4 (Nov. 1954), 387-9

Pickhardt, Michael - Fifty Years after Samuelson's "The Pure Theory of Public Expenditure": What Are We Left With? - Paper presented at the 58th Congress of the International Institute of Public Finance (IIPF), Helsinki, August 26-29, 2002.

Musgrave, R.A. - Provision for Social Goods, in: Margolis, J./Guitton, H. (eds.), Public Economics - London, McMillan, 1969, pp. 124-44.

Musgrave, R. A. - The Theory of Public Finance -New York, McGraw-Hill, 1959.