Sunday, July 29, 2012

Why school choice has failed to improve schools.

Why has school choice failed to improve the schools? The concept, argued by Chubb and Moe in their influential book Politics, Markets, and America's Schools was that competition would improve quality in the same way that it has for say, cell phones. This led to a proliferation of Charter schools—paid out of public funds, but independently run—which parents can choose among.

But as Diane Ravitch is documenting extensively in her blog, with the help of a torrent of information from outraged teachers around the country, this effort has failed. There are a few charter schools which are outstanding, but many are worse than the regular public schools, and most are no better.

In spite of the evidence, today the idea that making schools more like businesses would improve their quality has such an appeal that the majority of politicians, including both Democrats and Republicans, are still backing the current trend of school reform, in spite of its demonstrable failure.

Economists have pointed out that many conditions are necessary for a market to work in a way that improves the quality of products and services. When these conditions are absent it is called market failure. If we are going to stop the misguided juggernaut of school choice, we need a good theory of why exactly school choice is an example of market failure.

Paul Krugman I think gave us good clue about educational market failure in his discussion of prison privatization, which has had similar arguments and similar popularity and failure. He argued is that the companies competing for prison building and management are "definitely not ...competing in a free market. They are, instead, living off government contracts."

You don't have a competitive market when there is only one buyer, namely the government. In education we do have more competitive markets, namely in private schools. The buyers of private school education are many parents spending their own money for their own children.

When the government is the only buyer you have what is called a Principle-Agent Problem. The 'principle', in this case parents are having their agent, namely the government, doing the buying of charter school organizations to run schools. The problem is that the agent starts acting on its own behalf, not on behalf of the principles, the parents and their children.

What happens is that government officials get bought off, and give phony arguments to try to get re-elected. Now there are always problems with government contracts, as well as with private ones, and there are many efforts to try to remedy this problem. But the difficulty is that the advocates of privatization pretend that they are free marketeers, and there is a smoke screen over everything. Thus democratic processes, which might counteract the principle-agent problems, are stymied.

Krugman vividly argues this for the case of prison privatization:

"As more and more government functions get privatized, states become pay-to-play paradises, in which both political contributions and contracts for friends and relatives become a quid pro quo for getting government business. Are the corporations capturing the politicians, or the politicians capturing the corporations? Does it matter?

"Now, someone will surely point out that nonprivatized government has its own problems of undue influence, that prison guards and teachers’ unions also have political clout, and this clout sometimes distorts public policy. Fair enough. But such influence tends to be relatively transparent. Everyone knows about those arguably excessive public pensions; it took an investigation by The Times over several months to bring the account of New Jersey’s halfway-house-hell to light.

"The point, then, is that you shouldn’t imagine that what The Times discovered about prison privatization in New Jersey is an isolated instance of bad behavior. It is, instead, almost surely a glimpse of a pervasive and growing reality, of a corrupt nexus of privatization and patronage that is undermining government across much of our nation."

The principle-agent problems are by no means the only market failure at work. As Ravitch points out in a recent blog post, the parents making the choice are usually the poorest and least educated, so that the 'perfect information' that is necessary for the ideal competitive market is absent. But the information problem, I would argue, goes far deeper than that. You can only judge an education system long term. It is much more difficult to assess than a consumer good like a cell phone. In fact it is one of the most difficult things to assess, period. For this reason, the government relying on good research and decades of experience by educators is the only hope, not school choice.

Thursday, July 19, 2012

"We're Broke." —What you mean 'We' Mitt?

One of the key planks in the current right wing con is the idea that "We're broke." Because of this, the argument goes, it is urgent to balance the budget and reduce the deficit. We can't raise taxes because that would hurt "job creators", so we have to savagely cut federal government outlays.

This reminds me of the old Mad Magazine cartoon of E. Nelson Bridewell, reproduced above (click to enlarge). The Lone Ranger and his trusted Indian companion Tonto are surrounded by hostile Indians. The Lone Ranger says to Tonto "Looks like we're finished." Tonto replies, "What you mean, We?"

The United States is today the richest country in the world by far. We have a 15.5 trillion dollar per year GDP. This is double the second largest economy, that of China, which has four times the population. On a per capita basis, we have five small countries ahead of us, but we are the richest of large countries.

Now China is investing 50% of its GDP in infrastructure, and growing at more than quadruple the rate we are. And we are investing only 15% of our GDP, according to these charts.

Admittedly we are very different economies, but at double the total income, do we really need to cut back on our small investments in our future?

Ah, the right wingers will say, you forgot about our crushing debt. That's what makes us have to cut back radically.

That reminds me of another tale from the past. A famous Hollywood director was interviewed by a journalist, who interviewed him on the set of his upcoming blockbuster, and saw him happily in command. The journalist asked him, "How can you be so happy when you are two million dollars in debt?" He answered, "What should I do, cut back on cigars?"

The point is that level of debt in itself is meaningless. The key factors are: 1. The ratio of debt and income, in this case, national income. If you have a high income, you can carry a high mortgage; if not not. You have to look at the ratio. Here our ratio is high, but it has been much higher in the past, during WWII, and we grew out of it successfully after the war. Further, as Paul Krugman points out, Great Britain in its glory years as an empire for half the time had debt at over 100% of GDP.

This points to: 2. Creditworthiness. If you have a brilliant nephew who has been accepted into MIT, then you might be willing to chip in a portion to send him to school. If he is a notorious goof-off, not so much. The US creditworthiness is shown by the willingness of others to lend us money. And the world is falling over themselves to lend money to us even at historically low interest rates.

So "We're" not broke. But yes, we middle class are broke. Our wealth has declined by 40% because of the Reaganomics—facilitated financial collapse and Reaganomics-induced flat income growth for the middle class for thirty years.

So we middle class are broke. But you're not Mitt. You've been raking it in. And you and the rest of you 1 percenters are sitting on 2 trillion dollars, not investing it.

Should you 1 percenters be taxed and the money invested in public goods? Yes, that is something that has proven historically to be oxygen to economic growth. It both creates demand and strengthens public and personal capital, a foundation for growth. Refusal to invest means American decline, and so the debt getting worse in comparsion to income.

So when you say "We're broke," right wingers. I say: What you mean 'we'. Yeah we middle class are broke, but not you. You need to pay up, and stop trying to bamboozle us into thinking that the cure is to make the middle class suffer more.

Thursday, July 12, 2012

When Republican became RepubliCON

Matt Miller Writes an appropriately outraged column on the latest House bill repealing the Affordable Care Act, AKA Obamacare.

He points out with complete accuracy that Obama passed the Republican health care plan. But the Republicans decided that instead of claiming credit, they would oppose it as the work of the devil.

I do think that the summer of 2010 was when the Republicans fully become RepubliCONS, losing all intellectual integrity, and just becoming a con to insure the short term (not long term) interests of the greedy rich.

Now in the irony of all ironies, Romney preaches against is own only claim to fame, and gives no coherent argument as to why, except to fool people and grab power.