America's OPEC; The Public School Cartel; T. DiLorenzo

The public school bureaucracy thus portrays itself as comprised essentially of selfless, benevo lent public servants, in sharp contrast to stingy, self-interested taxpayers. Accordingly, the state supposedly needs to raise taxes because local com munities are unwillingto do so, even for the good of their own children. I believe a more accurate explanation of vari ous campaigns for greater state funding of local public education is that such campaigns are a manifestation of how local government consists primarily of a collection of cartels-public school Dr. DiLorenzo holds the Probasco Chair of Free Enter prise at the University of Tennessee at Chattanooga. cartels, cable TV cartels, electric power cartels, water supply cartels, hospital cartels, and even parking lot cartels. Not surprisingly, since most municipal "services" are organized as monopo lies, they perform as monopolists, gouging con sumer/taxpayers with high (tax) prices while offering low-quality services.

Greater reliance on state funding of local public education, I will argue, is simply a way of extract ingfurther payments from the victimsof the public school cartel-the taxpayers. If my interpretation is correct, then much of the rhetoric about how the public school monopoly is in the public interest is just that-rhetoric-which only serves as a smoke screen for what is essentiallya price-fixingconspir acy against the public. The PublicSchoolCartel A well-enforced cartel is one in which each member agrees to cut back on production in order to drive up the price of the product the cartel is selling. Fortunately for consumers, cartel "cheat ing" is so pervasive and inevitable that they rarely last very long. Historically,there are thousands of examples of private cartels that collapsed because their members cheated. Unfortunately for consumers, cartelistsin many industries have been able to invoke the power of government to enforce their cartel agreements when private enforcement failed. The Civil Aeronautics Board was a government-enforced cartel agreement; the Interstate Commerce Commission enforced a trucking industry cartel; the regulation of hundreds of occupations, from taxi driving to morticians, is a way of enforcing occupational car tels. The list is almost endless. In return for cam paign contributions and other forms of political support, politicians use the coercive powers of government to enforce "private" cartel agree ments, all to the detriment of consumers.

Local public schools are monopolies since, by law, they enjoy a captive audience of students, are funded by compulsory taxation, and mandatory attendance laws force their "customers" to "con sume" their "product," regardless of how low quality it may be. School districts across the United States would like to enhance their mono poly power (and "profits" in the form of tax rev enues) by acting as one giant cartel-at least within each metropolitan area-but are often unable to do so effectively. The reason for this is opposition by taxpayers, both at the voting booth and by "voting with their feet." For example, if there are 10 school districts within a metropolitan area, and one of them raises taxes significantly (or, equivalently, reduces the quality of education), it will be at a competitive disadvantage because many parents who believe their children can get just as good an education in lower-tax jurisdictions (or a better education for the same tax burden) will move.

If all 10 jurisdictions conspired to raise taxes, however, then the taxpayers would have to move to a different metropolitan area altogether to escape the tax or the decline of educational quality (or both). This form of taxpayer opposition is more costly to the taxpayers and is therefore more unlikely to occur. Thus, in order to raise taxes as· much as they would like, local governments must enter into a cartel arrangement. But like all cartels, they face the problem of "cheating" by other cartel mem bers. That is, there is no guarantee that every juris diction will raise its taxes. No jurisdiction will increase its taxes if it thinks the others won't follow suit. Even though they all would like to raise taxes, each hesitates to do so. Moreover, the more members of the cartel there are, the more difficult it becomes to enforce a school district price-fixing cartel. That's where the state government comes in.

245 The state can act as a cartel enforcer for local gov ernments, just as various regulatory agencies and other governmental entities have acted as cartel enforcers for privatesector cartels. Specifically, raising state taxes and then redis tributing some amount to local governments after the state has taken its cut-is a way for local governments to avoid the cartel cheating problem. State governments are the enforcement mecha nism to raise everyone's taxes; taxpayers must then move to an entirely different state to vote with their feet. Obviously, this makes it much more dif ficult and unlikely that taxpayers will express their freedom of choice. The local government price fixing cartel becomes effective, thanks to state government "enforcers." The Role of Government Propaganda State politicians seek tax dollars as much as oth er politicians, but they are also aware that they run the risk of losing political support by advocating higher taxes. They want the higher tax revenues that they can use to enhance their political careers by claiming credit for "improving" public schools and declaring themselves the "education gover nor" or senator, or whatever. They must, however, from their perspective, deflect taxpayer opposition to their political plans.