The Economics and Politics of Education: An Interview with Robert Murphy

0:00This is another lecture in the home study course. This time we're covering the topic of education with Professor Robert Murphy. And let's first address, we're presuming that the readings are covering lots of the history from Rothbard. So in this discussion we'll cover some of the more theoretical aspects of public schools, state control of education, Viability of a Market Order, and some other topics along the way, whatever happens to come up. Let's start with the first issue of why it is that education is considered a public good. Or is it usually considered to be a public good in economics literature?

0:46Yes, it is. And it's interesting just the terminology they employ that it's called public schooling. So right there that loads the issue against the person who wants to argue for private provision. So really what people mean when they talk about public schools, of course, are government schools. And I think even myself, I fall into that trap when I'm writing about this and I always try to come back and correct myself and go through and change any place where I put public school to government school so that I myself am not perpetuating that stereotype. and also just as an aside with this terminal terminology the really what we're talking about in this area is is formal schooling and not education and so again to talk about public schools providing education the you don't want to fall into the trap of saying oh are you for against education because of course we're all for education and so the thing to remember is whether or not someone is

1:42compelled to sit in a particular building and hear instruction from designated experts that doesn't mean that person therefore that's the only route to education that people on their own can can read and so forth and that people can continue to learn to receive an education well beyond formal schooling years so I think we need to keep those issues in mind but to go back to what you were asking yes in the mainstream literature education is considered a classic public good perhaps second only to defense or provision of and the argument runs something like this that it's true when you go to school and receive instruction it raises your productivity and so it directly benefits you but it also has spillover effects, positive externalities on everyone else in the society and so that's why it's in the public interest to both have compulsory attendance laws and also to have state funding of education that if there's a person who's too poor to go to school for a college, for example, but yet that person's an excellent student and would do well, then the argument is, oh, we should use tax funds to send that person to college because it's going to benefit the rest of us as well.

2:53So, as with most arguments of this nature, I think one of the major criticisms that the advocate of the free market could level is that you need to focus on the actual decisions on the margin. Just because something has a spillover effect, even if we concede the legitimacy of that way of thinking, it doesn't necessarily follow that therefore provision will be too small in a market setting. Just to give you an analogy, another example they often use is when it comes to vaccination. And the argument there is the government needs to force everyone to get vaccines because even though left to their own devices most people would choose to do it, If you do it, you're only narrowly considering your own selfish benefits and you're not considering, well, if I catch whatever this communicable disease is, then not only am I sick, but then I'm going to spread it to a thousand other people.

3:44And the argument goes, if you were forced to internalize all those externalities, you would then choose to get the vaccine, whereas left to their own devices, people are too short-sighted and too selfish to think like that. But if you think about that, it's true theoretically. You could devise some sort of model in which people are neglecting those facets of the decision. But in reality, I think most people, just considering my own benefit, do I want to get polio or tuberculosis, they're going to get the vaccine even though they're disregarding the fact that, oh, well, if I get this, then I'm going to be a person to spread it out to others. And so in the same way, when it comes to education, And even if we concede that, yes, of course, other things equal, if someone's educated, that's better for everyone else in the society as well.

4:35It doesn't follow that, therefore, that person can't be trusted to choose the level of his or her own education on their own. And so I think that that's the primary objection to the public goods argument in terms of just the theory of it, is that on the margin people will choose to get education, that, for example, It's not as if people aren't going to, because of the benefits themselves of becoming literate, that they're going to choose not to learn how to read or that parents aren't going to teach their children how to read because they're neglecting the spillover effects to everyone else from having one more literate person in society. And so that's, I think, the major theoretical problem with the public goods argument. and then of course just the practical ones that for example another it's really the same argument but a different way that they usually frame it is that they say there are benefits to having a responsible informed citizenry in a

5:34modern democracy we need to have educated citizens and that's why and so we can go through that argument I just gave you more theoretical one and say well is it really the case that you wouldn't want to be an informed citizen on your own and you need to be forced to. But even beyond that, just to look at in the real world, does anyone think that the US educational system right now is churning out informed citizens who are making responsible decisions at the ballot box? And I think most people would agree that that's not the case. Just with the the anecdotes, the funny things we hear about what percentage of high school seniors knows where particular countries are on a map and what the US Constitution is or what year was signed and things like that, that clearly the system is not producing well-informed decisions. One of the rejoinders to that is that, well, look, if you reduce the amount of funding available for public education, it can only make the system worse.

6:30Right. You could say that about anything, just as whenever a government program screws up, whether it's the war on poverty or inner-city housing and so on, that they just say, oh yeah, that's because we need more money. Well, speaking of things you could say that about anything about, I guess one of the Austrian criticisms of public goods type logic is that if you construe a public good broadly enough, everything qualifies. Right. That's exactly true. So it's not just vaccines and things they really have made the argument for, but Austrians have taken it and say, why, if I put on a clean pair of socks in the morning, that that's a public good, that it benefits me, but it also benefits everyone else that I interact with, and it doesn't follow therefore that we need to subsidize people putting on clean socks. And again, it's, I think we should think through as to specifically what's going wrong with the argument, the public goods approach there, it's that on the margin, even though you have that

7:24spillover effect, just considering your own costs and benefits, most people are going to put on a clean pair of socks. And so it's the same thing when it comes to education, that the type of thing that people are talking about, to learn how to read and arithmetic and things like that, stuff that you really need to know in order to function in society. I think people left to their own devices, even if they don't care anything about their neighbor's welfare, just in terms of their own marketability and what kind of wages they're going to get when they graduate, they're going to choose to get that sort of minimum education. Right, but as I understand the rationale for the public goods argument, it's not that the market means won't provide education, that it won't, it's that it won't provide it in sufficient quantity or with the type of quality, I suppose, that economists somehow know for sure as necessary.

8:14Right. And that's what I mean when I'm saying, of course, you could theoretically, if you're going to devise an actual model in the little world of the model, you can show that, oh, there's a market failure. But what's crucial there is there needs to be a continuous range of choice So that you're choosing to take 20 semesters in a certain area or a certain liberal arts education and so the argument will be, oh, left to their own devices, people would only take 14 semesters, whereas we know the optimal amount would be 20, for example, just to make up numbers. But if it's something that's a binary choice, such as learning how to read or not, well then there, even if you accept the public goods argument, it's not going to get the inefficient outcome.

9:00So it's not merely that the argument is contrived and that it's not realistic, but even on its own terms, it has to be a very specific type of decision where there's a whole continuous range of things and then the idea is the market under-provides. But you're right that it could be applied all over the place in any aspect of life and we could find that there's market failures and everything. I recall reading an unpublished paper by Murray Rothbard. He had written as a graduate student. He was complaining that the administration at the time, I guess it was Eisenhower or somebody, had been going on about the terrible shortage of mathematicians and scientists, that the education system was not providing that and that there needs to be some sort of intervention.

9:49Well, I mean, we still hear that today, just constantly. There's always, somebody has a better idea about precisely what people ought to learn. Right, just everything in terms of research and development. I can remember, even in graduate school, that there were models of R&D. And of course, it was just obvious, y'all knew going into it that it was going to be the market can't do it correctly. And so it was, there's really a whole industry in mainstream economics of different ways the market can screw up. and by the market they mean decentralized decision-making where people decide things based on just their own costs and benefits and it's ironic because it actually you have to be clever to come up with ways that the market screws up because in general with a price system people do what's the socially optimal thing going back to at least Adam Smith's formulation of the invisible hand and so that's why it takes these clever PhDs at MIT to come up with all these

10:44models in which the market is going to fail here. But of course it just begs the question of therefore since there's a theoretical market failure the government of course can identify it and we can trust the government to implement the solution. Right. Well the rigorous models aside there is something like a public intuition that most people have that seems to suggest that Education is something like a service unlike any other, you know. There's a popular view out there that really can't imagine that even though education is very much in demand by everybody, it somehow wouldn't be supplied. Right, that's true of a few other items. I think food and health care and I suppose police services and firefighters and things of that nature that people just assume it's a matter of human rights and that everyone is entitled to an education and only a reactionary Neanderthal would say if you can't afford to go to college then you shouldn't go or that it's not my fault if your parents aren't sending you to college or go get a scholarship

11:57you can't that's tough that that sort of idea just would shock people and so it's I think some of it is due just to the nature of education itself it seems to be so important and also it's such a laudable thing that people don't think that you have a natural right to receive cable television necessarily although even that as we get richer more and more people would say that yeah you have a and the right to cable television but there's something about education that who could possibly be against providing education to someone and so I think that that's involved but also just the fact that it has been this way for so long now that people are brought up in that frame of mind and just the idea of change shocks them that if to have a private postal system for example that's an area where I think clearly the market would obviously outperform the current system because we have have private alternatives, and yet people are just horrified. Oh no, if that happens, then it would cost $15 in a letter to Alaska. And I've actually heard people make that argument. Someone who worked for the post office, coincidentally enough.

13:06But that's, I think, clearly something that's just due to the historical accident that that's been provided by the government, so people assume it has to. But with education, I think it is the historical accident, but also something about it that it seems so important, and it is important. And there's this idea that if something's that important, we can't leave it to the vagaries of the market because the market might fail, whereas we know for sure, of course, government, when it sets out to achieve something, always does it. Yeah. I seem to remember in the mid-1990s, just after the web browser became sort of commonly used, that it only took a few months before, the Clinton administration was arguing that there was a digital divide and that there had to be some sort of public provision of these services. Services, so it doesn't take that long, but fortunately the market outraced the public sector.

13:54And in education, it seems perhaps one of the reasons people have a difficult time imagining market provision of education across the board, is that development has been hindered by the state in so many ways. Right, that's true, that as in every other area, people look at things that are deplorable in the current situation and they assume that's due to the market, and they don't realize that actually it's the result of previous government interventions. But this is a very interesting point, because one thing you notice about all debates about education and politics is that most everybody agrees in some sense that whatever time you're looking at, whether it's the 1920s, the 1930s, the 40s, 50s, or now, are now that something is going wrong with education and it needs to be reformed.

14:46I mean, in my lifetime, I can remember just three, four, five big rounds of educational reform. Right. Yeah, and they have all these proposals, things like standardized testing is big with the Bush administration now, and they're trying to hold public teachers accountable, and you understand why they have this concern, Because there is certainly data to suggest that the so-called public educational system or system of government-run schools isn't performing by any standard up to an acceptable level. And so people wring their hands and they want to say, what can we do? And of course, it doesn't occur to anyone, well, let's just abolish the whole system. That's unthinkable. So given that we're going to have this system, how can we tinker with it?

15:33and so the centralized bureaucracy administers standardized tests and given what their goals are that's understandable they would do that but then of course there's all the drawbacks that just talking with teachers who have to administer them and just to a limited extent in my own classroom you note that you have to teach to the test is the way they describe it and especially in these failing inner city schools the so-called problem schools where they're going to get shut down unless In the past, they can bring up their students' test scores. What happens is people stop teaching about the world and stop trying to teach the kids to become good citizens and all the things that they're ostensibly supposed to do, and they teach them how to get a good grade on this upcoming standardized test.

16:19And for those who have read the book Freakonomics, one of the better chapters in that book is where he goes through and documents how he caught a bunch of Chicago school teachers cheating on the test. and there's all sorts of various techniques. One teacher, I think this was in Chicago also, went so far as to put the correct answers up on the blackboard and just told the kids and one of the kids happened to mention to their parents what had happened and so that apparently that plot didn't last too long. But other ones were more sophisticated and they would go through and take some of the problem students after the test was administered and go through in a race on the bubble sheets and put in the correct answers to try to bring the classes average up. And so in that book for economics they document how and how they actually caught those teachers using statistical tests to pin down and say that it's impossible that your students improved so much from how they did with the previous and then in the succeeding year.

17:10But again, given what's happening in the system, of course it's horrible that teachers would end up doing that, but what are they supposed to do, that they're teaching at this school and presumably if they're going into a government school, The Theory of Money and Credit

17:52So that's just one example of reforms that people try to institute, but no matter what you do, given the nature of the monopoly that the government has on its own institutions and then even the indirect control it exerts on the so-called private sphere, those reforms aren't really addressing the basic problem. So you're not denying that these reforms can actually improve the schools. If your standard is more kids able to read earlier, or kids learning better mathematics by a certain age, it does seem like the data indicate that certain approaches to public education work better than others.

18:37Well, I would certainly agree with that last statement. If someone somehow made me czar of education, I imagine that I could institute reforms and that would bring up test scores. But even that, it wouldn't substitute for if it were completely decentralized, because of course, just the standard argument for any decentralization is that whatever reforms I can cook up, I'm free to implement them in my own private school. And if it really is a great idea, then others can copy it. And maybe there's something I'm overlooking, or maybe It takes 15 people independently to come up with the 15 great suggestions that no single person could possibly come up with all the right ideas. And also, it begs the question of what should be the appropriate standard. And so it's certainly true that if the government wants everyone to be able to do long division, I'm sure if they spend $100 billion and they threaten to fire teachers and they give all sorts of subsidies to kids who can learn how to do long division so they can go on to college and eventually you could raise that number, but you're raising it relative to the previous status quo, which was having a government run system where they didn't have all those incentives. So it's not hard to improve when you're starting out in an abysmal situation. It's not as if it would make more kids learn long division as would happen, I think, under a completely decentralized market approach.

20:03In the 1940s, in the Soviet Union, there are better and worse ways to increase grain production, too. Exactly. And again, that's a great analogy, because you can certainly pick one or two things that you want to focus on and be able to improve the report that you send up to the Commissar, but is that really what the system needs, or is that the optimal thing to do? And so just to go back to the education, yes, if you're cranking out a bunch of kids under the proposal who now can do long division and know the birth date of John Adams, that's great, but if they also now don't know the difference between a democracy and a republic, or what federalism entails, because some of those things are going to have to go by the wayside, if we're going to focus now on making sure kids know how to do long division, well then, are we really doing what we're supposed to be, churning out well-educated citizens?

20:55And so it goes for all these arguments about whether or not the school should be emphasizing more of the humanities, or the arts, or music, or these other things that are commonly called extracurricular. Exactly. Or even just within the normal educational approach itself, just things that are in the standard curriculum, there's scarcity there. You only got the kids so many hours per day. And if you stress one thing, if you really want them to pass that standardized test, then you can't fill in the other areas. And so you can certainly make a choice and then gear everything toward that. But the point is not merely that the choice might be wrong, but that also you're imposing a uniform outcome on everybody.

21:41And really, we have to be careful not ourselves to fall into this trap of saying, Oh, the problem with the government-run schools is they do it this way, but actually it ought to be done this other way. Well, no, there's millions of ways it should be done. It wouldn't make sense to say, well, what's the right shirt to produce? There's all sorts of different shirts that the market would produce, and that's what would happen. In fact, doesn't it seem like the public schools are sort of ripe for being captured by certain political or cultural interests? in the 60s and the 70s there was this wave of open classrooms and what you might associate with left-wing theories of education and then they get captured again by the other side and then captured again by the other side and so on it goes sort of buffeted between these political winds, which I guess you could make that that's one of the reasons you don't want a public school system

22:34precisely to avoid this kind of... That's certainly true. The examples you're setting were a bit before my time, but even in my own experience, it's certainly true that radical leftist ideology has permeated the public sector far more than the private, whether it's environmentalism. So I just know anecdotally that when I was going through high school, my friends who were going to public schools, they were, and again, government schools, excuse me, they were learning about how man's destroying the earth and that the white settlers decimated the Indians and things like that far more than I was learning in my private Catholic school and it's, it would be hard, I'm not sure that I could give an exhaustive description and the description of why that's the case but clearly we can see that it is or even it's even more prevalent when you get to the undergraduate level that if you go to a little private liberal arts school somewhere that certainly the education you're going to receive is probably not going to be nearly as leftist and radical as if you go to a large state institution and there's again there's all sorts of various factors I imagine some of them are the conspiracy view that those who favor the

23:58The government and are attracted to power would tend to go towards large state-run institutions. They're very prestigious for those who like state power, whereas people who are old-fashioned and conservative in a cultural sense would tend to be attracted more towards a liberal arts school that's private. But I think there must be other reasons as well. Why is it that these radical leftist movements tend to take over at public schools? I think part of it is just the left prides themselves on being very tolerant. And so the presidents of these institutions are very afraid to crack down on militant black groups, for example, or radical feminists or what have you.

24:45And whereas at a private school, just by its very nature, they're more exclusive and they They can kick people out, whereas the state school, what their function is, is to be the repository for everyone else that the private sector won't accept, and that we're here to ensure that you get your God-given right to an education, or your Earth Mother right to an education, depending on who's giving you the spiel there. So I think that they are more willing to tolerate things that strikes the average person as just obscene and crazy. I can't believe what they're doing in college campuses these days and it's precisely because it's a very tolerant but defined of course to tolerate certain thing they won't tolerate homophobia for example what they define is that but other than that I I'm not sure what the precise reasons are but clearly those movements do capture the the public schools far more than the private ones you recall in Mises's liberalism he's talking about the market for

25:45Education and and he raises the point that or the implication that public education would probably work better in some in some sense if you can talk that way and and a culturally homogeneous and sort of linguistically homogeneous area but once you introduce diversity then it becomes nearly impossible because the educational system becomes this sort of political prize right that's exactly Exactly true. I can't remember his exact wording, but I remember that he says something to the effect that the reader who has not grown up in such a hotly divided political area probably would think my words are an exaggeration, but no, in these areas where it's crucial which language your children have as their mother tongue, where if the rival faction controls the schools and that's what the instruction is in, that can be a huge fact.

26:43or a huge decisive victory in terms of the different groups competing with each other whereas in the United States for example, although even there in some border regions there's the debates over should we have classes in Spanish and so forth but to most people in the US it doesn't seem that big a deal but somewhere in Europe if there are four different languages competing for dominance that it could be a huge deal who runs the public schools. You're showing your age. I think it was maybe ten years ago. California schools, English only. It's a big, big deal. It's hot stuff, and it could be in the future. Let's jump from dreadful current conditions and the difficulties of reform over to a radical solution of laissez-faire.

27:35What would be the legal apparatus that would oversee a laissez-faire educational system? Regulations would exist, if any at all. How would kids be protected? Okay, well it depends what the constraints are here. If you're asking, you have to leave everything else the way it is, and what do you want to do with education, then you would say, okay, well then you would deregulate, the government would stop running their own schools, and depending on how far you want to scale it back, and you can make the moderate argument that, look, even if we concede that you want If you want to fund poor students so they can go to go to school it doesn't follow that the government has to run the schools just as in our society we won't tolerate people starving to death on the street and so we have all sorts of assistance programs but it doesn't mean that the government has its own grocery stores and things like that so regardless of one's views on the justification for government involvement clearly there's no reason whatsoever on any account for the government to be running schools themselves

28:42But then even there that concedes far too much and so I would say in the in the modern political context if you're going to still have the rest of the state machinery the way it is then yes, you would just deregulate and have schools that you need to run as a business just as if you were going to open a laundromat and you don't need special educational certification to do so and of course the more radical The legal solution would be just to get rid of decentralized state altogether and then schools would be just as any other business would be regulated and so there would be a network of a private legal arrangement where you have private judges ruling and that there what you would have to do and this would be the same really under both alternatives is just honor your contracts and so parents would or students who are paying for themselves would enter into contracts with people And so some so-called schools, other people would probably say they're not even a school, could just watch, they could watch soap operas all day, but the point is you don't need the government to come in and crack down to prevent that, because pretty soon people who have a degree from this place where they really don't learn anything, employers are going to catch on to that, and we're going to have to do something about it.

30:08that degree is going to be worthless. So market mechanisms would kick in and reputational effects so that schools that really did produce students of outstanding excellence, they would get a reputation for that and people would be willing to pay to get into those schools and they could be very selective and there could still be scholarships. It's interesting if you stop and think because when I was younger, I didn't really understand this, but why do schools get scholarships in the first place because in the one sense you feel that oh it's well if you're really smart then you should be able to go to school for free why should they charge you but that doesn't follow in other areas it's not that if you're really good at eating you should get food for free and so the question is why is that why is it in the school's interest and it's it's easier to understand athletic scholarships because then people go to pay to watch excellent football

31:01players but even if you're the smartest kid in the country people don't pay to watch you take to take a test, or to write beautiful essays, and so it's not clear why the school benefits, but then if you think ultimately what is the school's product or service that they're granting degrees that signify to the community that this person who holds this degree has received an excellent education, well a lot of the learning that you do, especially at the higher levels, isn't in the classroom from the teachers alone, but it's also working in study groups and doing problem sets with your and so it certainly does benefit the institution if 10% of their students are there free of charge but they're really great students and they're the sort of person that in their free time would love to help somebody else, oh this is how you do number four on the homework set and that's the kind of person they want so a lot of what currently exists in the educational market today I think we would see analogs of that in the private setting but what we wouldn't see is schools that are turning up kids who

32:05who can't even read, or who don't even have basic math skills, which is actually quite prevalent today, because, again, if parents were paying for it, then they would soon enough switch over to schools that weren't providing such shoddy results. and the thing that it's ironic because the idea is now that by using tax money and therefore making it free in a sense at least in the marginal sense to parents to send their kids to public schools that that's somehow making education better because now it's available to all but what ends up happening is the parents aren't directly considering how much is being spent on that because whether or not their child for example goes to the school And so, I think the incentives in the parents to make sure that their children aren't skipping class and so on, that it's much lower if their kid's just going to the public school, because it's, whereas if the parent says, what are you doing? I'm paying however much a year for you to go to that school. You better show up to class or you're in big trouble. I think that is going to be more. And the other major difference would be there would be no compulsory school laws. Right. And that, so this goes back to depending on how moderate or

33:23The more radical you are that I think a moderate would say, okay, sure, we should, the government shouldn't run schools, but we could still have funding and we could still have, and we should still, of course, require that all students up to a certain age go to school because that's just obviously necessary. And there, even those arguments, again, I think are wrong, and that the radical solution is the correct one. for the funding, just to touch on that for a moment, it depends how far do you want to push that because it's sort of like an arms race that we can have everybody get the equivalent of a high school degree, or almost everybody, and then we can give all sorts of funding to get them to go to college, but if everyone's going to college, then a college degree doesn't really signify that much.

34:09And I know that for a fact just in my own classes that if I had to guess I would say maybe 20% of those Students are really good students in the sense that they have the right attitude and they just like to learn whereas the rest of them I think are there just because oh well today's world you got to get a college degree and my parents want me to go and yeah so I'm here and it beats working whereas if a lot of the state funding were taken away then there wouldn't be nearly that many students in the market for higher education and again it wouldn't be the equivalent of oh so right now if you don't have a college degree that would just be multiplied by two million students who now wouldn't be able to afford it. Well, no, because as the proportion of people having a degree went down, employers would take that into account.

34:56And then it wouldn't be as if now all of a sudden everyone were unemployable. It would just mean people would take that into account. And so those who went on to get the degree, that would be a better signal. Just as we could just take the argument and say, why don't we just have funding and make sure everyone gets a Ph.D. or gets five Ph.D.s. I mean, you could just push it as far as you want. Give everybody a Ph.D. at birth and just save the money. Money. Well, that too. So that's for the funding that I think it shows that it's sort of like an arms race that we all keep trying to get more and more degrees that collectively it's not really worth it or we're wasting, those are valuable years where we could have been out in the workforce or why don't you just have everyone stay in school until they're 35. At some point you realize it becomes absurd and so the point is why do we think that the

35:38government's magic number is better than what the market's outcome would be. But then to go back to the other one, so again, the moderate might say, okay, so we shouldn't have the government running the schools, and maybe we shouldn't even have the government funding it, or at least not nearly as much as it's doing right now, but clearly, kids ought to be forced to go to school, at least for a few years, and even there, I don't think that that's at all obvious, because if you think of it this way, the sort of student who wouldn't go to school at all were it not for the government coercion being employed, is precisely the student that you don't want to have in school. There are true social menaces that are in the government schools primarily because the private schools would kick them out and it's not at all clear that that's even helping those children, let alone is it conducive to learning for everybody else in the classroom.

36:30in the classroom. It's obvious in the case of actual bullies or people who bring weapons to school and physically injure their classmates, not only the kids who are injured, but just the fear it would create that that's not at all conducive to learning. And as I said, it's not even clear that we're doing a service by forcing those children themselves because maybe they want to go get a job and maybe all things considered it would be better to let them go work when they're 13 or even 8. And that shocks people, but again, we've focused the issue down on those children who are really troublemakers. And you say, okay, well, what about other children? And again, if the question is, what are we so afraid of? If everybody, if all reasonable people can agree that, oh, children should go to school, well, then send your own kids to school or homeschool them or take care of their education yourself.

37:22and why do you feel the need to impose that solution on everyone else because really what it is is all of us right-thinking people we're worried about those few bad parents out there then we're so much better parents than they are and we can't trust them to raise their children the right way and so let's coerce them but again it's precisely the children from those problem families that it's not clear you're helping anybody by forcing them to go to the school it's basically a mild form of prison that for your first depending on the laws 13 or up to 18 years of your life you're basically forced to go to this building for a long portion of each day and and sit there and again it's you're not learning if your attitude is such that you really do view it as a prison sentence. Right. Well, Dan, I want to talk about some of the some of the the booster clubs that are involved in public schools. Interesting stuff going on

38:13about about that but but to get back to the the way that the education market would look. Just to be clear, you're not suggesting that education would always and everywhere be a commercial thing plus scholarships, right? There are other things going on, other choices. I guess part of the difficulty is to imagine the way education would look in a market setting. It would be as if, perhaps as if groceries had always been provided by the state and you and I are sitting here speculating what would the retail food market look like under a market. Right, that's interesting that you bring that up because I had a student from the former Soviet Union just two years ago and she was describing what it was like to get food and she said that it certainly wasn't that there was little grocery stores down the street for everyone that people had to drive or take a train or what have you to go to the central distribution area to get their food and then go out because just from the central planner's point of view that's what yeah it would be wasteful why would we build all these little dinky grocery retail stores

39:19So I think that's a good analogy you bring up and part of the problem is that it's hard for us to picture what it would be like and that's one of the benefits and the arguments for freedom is that no group of people can put out the blueprint for how the system ought to look and so you and I can speculate but yes I think no matter what we come up with we're not going to be fully capturing the The availability of all sorts of options to people in a free market setting, but there could be things, especially now with the internet, there could be all sorts of online instructions, there could be academic institutions, things like the Mises Institute, for example, now part of the problem with the Institute conferring legitimate degrees or certificates or what have you on people is that outsiders are going to think, oh, well, they're not an official school.

40:19Education and so on, but there would still be this spell of you need to have a formal school to do something and that in a totally free setting, I think that prejudice would be gone and people would realize that it doesn't matter so much how someone came to know something, but more what are the skills of this person. And so there could be all sorts of things, the equivalent of a guild system, not in the sense of restricted entry, but that people would go and be someone's apprentice and learn a trade and move on. And who's to say that a child wouldn't be much better off doing that, working with a master carpenter from a young age and then going on. And you could say, well, how would he know about history and culture and poetry?

41:05He can, in a spare time, read that stuff, or he could even enroll in a particular class offered by some organization that specializes in poetry or what have you. But again, it's really what people are afraid of, is that people are going to choose things that the critics don't approve of. You know, I've wondered sometimes, homeschooling is booming and it's just wonderful, but these These days, it's almost as if you have to, the market is so restricted that you either have to look like a regular school in the sense that the state approves of. The regulations concerning schooling in Alabama, how to run a public school, it really looks like the Gauss Plan. I mean, just endless pages of detailed regulations.

41:51Or you can secede from that entirely and just stay at home and have just a completely domestic-based Education, which for all its merits does raise questions about the extent to which homeschooling employs basic principles about the division of labor, for example. So the in-between stuff, it seems to be what's missing today, you know, the subdivision school, you know. Exactly. Yeah, that's a good point you raise, because on the one hand, I'm torn, because on the one On the one hand, with an economics background, it does seem odd that parents would be teaching their children individually in their own households for so long, especially if both parents are productive and they could be out working that, from a certain point of view, it seems, oh, isn't it more efficient for the parents to go out and earn the money and then pay someone else to train their child just in the same way that you wouldn't say we should have home Home Operations, and that everybody to make sure that, you know, I'm taking care of my child, I'm the one who cares most for my child, that I'm going to do the operation, that that would be absurd for people to think like that, but at the same time, what is cutting in the other direction that I've noticed, and this is why my wife and I plan on homeschooling children that we have, is that the smaller the classroom, and even if it's just a few children, you can really tailor the education to the student and you don't

43:20I have to teach to a certain group of the class. So in my own classes, some advice that I got when I first started with someone said, teach to the top third, meaning that just figure out right away who the top third of the students are, and then teach such that everyone in that group knows what you're saying. So it's true, the smartest kids in the class are going to be a little bit bored, and the weakest students are going to have no idea what I'm talking about, I think your advice was suggesting that if you tried to teach to the middle then everyone else is just going to adjust and the lowest students are just going to do that much less reading because they're used to being the lowest students and so the point was you've got to just accept the fact that some kids aren't going to get what you're talking about and teach the top third. But the problem there is, again, the top students then aren't going to be interested, they're not going to be challenged and that's happened with my classes that I've had some really great students and except if I completely change the rules and graded them

44:20The Theory of Money and Credit

44:50who have to work with a group of 30 or even 40 or 50, depending on the school students and instructing them. So that's, I think what you said is exactly right, that probably what would happen would be it might even initially start as a homeschooling phenomenon, but then a particular parent who happens to have a knack for teaching children of a certain age, maybe that parent's children are all just wonderfully educated and their friends realize it and then maybe instead of sending their students to a private school where there's an enrollment of 30 or 40 per class. They put the kids there and maybe they renovate the garage and they have a more formal structure, but it's still got the feel of a homeschooling environment. So even that distinction would break down because, of course, there wouldn't be things that were zoned residential and zoned commercial in a private property order. And the distinction between, well, is that someone's house or is that a school? People say, oh, it's both.

45:46You're more likely to break down what would go by subject, right? Right. And again, for some areas maybe it wouldn't, some it wouldn't. Clearly, a lot of things that you want to teach, especially just to younger children, the parent could teach most of that stuff. But if they want to teach a foreign language or a musical instrument, well then no. Unless the parent happens to be bilingual or to know how to play that instrument, there's nothing they can do. The parent, of course, can teach the times tables and basic US history and things like that. But it's an interesting point you make that, in some sense, having a private tutor is the ideal. I mean, that's sort of, I think, widely granted. I mean, if you look at, you know, the great figures in history of somebody with a private tutor, everybody recognizes that. But it might be too costly for everybody.

46:32Right, exactly. So, you have to consider the trade-offs. Right, I mean, in the limit, unless I'm doing my math wrong, would that require that half the population teaches one person on the other side? So clearly that can't be for everyone, just because it would be too costly, but it's certainly... You would want a private setting where those incentives would just play themselves out and you could see what the costs and benefits were. and some students. As I say, I think it would depend how far they could go. And so if you were just one person's private tutor, and you're exactly right that that's probably why the monarchs in the past did that, that they knew if you want your son to have the best education possible when he assumes the throne, then you find someone really smart.

47:24You pick Carl Menger and say, I want you to raise my son in terms of teaching him the in the Ways of the World, and if that's what you want for your child, that probably is the best thing you could do, but yes, not everyone can do that, but then the next best thing is to send them down the street to the school where they've got 15 students in there. What's interesting about the advent of homeschooling is that maybe it's providing something like a benchmark for the future of private education. Send your kids to us, we're just as good as homeschooling. right and that's it's interesting because there are all these I don't know if you've heard of these things but where I teach there is a certain backlash or just standard jokes that people make we happen at Hillsdale to have a lot of homeschooled students at least relative to other institutions I imagine and some of the professors they make jokes when we're out at social events about oh I

48:18had a student come up to me today and and like she's never taken a test before before, come on, you know, haha, homeschooler, right? Yep, and they joke about it. And so I was on the lookout for that, but in my classes, the kids that I knew were homeschooled were by far the best students. It didn't mean they were the smartest people, but they had the drive and they were curious. They actually liked to read if I said, by the way, this won't be on the next test, but here's a book dealing with this topic, those would be the students that might actually go out and look at it. And so it's true that this issue of the Division of Labor that the randomly picked parent isn't as educated as the randomly picked teacher probably in most of those areas but nonetheless just the difference of incentives and the fact that they get to lavish their attention on the one or a few children that they really care about, namely their children

49:08and also that again you can tailor it so if your child is having difficulty with a certain topic you can spend more time on it and so it's not even an issue of sort of selection argument that all the parents who are who homeschool tend to be more concerned about education and so therefore that's why their children tend to do better which I think is a valid argument is true but even all equal if you can tailor the instruction to an individual they're gonna do better you know I do you do detect a lot of public resentment against homeschoolers and it does strike me that part of the reason is that Homeschooling is something of a luxury good that a pretty small segment of the population can sort of purchase in some sense with the opportunity cost involved.

49:57But in a sense, you know, like Mises makes the point about luxury goods that, you know, under the right market conditions they can be spread democratically. Right, that the function, if you want to use that word, of luxury consumption is for the rich to experiment and to find what is the sort of thing that would appeal to a mass market and so that the massive consumers can see the rich guy with a color TV and say wow, I'd like to get one of those and then the companies know if we can figure out a way to produce it on a mass scale, we'll be profitable. So coming back to that distaste or bias against homeschooling, I think another aspect of it, it's true, like as you say, that there's this feeling that, okay, well, the rich, or at least upper middle class, they can afford to have one of the parents stay home, but the rest of us in working class, we can't do that, so that's not a luxury we have, but I think there's also a suspicion that it's very elitist, that, oh, your kids are too good to send to the public school,

51:03and the people resent that aspect of it that parents who homeschool as they will often report with the reason they're doing this because I don't want them my kids learning the garbage they're teaching down at the public schools or I don't want them being exposed to the language they're going to hear on the playground and so I think a lot of people resent that and think that that's a form of elitism which I suppose it is but I think it's justifiable sure you You raised a point about the financing. I'd like to ask about some of the proposals for reform include charter schools, which you mentioned earlier, but also vouchers, which appeals to a certain intuition that many people have that it's kind of crazy for all families to just pay the same amount for the public schools, whether they have kids or not, through to the property taxes, that there's a better way to more closely connect the running of schools with the pain for the schooling, and that the voucher system is one way to do that,

52:11and that would introduce a kind of competitive element into the existing public structure. I mean, it's market economists who are promoting this, people who understand incentives. This is the type of argument where people are going to be accused of being purist and unrealistic and they don't understand the political situation. So my take is I'm against vouchers and I have written on that. I understand where the advocates are coming from. So the problem is, the major danger that I see is that it would just be another way for the government to regulate even what remains of the private sector, all the more so.

52:56And so, specifically, the route would be that in order for a school to qualify to get those vouchers, they would necessarily have to pass some set of requirements that you couldn't have the building that where you go and you just watch soap operas all day, and all you're gonna get tax money to have your children go there that of course isn't going to happen and so there must be some list of requirements criteria that a school would need to pass in order to be eligible to receive these vouchers and by the way that seems to make sense I mean it's a taxpayer right exactly it's it's unavoidable you would have somebody funneling money to their brother-in-law if it weren't for those sorts of regulations it's just as Mises points out in bureaucracy that the reason the state has bureaucratic codes and all the red tape is because if it didn't and there was just this tax money waiting to be stolen by everyone then it would be just be pure chaos and so they

53:48need to set up these arbitrary benchmarks and hoops for people to jump through just to prevent people from blindly taking from the public till so given that then the government is just gonna have yet another means of regulating the private sector now people say pro voucher the pro voucher side They'll come back for that sort of argument and say, look, right now the government has the legal mechanism by which they can regulate the curricula and so forth of private schools, so vouchers wouldn't give them anything they don't have right now. But I don't think that's entirely true, that right now there's a certain equilibrium that's been established as to what the government's legitimate role is in telling a private school what they can do or not. And that would be fundamentally altered, I think, if those schools were directly receiving money from students that were getting the vouchers.

54:39And again, people say, well, what about busing and things like that, the bus that takes the kids to the school that's paid for by the government often, and so on. But again, there's, I think, just a fundamental difference. And you could even push that further and say, well, if the president declared martial law, there's all sorts of things he could do. And that doesn't mean, therefore, that anyone who raises a worry about the government's encroaching power, it would be silly to say, oh, right now, if Bush declared martial law, he could do that anyway, so this measure, there's no danger implicit in it. So the fact is, just because on the books right now, the government could tell a particular school, we don't want you teaching anything that disparages the Republican Party, that even though legally they could do that, there'd be a public outcry. And they would say, what are you talking about? You can't do that. That's crazy.

55:27Whereas I think if the government is funneling millions of dollars to a particular place, and then the taxpayers don't like what's happening there, they could truthfully say, wait a minute, my money is going to support that school, and so I don't want people teaching that. That's crazy. Command accountability, right. Right. So I think that's the major problem with vouchers. And then Lew Rockwell and others have picked up on the point, brings up the argument that that what good public schools there are, because in certain, especially affluent neighborhoods, there are public schools that they're not horrible or they're not the nightmare image of gangs running around and kids not learning how to write by the time they graduate, that could very well be wrecked if they don't have any means of excluding people from other communities coming in there because they're backed up now with voucher money.

56:19And so the point is that I think it's the exact opposite of what the proponents think that by introducing more, what I would call pseudo-competition, that's going to raise the bar and force the public schools to improve their standards, but I think the opposite would happen. I think it would just wreck what standards remain in the private sector and that there would no longer be this distinction between public and private, even as dubious right Now is that distinction is for all sorts of reasons that that would just be weakened even further and if one concedes that I think it's naive to assume what's going to happen is the excellence is going to pervade the government sector rather than the other way around that the government's incompetence is going to influence the private sector another the response to that is but look if you're a private school and you don't want to take vouchers you don't have to that's true again I think there's going to be a

57:15I think it would be a problem with, first of all, just being short-sighted that the people running the schools, as much as we would like to think, aren't necessarily well-versed in classical liberal tracks. And they might be thinking more of, wow, there's all this extra money, all these extra customers we could be getting, and probably the effects of the vouchers wouldn't really kick in until several generations down the road. And so I don't think that necessarily the people running these schools are going to be making that sort of political calculation. Right. Just as you could say if, for example, the Social Security privatization proposals, one of the major political dangers of that is to say, well, look, if we're funneling billions of dollars into the stock market, don't you think the government then would be able to lean on certain corporations because of that and of course you could say well the those corporations could refuse to accept the government money but I think that would be naive to expect that so the same thing with the education and also just that if your competitors are accepting voucher students then you're going to be at a disadvantage and so and even so perhaps there would be a few handful of schools or more people would go into homeschooling but nonetheless

58:35Certainly, plenty of people would accept voucher students. And the fact that so many free market economists and other activists are cheerleading this movement, I think that they're wrong strategically, that it would be odd to think that the people running the schools are going to not be fooled by the free market advocates championing the vouchers. Cards. So I think that that's the danger and that the schools would go down that path. Yeah, on the point about schools' right of refusal, of course every business has the – well, let me ask you if this analogy works. Every business can refuse to accept credit cards too, right? Right. So – or checks can only be a pure cash business, but that necessarily limits the size and they're going to be at a competitive disadvantage. Do you Right. Right. And just even in higher education right now, that Hillsdale, and I think it's a few other places, one of its selling points that it makes when it tries to get money from conservative donors, is that we don't accept government money.

59:48Yeah. And what that refers to is back when the government required schools to report on their racial statistics of their student body, Hillsdale refused. And the ruling was that if you have a student going to your school that in any way receives federal aid, well, then you're a recipient of federal money, we can regulate you. And so that's why Hillsdale adopted that policy. But the point is, it was a very difficult move, because given that all the other schools are accepting students, well, then they can have gorgeous sports stadiums and they can have enormous libraries If you want to, my wife for example wants to study psychology and going to Hillsdale they don't have a very big lab and they don't have all sorts of money for running tests and things like that and running experiments on rats and all sorts of things like that and so if these huge state schools or even private schools that are willing to accept the federal funding or other state funding the product they offer in many respects is superior because they're backed up by so much money

1:00:48and so that the point is yes there could be a few outposts who cling to their independence and refuse to accept voucher students but again I I don't think that that's gonna stop the trend and I think overall it would be the case that vouchers would hurt the private sector more than they would raise the public sector. Yeah, one wonders then what the realistic means of reform in the The future will be, if you look at something like the mails, there's a time when the only way to get information from one person to another was sending it, giving it to a government bureaucrat and having them deliver it. But in the meantime, I guess innovation, private sector, sort of ingenuity, technology, all these things have worked together.

1:01:35So now we have many options, even though the law was really never changed. Do you know what I mean? So you've got a Federal Express and UPS and email and all the rest of it. So you wonder if maybe the future of education might follow a similar path? Oh, I think definitely. Just the rise of alternate forms of education, just the cost of certain publications gets lower and lower, more and more things are on the internet now and beyond just the availability, There's also places such as the Mises Institute that their whole function is to package and distribute that information in ways that the consumer can readily digest. And then there's also different hierarchies so that you can certify in a voluntary sense the product that you're selling so that people know, The Theory of Money and Credit

1:03:00Social channels, and it's not someone making something up necessarily, but whereas if it's something you've never heard of and it looks sloppy, so there's built-in mechanisms by which people can evaluate the content, and again, things that you can go to institutions and receive certificates and other sorts of designations to show to others that I receive this type of training, and just more on-the-job training. This is obvious stuff, most of what people do in their day-to-day life is not necessarily something they learned in calculus class in 11th grade. Oh yeah, I want to get back to that as a last point, but before we get to that, just an observation on some ways in which maybe public schooling is currently sort of being privatized and piecemeal.

1:03:50If you look at booster programs, they're mostly all private money. There's sports programs and music programs and chess clubs and choirs and all the rest of it. There's a lot of parental and Involvement. Those are the parts of public schools that work best. Exactly. And that also ties in with one of the fundamental problems of government schooling is this issue of once everything is going through the government and it's the community's decision, then there's all these conflicts that arise. And so I remember in my hometown of Rochester, New York, there was an issue that the school budget was insufficient. They were in the red, and they were going to threaten, and I'm sure people have heard this story all over and over, that oh, if we don't raise taxes, property taxes, then we're going to have to shut down the buses, and we can't get kids to go to school, and we're going to have to take away football, and that was what they would do, instead of saying we're going to get rid of all these mid-level managers, or all these bureaucrats involved with the public educational system. They were going to, oh, there's going to be no football this year unless you guys raise your taxes, and so because of ridiculous things like that, yeah, there were private initiatives,

1:04:56and so they would get the money somehow and again just the private sector filling the gaps to avoid these absurdities but the whole conflict there being caused by the fact that it's the community making these decisions and I remember there was a photo of these elderly people in the room and these high school kids were just literally crying and just pointing fingers at them Because the idea was, you greedy old people, you aren't agreeing to allow me to have a softball team. I can't believe how greedy you are. And the point is that would never happen in a market, just as students who want to go buy Dave Matthews' CD, they don't go up to old people and say, why don't you go buy some of those CDs, then you lower the unit cost for the rest of us, you greedy old people. It just wouldn't even occur to someone to make that accusation.

1:05:51And on your point about the need to constantly learn, it's an impression that I have that sometime between the end of World War II and about 10 years ago, there was a cultural wide assumption that learn pretty much what you need to learn by the age of 22, and you find a job, you stick with it, and you pretty much do that until you retire and you get a watch

1:07:19are expected to continue learning. You might work at six different areas in your life, whereas before, once you found the company, you were going to stay in, you liked their health benefits, and that's where you were until you died. Yeah. Probably the future is going to look a lot more like it wasn't before World War II, where there was constant innovation. It was just a sin that you had to work your whole life, for example, and you had to learn your whole life. One point that you mentioned before that I wanted to come back to was painting the picture of how would a completely free educational market look like. You talked about finance and one thing I forgot to mention was you could still receive loans, student loans, and because again what's the the rationale for publicly funding students is that oh well once it'd be absurd for some poor student off the street who's a genius to not be able to go on and get a higher degree but of course to the extent that it really is absurd well then there's a huge

1:08:20profit opportunity there's gains from trade that why wouldn't if it really is true that there's some really poor student somewhere who is going to be a genius and would make thousands hundreds of

1:09:00local students in for free because the marginal cost of teaching somebody arithmetic is fairly low or people who want to set up endowments to fund scholarships for certain students just not because it redounds to the benefit of the institution but just because they feel like that's something good that ought to be done and they would be able to do that and they would have at least twice as much income tomorrow to do it if the government would stop stealing their money. It does strike me that there's a number of things that we notice are heavily in political demand. For example, assisting the poor, making sure they get a good education. That in a free society, in a purely laissez-faire system, would be converted to not a political demand, but to a market demand, in a way. In other words, as you said, we as a society would not tolerate.

1:09:49Right. And it's not merely that your money is being taken from you right now, and so you have that much less to spend, but also the resentment that, as I think it was Ebenezer Scrooge says, something to effect when they ask him for a donation, he says, no, Arthur, doesn't the government take care of this? Isn't there a dole or something? So it's, the whole mentality would be different in churches and other organizations, because that's the thing, even I fall into this trap myself, you don't want to picture it just as a pure your business transaction where there's just paying customers and that's it. There could also be third parties, charitable organizations, endowment funds set up in church groups and civil groups and all sorts of things like that. The only difference would be they couldn't take their funds at gunpoint from someone else.

1:10:38That's the only thing that wouldn't be there and yet everyone says, no, no, that system would be unthinkable. What sort of horrible society would that be where you can't raise funds through force? Okay, very good. Well, thank you so much. Thank you.