Sunday, February 26, 2017

The Free Market vs. Customers

I write so much about the free(ish) market that one might assume that I hate it. I don't. I think the profit motive, properly harnessed and directed, can accomplish a great deal. Making money is not inherently bad.

However, there are certain things that the free market will not do, and those weaknesses are in direct conflict with the purposes and goals of public education.

If you want to see what the problems would be, all you have to do is look around right now at every other sector of Trumpistan, where the Privatizer-in-Chief and the members of his Free Market Fan Club have been pursuing a particular set of goals.

This week the FCC took some steps to "relieve thousands of smaller broadband providers from onerous reporting obligations." More specifically, they removed some regulations that require ISPs to publish pricing and service information. This is seen by some as a first step of a general assault on net neutrality.

Meanwhile, some environmental regulations are already rolling back, a trend that is expected to accelerate under the new EPA head. Elizabeth Warren's Consumer Financial Protection Bureau is under attack. And in the education world, for-profit colleges that were feeling some pressure under Obama (though, seriously, how much pressure really) are feeling like there's a fresh new day a-borning.

These and the many government actions like them come from the same basic free-market complaint, addressed to government:

"We could make a lot more money if we didn't have to [insert regulation you don't like here]."

Free market fans (like Betsy DeVos) prefer to argue that free market business needs no regulating because customer reactions provide all the regulation needed. If the business fails to do a good job, customers can vote with their feet, and free market justice is served by the invisible hand.

This is bunk, and any successful business people know it's bunk.

In fact, between "this company is awesome and I love them" and "these guys suck and I'm going to start foot-voting right now" is a whole grey area where businesses actually operate. Awesome-love is really expensive to provide, so the smart business play is to figure out just how little you can get away with providing before the foot-votes start to hurt.

Government regulations are a pain in the ass because they interfere with the search for that sweet barely-enough spot. Auto makers might love to cut the costs associated with things like air bags and seat belts, but regulations won't let them. Industries could be far more profitable if they didn't have to follow environmental regulations. Internet providers could make way more money if they were allowed to give special treatment to rich customers. Any business could be more profitable if it could pay workers the very lowest pay it could get away with.

If Donald Trump possesses anything like a business genius, it would be this-- he has really pushed the boundaries on "the least you can get away with." Lying to investors and refusing to pay contractors, as well as extracting pay-to-play bribes good treatment, Trump has dared people to walk with their feet or hold him to any code of conduct. And he has mostly won. Like that annoying kid in your fourth period class, he has a genius for figuring out exactly how little he has to actually do to get by.

This is what the privatizers want to see-- a world in which the bare minimum required to run a school is hugely lowered bar. They want a friendly federal government, someone prepared to listen to them when they say, "We could make so much more money running this school if we didn't have to [fill in any school function or service here]." We could make so much more money if we didn't have to serve high-needs students. We could make so much more money if we didn't have to pay teachers more than minimum wage. We could make so much more money if we didn't have to pay prevailing wages to our contractors. We could make so much more money if we didn't have to meet all the items on this list of regulations.

Can government go way too far when it comes to regulation? Absolutely-- particularly when it's going in the wrong direction.

But what the privatizers promise to do to education is put the needs of the business operators ahead of the needs of the students. In the business world, that is common and results in a kind of sorting-- the business chases away some customers and focuses on the smaller assortment of customers whose needs best match what the business wants to do as its bare minimum.

That's a rational business approach, but it is an immoral approach to education. And it creates a hugely unbalanced contest. On one side, we have the businessmen and hedge funders and national charter chains plus the elected and unelected government officials who are looking out for their interests. On the other side, we have parents.

That's why it's absolutely necessary that government stand up for those parents and for the interests of those students. That's why it's up to government to set boundaries, to determine what the barely acceptable minimum will be (because businesses will always sink to that low bar). That's why it's up to government to stick up for citizens, and not the invisible hand.


  1. Yes, I can vote with my feet although in some cases I may have to vote with my grave -- because the drug/food/whatever is really not safe. But others will gain by my demise, well, if we have a media left that can honestly report.

  2. "In the business world, that is common and results in a kind of sorting-- the business chases away some customers and focuses on the smaller assortment of customers whose needs best match what the business wants to do"

    This is what every real business knows and what every free-market idealist doesn't.

  3. The free market is excellent at providing abundance and terrible at providing quality. Your typical free market advocate does not get this. At all.

  4. Oh ffs. Free market idealists - if any of you are reading, which I guess is unlikely - there's no such thing as a market free of rules. Markets are *defined* by rules. You might as well talk about sports without rules - what makes a football game a football game, other than the various rules that define its goal, the movements of the players, and so on? Freedom of choice doesn't exist in the natural world: we make it happen, largely by forcing everyone to obey rules that govern the exchange of goods. No, you can't just hold a gun to people's heads to force them to buy your crap. No, you can't kick this guy in the ass and run away with the apples he's selling - you must give him something he wants. No, you can't just force 11 year old girls to work for you on threat of death, to lower the cost of your product.

    And sometimes we say - no, you can't consider this a unit of commerce.

    There is, for instance, no legal market in human organs in the US - let alone a free market - because we recognize that this could lead to all kinds of terrible outcomes.

    Nor is there a free market for the army. How come we leave wars in the hands of sad, uncompetitive government sinecures? I say, let's ditch the military, and instead hand out vouchers to people who can choose to spend on their own defense. And let's see how well that works out.

  5. Every person who sells his or her labor or creativity is a business of one. That is, every teacher is a business, every laborer, etc. We do usually try to maximize our profit and minimize our pain, and at the individual level we don't think of that as nefarious or harmful. At what level of scale does this become problematic?

    Of course, at any scale it can produce excesses, but beyond the level where direct human relationships or direct knowledge are possible, there is certainly an increased opportunity for abuse and a decreased ability to detect it.

    All that said, I don't know a single person who favors school choice or free markets generally who believes in having no regulation. Most people who favor the free market do so because they see it as the best only in the sense that the tradeoffs are better than other possibilities. You might even say they see it as the least bad system.

    Finally, the argument you make certainly applies to monopolies. It applies, that is, to government programs. You say nothing here about your apparent faith in politicians and centralized bureaucracies. In other words, you present a carefully constructed but wholly unrealistic picture of those who favor greater freedom and choice while neglecting to apply your criticisms to the status quo where they so obviously also apply.

    1. One definition of "business" is "calling". Another is "activities involved in the buying and selling of commodities". As a teacher, I feel the former is much more descriptive of what I do than the latter.

      "Profit" can be "a valuable return" or "the excess of the selling price of goods over their cost". As a teacher, my "valuable return" is seeing my students learn. The "selling price of goods over their cost" is not applicable. And you can't have an excess of learning.

      All the libertarians I have talked to (and libertarians are the most fervent believers in the "free market") would prefer that the "free market" have no regulation at all.

      A monopoly is "a commodity controlled or owned by one person or specific group". Public schools are "owned" by the whole community, so they're not a monopoly. That's democracy: of the people, by the people, for the people. The "free market" does not equal democracy. Democracy is the "least bad system".

    2. I deeply disagree that a teacher is a business of one. You're labor, sure, but not a business. We don't try to maximize our profit and minimize our pain, or I wouldn't be sitting here cranking through a stack of essays trying to make intelligent and helpful comments - I'd just say "not bad" and call it a day.

      And yes, of course, few people really believe that markets should have absolutely *no* regulation (though some people almost believe this). But when libertarians, and many conservatives, talk about the "free market" they speak as though it were a natural phenomenon, and "regulations" an interfering force, something to be kept to a bare minimum. The mantra seems to be, Leave markets alone, and they'll settle into the best condition for society - but interfere with them and we will end up with something fake and ill-fitting.

      This is an idea straight out of the 18th century, and people have been criticizing it since Voltaire's Pangloss who kept dementedly insisting that all must be for the best in the best of all possible worlds. My point was that a "market" is, itself, a social creation rather than a phenomenon, defined by regulations, like a football game or a war. Markets are an artifice of rule-making human society. Capybaras don't have markets.

      So the "rules v. freedom" is a false dichotomy. It's all rules. The real question is, which rules confer results that we like? Which ones get in the way?