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Saturday, September 16, 2017

Markets Smart and Free

Unlike many of my friends in the ed debates, I kind of like free market capitalism. Under the right circumstances, it can really get things done. But there are sooooo many reasons to believe that the field of public education is precisely the wrong set of circumstances.

The free market can be uber-excellent at setting a true price for goods and services-- particularly goods. But the market can only do this job well when it is smart. We've seen the market get way smarter in just the last two decades, so we have examples of the effects (and yes, some of what I'm going to talk about comes under the sexier term "asymetric information," but I am not feeling sexy today).



Take used cars. Back in the day, you would go to the Used Car Dealer and do a long and complicated dance. You weren't sure exactly what the car you wanted was worth, but you knew what you could stand to pay. The dealer knew pretty well what the car was worth, but he was not about to tell you. If you were savvy, you might have checked the Kelly Blue Book, but mostly you had to drive from lot to lot to lot to lot, comparing prices and trying to build some sense of what a fair price was, particularly if those lots were priced all over the map.

Now we have internet. On the one hand, it's a bummer because it's extremely unlikely you'll find a surprise bargain wildly out of line with the common going price. On the other hand, you probably won't get hosed, and those days of interminable negotiation while the two parties tried to keep a grip on their own secret info (car price, buyer's budget).

A smart free market sets a value for objects; that value equals "whatever people will pay for it," and thanks to sites like eBay, we know exactly what that amount is. If the last 600 widgets sold on eBay for $10, you are not going to sell yours for $50. The market is too smart for that.

Surviving in a free market has always involved companies trying to make the market dumber in several different ways. The company can make the market dumber by withholding pricing information, like the old used car lot. The health care industry has made the health care market positively brain dead; no customer has any idea what anything costs.

We can also make the market dumber by concealing the nature of the product. "This is magic snake oil," I declare, holding up a jug of water. "These pictures of magic sea monkeys, with cute little faces, totally represent the real thing," declares the ad. "This maple syrup-like product is thick and colored a kind of dark amber," declares well-shot video of a completely synthetic crappy product.

Maple syrup is, in fact, a good example. Marketeers have convinced folks that good maple syrup is thick and rich and gooey, with a sort of dull faux-sweet tone, while actual maple syrup, when heated is thinner than water and cuts through waffles and your enamel with the same sharp, sugary edge. The market has been made dumb about maple syrup.

The free market is exceptionally dumb about education, and reformers have been working hard to make it dumber.

Nobody knows what the actual costs involved in education are (though there are many people who are sure they are Way Too Much). The ed reform debates have further muddied the water, because some reformsters like to characterize the cost of public education as Exorbitantly Expensive, whereas marketing for charters generally refers to them as Free. And unlike a used car or a beanie baby, education can involve a wide range of costs based on location.

Meanwhile, the effect of reformy focus on "outcomes" is to seriously dumb down the market's understanding of the "product" which has been reduced from the nebulous idea of self-actualization and personal growth leading to a better life-- well, we've boiled all of that down to "good score on a Big Standardized Test" which is such ridiculously reductive version of the "product" that it makes the market blindingly ignorant.

And on top of that, there is also a hidden market involved, transactions so unexamined that the market is completely ignorant of what's going on. That's the data market. The product being sold is personal data, and the vendors do not even know they're in the market at all. It's as if we walked onto a used car lot and said, "For a dollar, I'll clean up your trash" and the dealer said sure, fine, and we then drive a Lexus off the lot. The free market can't even function when at least one of the parties doesn't even know they're selling something,

Many of these factors keep the market dumb, and certainly some could be overcome (though, as with ebay and internet used car sites, at considerable cost to profiteers), but probably not the issue of knowing what the "product" is so that it can be valued. Different people get different kinds of education for different purposes, and often the true value of the education is not known for years-- or decades. Reformers try to work around this by suggesting that parents are the true "consumers": of education, but that's just not true. The primary "consumer" of a year of kindergarten is the five year old sitting there, and also her future employers, friends, neighbors, fellow citizens and even future family members. None of the yet have a clue what that year of education looks like as a product, or what its value will be. The free market demands that we put a value on our goods and services right now, today-- and that's just not possible.

The free market can't handle education because it's too stupid about education. That stupidity works out well for people trying to make a buck on education, but like the pre-internet used car market, it works out poorly for the "customers." And it certainly doesn't improve education itself, which the market deliberately fails to understand.


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