Thursday, August 08, 2013

Markets Operate Through VISIBLE Prices, State Bodies Through INVISIBLE Decision-Making


Andrew Coulson (7August) posts in Cato at Liberty HERE
Making a Market in Education”
“There’s a reason Adam Smith called it an invisible hand. You don’t need a lot of very visible committees or technocrats pulling at the levers of government or NGOs to make the free enterprise system work. You just need freedom and the rule of law (okay, respect for entrepreneurs, too).
Comment
I chose this passage from Andrew Coulson’s recommendations for introducing markets into education, which is a general policy I accept (my children were educated at private schools in Edinburgh, though all of them send the three grandchildren, so far, to be educated in the Edinburgh’s public schools system).
The above quoted passage is quite extraordinary.  
During the years I was paying for education in private schools there were many visible committees running these generally excellent schools.  By “visibility” I mean we could read their members names and also read reports of their meetings but whether that meant our participation in their essentially private discussions (unless you sought membership of them) is another matter.  Given our busy academic lives (mine often involving meetings at the university I taught at in Glasgow an hour away if by train or more if by car, so finding out whom to lobby to join one of these private school committees was out of the question) and anyway, parents nominally representing all parents never asked us about any of the issues they voted through. 
Essentially private schools, with a few parent attendees, were managed in no more democratic fashion to the publicly-managed, taxpayers’ schools under the Education Departments of locally elected city councils.  Political bodies tend to be run by broadly ideologically-rooted parties. In fact both private and public education sectors have much in common in having “a lot of very visible committees or technocrats pulling at the levers of government or NGOs” trying to influence education policy.
Andrew Coulson concludes that “[y]ou just need freedom and the rule of law (okay, respect for entrepreneurs, too)” to create “real, vigorous education markets”.  I suggest that he may be more than a little too simplistic here, especially as he invokes that alibi for not thinking the actualities through by “encourag[ing] the growth of school choice programs that do not suffocate private schools with regulation, then sit back and watch.”
He also believes that there is “a reason Adam Smith called it an invisible hand”, presumably because the sitting back and watching strategy is in safe, if invisible hands, as opposed to supposedly “visible” (but unsafe) committees.  However, real markets do not work through “invisible hands” – and Adam Smith never said they were – because they work through very visible price signals (which Adam Smith described in Book I and II of his “Wealth Of Nations”). 
Management at all levels is not “visible” (unless you attend every meeting and every private discussion of those also attending) because governments and governing bodies, public or private, are not the “visible” counter-part to the mythical “invisible hands” in markets. 
The former governing bodies are necessarily private and invisible in their deliberations, both in their secretive and confidential records and their “off-camera” conversations and lobbying influences.  While the markets, supposedly “invisible”, operate through highly visible price signals and cannot operate without that visibility! 
If Andrew Coulson thinks he knows differently, I suggest he might wait a long time if he opts just to “sit back and watch”.

2 Comments:

Blogger Patrick Sullivan said...

Markets operate through much more than just prices. They also operate through quality. Which I believe is Coulson's point.

If you don't like the quality of your children's school, in a market system you pull them out and put them elsewhere. If you can afford to.

Milton Friedman, at least, wanted to make the 'afford to' possible by the use of vouchers that the parents could direct toward the school of THEIR choice. Which is a lot easier than spending endless hours arguing with the educrats who had a legal, local monopoly.

3:16 pm  
Blogger Gavin Kennedy said...

Patrick]
Thank you for your interesting comment, of which I do not disagree in principle.
My comments were not a criticism of the market system. My broad position is: markets were possible; states where necessary". I am broadly a soft Libertarian.
Poor schools are not easily avoided in Scotland (though my own children went to private, not public, schools). To get from education provision as it is - a mix of both public and private - is not something achievable in the short run, though it should be started.
My point in the post is that markets operate by price signals, not "invisible hands". Scroll through Lost Legacy and read many previous posts. The UK is experimenting by allowing the establishment of alternatives to state-managed schools which is a start.
Gavin

4:17 pm  

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