“Capitalism and Freedom” Summary, Chapter 6: The Role of Government in Education

by Danny Fenster

This chapter is a free excerpt from Quicklet on Capitalism and Freedom.

It's taken for granted that the government funds schooling; nobody questions schooling's special treatment in otherwise free enterprise societies. "The result has been an indiscriminate extension of governmental responsibility."

Government intervention in schooling can be justified on "neighborhood effect" grounds or on paternalistic concern for children and irresponsible individuals.

"Schooling" and "education" are different things. The proper subject of concern is education, and the activities of government are mostly limited to schooling.


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It's taken for granted that the government funds schooling; nobody questions schooling's special treatment in otherwise free enterprise societies. "The result has been an indiscriminate extension of governmental responsibility."

Government intervention in schooling can be justified on "neighborhood effect" grounds or on paternalistic concern for children and irresponsible individuals.

"Schooling" and "education" are different things. The proper subject of concern is education, and the activities of government are mostly limited to schooling.

"A stable and democratic society is impossible without a minimum degree of literacy and knowledge" and an agreed upon set of values among most people." It promotes stability and democracy, creating significant neighborhood effects."

Government may require a minimum amount of schooling of a certain kind. If the costs can be met by most families in a community, they should pay directly, with subsidies for the needy. This would reduce government's tax-collecting burden in many neighborhoods as well as equalize the social and private costs of having children. Subsidies would decline with rising income levels. Currently the government pays for schooling in areas where direct payment is both feasible and infeasible, and does so for schooling beyond a required minimum.

"The gain from these measures must be balanced against the costs, and there can be much honest difference of judgement about how extensive a subsidy is justified."

Only certain kinds of schooling are justified. Purely vocational schooling that adds to the student's economic productivity, but not to his citizenship or leadership, should not be subsidized, though the line between the two types of schooling is difficult to draw.

What levels of schooling provide the most community benefits and where government money should be spent should be decided by the community through established political channels.

Government administration of education is not justified. Subsidizing the costs of running the school has been seen as requiring government to run the actual institutions, but the two can be separated. Parents could be given vouchers to be spent at private or non-profit schools of their choice, so long as certain standards are met. The role of government would only be to ensure a minimum standard of content for institutions. An example is the US educational program for veterans after World War II.

Some argue that free enterprise schools would instill too varied a set of values to promote social stability. It's not clear this would be so. Carried to its extreme, this argument would conflict with individual freedom; the line between providing common social values and freedom-of-thought-inhibiting indoctrination is another that's hard to draw.

Denationalizing schools would mean more options. "Parents could express their views about schools directly by withdrawing their children from one school and sending them to another, to a much greater extent than is now possible." Perhaps this is possible under government administered schools, but it would be difficult to carry very far.

One criticism is that private schools would exacerbate class divisions. This is not necessarily true, and because residential areas are often stratified, public schools already do this; "good" public schools are in high-income areas.

Technical monopolies may exist in rural areas with small populations where more than one school may not be feasible. This is less likely than in the past due to increased urban living and improved transportation.

Many urge more spending on school for facilities and higher teacher pay. The real problem is that money is spent unwisely--on buildings instead of education. Classes like basket weaving and social dancing provide no positive neighborhood effects.

Teacher salaries are not too low, they’re too uniform and rigid. "Poor teachers are grossly overpaid and good teachers grossly underpaid." Standard salary scales are inevitable in large bureaucracies. Workers favor merit-based pay scales because the talented are always few; colluding to fix prices, by unions or industrial monopolies, will always be beaten by competition without government intervention.

The public school system may have been preferable earlier in the nation's history. The case of yesteryear is, however, not only irrelevant but counterproductive to present interests.

The transition to the private sector should be gradual and easy, selling facilities to the private sector.

Technical monopoly and neighborhood effect arguments for higher education are even weaker, where there is less agreement on curriculum. And "there can hardly be any question of 'technical monopoly' at this level, in view of the distances that individuals can and do go to attend institutions of higher learning." Government funding for state and municipal colleges places unfair disadvantages on private schools; vouchers should be given based on need and merit to attend any university.

Investments in human capital are far riskier than in physical capital, where returns are more variable and based on ability, energy, good fortune and health. This leads to a general underinvestment in human capital, so "government intervention might be rationalized on the grounds both of "technical monopoly … and of improving the operation of the market."

The only intervention tried has been outright government subsidies. This is inappropriate, says Friedman, and suggests a form of loans for qualifying candidates. These loans should for political concerns, be instituted by private financial firms and/or non-profit foundations and universities.

The current system perpetuates inequities in wealth and status. The suggestions just outlined would make capital more widely available, making equality of opportunity a reality.

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