Pricing a Car, Pricing a School?

Pricing a Car, Pricing a School?
By Bob L. Corkins
August 4, 2005

Think about buying an education as if you were buying a car.

A car may be stylish, perfectly sized, fuel efficient, constructed for long life and safety, and loaded with the latest technology, but its price is still negotiable. And despite a window sticker that assigns a dollar amount to every selling feature, you can still cut a deal.

That sticker won’t list the car’s value to your sense of self worth, your hope for recaptured youth or freedom, or even the improved welfare to your children that the car might represent.

All possible benefits of the car will have their value defined by one number: the final selling price. When you voluntarily agree on a price, that price sends signals to all sorts of people throughout our economy.

The value of an automobile is as subjective as the value of a child’s education. But because the value of cars is determined in a competitive market where price is negotiated to the satisfaction of buyer and seller, a far greater consensus on value is possible.

Only when value is determined by a voluntary exchange does the price send reliable messages to producers and consumers. Nobel laureate economist Milton Friedman observed that “Anything that prevents prices from expressing freely the conditions of demand or supply interferes with the transmission of accurate information.”

In utter disregard of this principle, Kansas is now under Supreme Court order to list the manufacturer’s suggested retail price for K-12 education. You can bet it will be no mere suggestion once the experts finish their calculations.

Two state-sanctioned studies are now underway that will tell us by January how much more this state must spend on K-12. Although the Court already forced a $293 million enhancement (our largest ever) last month by threatening to close public schools, the Court also held that the new state studies might require at least another $568 million for the following school year.

Before this ruling, Kansas used to have a method for keeping the price of K-12 within reason. Voters would elect legislators; the legislators, in turn, would receive input from an unlimited number of sources and exercise their judgments on appropriate spending levels.

For K-12, which consumes a rapidly growing majority of the Kansas state budget, this is no longer a matter of legislative discretion.

Legislator judgment was not a perfect substitute for voluntary market pricing, but it was far better than what the Court compels. Kansas’ K-12 pricing decisions are now in the hands of appointed judges, bureaucrats and hired consultants who have no duty to care how additional money is raised to pay for K-12.

Another Nobel Prize winning economist, James Buchanan, highlighted this all-too-common problem. “Indeed, by their very nature, bureaucrats act as monopolistic suppliers. Whether their role is to supply politicians with information about alternative policies, or to design the specifics of policies to be implemented…they do so in a setting in which competitive provision of such expert advice, or alternative sources of supply of the relevant public goods, are unavailable.”

Even the most intense and professional effort of those engaged in Kansas’ studies cannot overcome this handicap. Their research will try to examine cost factors for achieving a level of student achievement that the Court finds acceptable.

This is not just a tall order, it’s an impossible mission.

Explaining that impossibility was the core purpose of still another Nobel laureate economist, Friedrich Hayek. Admiring the unplanned and infinite interplay of market interests, Hayek summarized that “all the details of the changes constantly affecting the conditions of demand and supply of the different commodities can never be fully known … [but] this is precisely what the price system does under competition, and what no other system even promises to accomplish.”

Understanding the flawed premise of the Court and the ensuing studies helps to crystallize a vastly superior alternative. For the field of education, like so many other policy areas, this state should embrace market pricing over government pricing, competition over monopoly, and choice over coercion.

The time for school-choice has now come to Kansas. Indeed, the Supreme Court has served up the idea on a silver platter to lawmakers. By removing crucial budgetary authority from the legislative branch, the Court has left no other effective means for taxpayers and elected officials to financially govern the big picture of public education.

Legislators should start by addressing the real areas of student need that the Court identified. School-choice scholarships should be immediately extended to the low-income “at-risk” children and special education students who motivated the lawsuit in the first place.

The state’s K-12 studies will eventually present us with a “book value” of our supposed price per student, just like car buyers and sellers will cite published “blue book values” whenever they can gain an advantage by quoting them. The Supreme Court may come to realize what everyone in the car market already knows, that the only book that buys anything is a checkbook.

# # #

Bob L. Corkins is executive director of the Freestate Center for Liberty Studies. The Freestate Center is a nonpartisan, not-for-profit, Topeka based research institute for advancing the Constitutional principles of limited government, individual liberty, free enterprise and traditional family values. Freestate is organized under IRS 501(c)(3).

The Freestate Center for Liberty Studies
827 S.W. Topeka Blvd.
Topeka, KS 66612
(785) 233-5157 office
(785) 220-2800 mobile
ksfreestate@sbcglobal.net