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by Gary Wolfram, Ph.D.
One of economist Adam Smith's finest insights is found in his celebrated treatise, The Wealth of Nations, where he writes, "It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest."
That was his way of saying that voluntary exchange in a free market leads self-interested producers, "as if by an invisible hand," to satisfy the demands of consumers. But what Smith knew in 1776 seems to have been largely forgotten by those who would reform America's failing public education system in 1998.
Smith and other economists have stressed that incentives matter in determining how scarce resources are allocated. In education-one of our most important resources-the incentives to meet consumer demand with a high quality product are based more on political, and less on voluntary, decisions. Parents often have little or no alternative if their local public school is performing poorly.
The result is that every year hundreds of thousands of American children must rely solely on the equivalent of the butcher's benevolence for their education. Can this help explain why some public school districts do well, while many-especially in the inner-city-often fail to educate their students?
Yes, because benevolence, as Smith tells us, is not the best method for making the most efficient use of scarce resources and raising people's standards of living. Certainly, some people-particularly teachers-are motivated by a sense of benevolence and service to others, but everyone has a built-in incentive to work for his own well being.
We must ask ourselves what incentives currently exist in the public school system to produce a quality education for all students. If children are not thriving in a particular school, how likely are they to go elsewhere? Do teachers' salaries depend upon how good a job they do educating their students? Do public school budgets depend upon how successful they are at turning out knowledgeable young scholars? How often do schools that fail to educate children close down, making their resources available to others that can use them more effectively?
An honest answer to these questions reveals that most public schools simply have no incentive, beyond the benevolence of their teachers, to educate children since the consequences to them are the same whether or not they succeed in their mission.
Smith noticed a similar lack of positive incentives in the educational system of his time: "In other universities the teacher is prohibited from receiving an honorary or fee from his pupils, and his salary constitutes the whole of the revenue which he derives from his office. His interest is, in this case, set as directly opposite to his duty as it is possible to set it."
How is the teacher's interest in conflict with his job duties? Smith explains, "It is the interest of every man to live as much at his ease as he can; and if his emoluments are to be precisely the same whether he does, or does not, perform some very laborious duty, it is certainly his interest . . . either to neglect it altogether, or, if he is subject to some authority which will not suffer him to do this, to perform it in as careless and slovenly a manner as that authority will permit." Citing Oxford as an example, he adds, "the greater part of the publick professors have, for these many years, given up altogether even the pretense of teaching."
This does not mean that teachers are lazy or slovenly; it means that they have every incentive not to be "too good" at their jobs. It is true that many public school teachers ignore these incentives and perform their duties admirably. However, a system that depends upon people ignoring its incentives is bound to produce a product that is highly variable in its quality-which is an accurate description of today's public school system.
The lack of market incentives in education is one reason why the numerous minor reforms and billions of dollars spent over the last decade have made little difference in the overall quality of public education.
Those who wish to improve education must focus on changing the incentives within the system so that successful schools are rewarded and poorly performing ones are not. Charter schools, tuition tax credits, school vouchers, and other market-based reforms are all a step in the right direction toward a sound incentive structure.
Parents who are free to choose schools that deliver quality education and avoid those that don't need not rely on the good intentions and benevolence of others to ensure their children receive the best instruction possible.
Gary Wolfram, a member of the State Board of Education, is George Munson Professor
of Political Economy at Hillsdale College in Hillsdale, Michigan, and a member of the
State Board of Education.
