Education is not a pure public good. The marginal cost of educating an additional child is far from zero; indeed, the marginal and average costs are (at least for large school districts) approximately the same. And there is no difficulty in charging an individual for use of this service.
Those who seek to justify public education in terms of market failure focus on the importance of externalities; it is often claimed, for instance, that there are important externalities associated with having an educated citizenry. A society in which everyone can read can function more smoothly than a society in which few can read. But there is a large private return to being able to read, and even in the absence of government support, almost all individuals would learn this and other basic skills. Indeed, most individuals would go far beyond that. The question is, given the level of education that individuals would privately choose to undertake were there no government subsidy, would further increases in education generate significant externalities? There is no agreement concerning the answer, but the case for government support based on these kinds of externalities seems, at best, unproved.
This was written by a very prominent American economist back in the late 1980s. He’s still alive and productive.
Who is he?
READER COMMENTS
Jeff G.
Dec 18 2020 at 11:29am
Larry Summers?
Arnold Kling
Dec 18 2020 at 11:31am
It could be anybody with an understanding of the theory of public goods. Even Paul Krugman. In the late 1980s, he was capable of writing like an economist.
Steve
Dec 18 2020 at 11:43am
You wouldn’t have posted this if the answer wasn’t somewhat “shocking”, so my first thought was Krugman as well.
Mark Z
Dec 18 2020 at 11:55am
Sound reasoning, that’s my guess as well.
robc
Dec 18 2020 at 12:43pm
But is he still productive?
Robert
Dec 18 2020 at 12:02pm
The hint was “still alive and productive.” Krugman is certainly still alive, but his output today is as a NYT political pundit. That can hardly be held in the same regard as a productive economist. I find that many of his opinion pieces do not add to the knowledge base, but rather subtract from it… the opposite of productive. The great Richard Starkey once noted, “Everything politics touches turns to s**t.”
Robert
Dec 18 2020 at 12:26pm
I don’t think it would be shocking if it were Krugman. What would be shocking is if he still believed it.
Jon Murphy
Dec 18 2020 at 12:43pm
I’m thinking Joe Stiglitz. The writing style seems like him, as does the focus on externalities. But the description of the “Pigouvian Problem”* is unlike him. So, let’s say 60% confidence on my part.
*By “Pigouvian Problem” I am referring to the issue John Nye talks about in his 2008 paper “The Problem of Pigou.” Most discussions of externality and market failure ignore currently-existing institutions and incentive structures. Ignoring current institutions and incentives is the issue Ronald Coase raised in “The Problem of Social Cost” as to why Pigouvian taxes and government intervention are not automatically appropriate in an externality situation.
Thomas Hutcheson
Dec 18 2020 at 5:11pm
I think the argument for finance/provision of education are much more distributional. Well to do families have provided their offspring with education since … The gradual expansion of public provision of education (technologies for separating finance from provision have not existed for long) basically allowed for education of the off spring of lower income families.
On a separate point, while Pigou taxes are not necessarily appropriate in every circumstance of externalities, neither are they necessarily inappropriate. Like any other policy, only a cost benefit analysis can help decide. It was this quantitative question that the mystery economist was addressing.
Fazal Majid
Dec 18 2020 at 12:48pm
Most governments and the Church realized they needed a reliable supply of qualified staff, which is why the earliest universities in the West set up to produce clerics, and governments set up schools to produce administrators, clerks, military officers and engineers, and so on.
During the Meiji Restoration the Japanese government would pay for medical school for poor students in exchange for some years of military service. That way it got a supply of military doctors, and after a few years medical supply to the general population increased as well.
Jerry Brown
Dec 18 2020 at 2:06pm
Robert Solow?
Thomas Hutcheson
Dec 18 2020 at 4:48pm
Whoever said it left out the issue of public finance of education and public provision of education. The arguments for the former are much stronger than the latter.
David Henderson
Dec 18 2020 at 7:02pm
Jon Murphy wins the prize.
Jon Murphy
Dec 18 2020 at 7:59pm
Yay! What do I win? Is it a year subscription to Econlog?
David Henderson
Dec 18 2020 at 10:40pm
Two correct guesses.
First, the right answer. Second, you guessed the prize correctly.
Phil H
Dec 18 2020 at 11:56pm
The problem with that statement is an empirical one. There is no country in the world that has achieved universal literacy without public provision of schooling. But reading has been a valuable skill for at least a thousand years, probably much more.
I don’t know why the market failed on this. Nor, apparently, do economists. But it did, and we can’t just wish that gap away.
Jerry Brown
Dec 19 2020 at 12:50am
Phil, it just isn’t fair to point out historical reality when discussing economics. But I could just as easily say that 5 year olds today have a better grasp of the cost versus benefits than the children in the past did. Because they are more rational consumers or something.
Thomas Sewell
Dec 19 2020 at 12:54am
It appears that U.S. literacy shifted from 80% to 90% based on free public education. That’s a good improvement, but it’s far from overwhelming.
The vast majority of countries have public schooling, but not universal literacy. So it seems to not be sufficient in and of itself. Perhaps other motivations and capabilities are also required?
Based on literacy rates for women (which severely lagged men in the United States, but picked right up to match and exceed men as more women were able to do more literate work, and thus found literacy more useful to them), it appears that literacy increases when there is more demand for it by people, generally because the world around them demands more literacy to survive and/or thrive in.
That sounds like a market providing the correct amount of something, not a market failure. You can’t just declare your preferred literacy rate to be the “right” one and then claim a market failure if it doesn’t match your preference. You’d need instead to establish that there are reasons for a different rate than the market provides at a given time which the market can’t account for.
Otherwise, it’s like saying, “I think everyone should have a gun, because guns are useful and have been for thousands of years, yet the market has failed to provide for every single person to have a gun! Market failure! The government needs to buy everyone firearms!”
I trust you can see the flaws in the above paragraph. They also apply to the provision of education, including literacy.
David Henderson
Dec 19 2020 at 10:07am
Very good answer, Thomas.
I would recommend to anyone who thinks that government has done a good job with education and thinks that there was market failure that he/she read E.G. West, Education and the State. I remember Milton Friedman saying in an interview that this was the book that convinced him that we don’t need any kind of government intervention in education. He had seen vouchers as a first-best way of handling a positive externality. Eddie West convinced him that there was no substantial market failure.
Sergio Martinez
Dec 19 2020 at 5:26am
If the government were in charge of instructing toddlers how to walk, eventually people would start thinking that government should teach people how to walk or else they could never learn how to do it. I think something similar has happened with government schooling. Since government schooling is heavily subsidized, we do not have a proper benchmark of how education and literacy would evolve if they depended entirely or mainly on the private sector.
Jon Murphy
Dec 19 2020 at 9:40am
Yes. And empirically, education is not a public good.
Now, if one wants to argue that for policy reasons there should be universal literacy, that’s fine. But note two things: 1) that is a different conversation and 2) that is not a market failure.
Phil H
Dec 20 2020 at 4:37am
Thanks for the comments.
Thomas:
“It appears that U.S. literacy shifted from 80% to 90% based on free public education.”
I don’t see that at all. For example, I find a source that says: “Virtually from the time of settlement…in New England, schools were frequently organized and funded at the village or town level. It is likely that the U.S. had the most literate population in the world by 1800.”
Local government is still government! The ways in which governments provide education varies considerably, and there is much room for debate. But it seems reasonable to distinguish clearly between public private provision.
“You can’t just declare your preferred literacy rate to be the “right” one and then claim a market failure if it doesn’t match your preference.”
Of course I can! That’s exactly what we mean when we dismiss “market fundamentalism”. Market fundamentalism is the doctrine that whatever the market provided was right. But it’s simply not true. The fact that the market provides fake medicines doesn’t prove that fake medicines are good. I teach English in China, and the fact that the market here provides many incompetent English teachers doesn’t prove that they are actually good teachers. There *are* objective standards of goodness other than what the market provides. And for a state or a workforce, it has been true for a long time that literacy is better than non-literacy. (Incidentally, I’m not “just” declaring, of course – I’m appealing to shared grounds or providing arguments that full literacy is good.)
“I trust you can see the flaws in the [gun] paragraph.”
I can indeed, but the flaws are in the premise that guns are useful for everyone, not in the reasoning that follows.
Jon: “And empirically, education is not a public good.”
You keep using that word. I don’t think it means what you think it means… Whatever definition of a public good you’re using, it’s a heavily theoretical idea. I’m not sure we can make any empirical claims about it. I certainly wasn’t appealing to any definition of a public good.
“if one wants to argue that for policy reasons there should be universal literacy…”
I do!
“that is a different conversation”
Welcome to my conversation!
“that is not a market failure.”
I mean… by your definition, it would literally have to be. You guys are the ones who claim that markets provide all goods better than any other means. So the failure to provide a good would *have to* be a market failure. I personally don’t start from that perspective, so I don’t really have to define it as a market failure or non-failure as a market anything. It’s just something that markets didn’t do, and government has done. (Now that’s an empirical observation!)
KevinDC
Dec 20 2020 at 7:59am
Hey Phil –
I wrote a longer reply to your original comment, but it looks like it was eaten by the spam filter for now. It may re-appear, but in the meantime, there’s still a lot here worth commenting on.
Regarding your source on local schooling, etc – your response is irrelevant. The initial claim wasn’t about when public schools were established in the US or at what level of government they were organized. The claim was about the change in overall literacy that came about as a result of those schools being opened. Nothing in that reply is at all relevant to that claim.
Well, by that definition, I don’t know any market fundamentalists. Even among anarcho-capitalists, I’ve yet to encounter even a single person who has argued that whatever the market does is always right. Even the most ardently pro-market books I’ve read come with a whole laundry list of conditions that allow the market to get things wrong. If there really are authors making the claim you describe, I’d be curious to know about them. Could you please point out examples of them, by name, and cite specific and verifiable sources of them making the claim you’re attributing to them? I suspect what’s happening here is you are badly failing the Ideological Turing Test, but I am willing to be shown wrong.
Phil H
Dec 20 2020 at 9:48am
Hi, Kevin.
Schooling: Sure, I didn’t fill out all the details. My point was that literacy in the 19th century was far below the 80% level that TS was citing, but some government provision of schooling had already started by that time. So his claim that a 10 percentage point uplift in literacy is all that happened during the period of government school provision is incorrect. It looks to me more like a shift from about 50% (around the start of the 19th C) to the 98-99% levels that we have today.
Market fundamentalism, can I provide you with an example – why certainly, in the very post to which I was responding:
TS says: “it appears that literacy increases when there is more demand for it by people” – he gives no evidence for this demand, other than the fact of more schooling happening. He makes surmises about the relative levels of demand across genders, again based *only* on the actual literacy outcomes (which he claims are market outcomes). This is a textbook case of assuming that the fact that a market created outcome X proves that outcome X is optimal. Market fundamentalism in action!
Another example: David Henderson on Covid. He argues often that the fact that people choose certain actions proves that they are optimal, or better than some other option (lockdowns). But there are other measures (e.g. number of cases; economic activity) by which other approaches (e.g. China’s) are clearly superior.
KevinDC
Dec 20 2020 at 8:41am
Oops, I accidentally hit “submit comment” too soon.
When you say things like this, it makes me genuinely wonder if you’ve read even an introductory text to basic economics. Among economists, there is no ambiguity about the definition of a public good, and it’s not a “heavily theoretical” idea about which no empirical claims can be made. It’s a very simple and straightforward idea – public goods are goods which are both nonrival (can be used by multiple people simultaneously) and nonexcludable (can be used without paying for it). When goods are nonrival and nonexcludable, the market will fail at providing it. These are simple concepts about which it’s easy to make empirical claims. For example, when Stiglitz points out of education “there is no difficulty in charging an individual for use of this service,” he’s making an empirical claim which shows that education is not a public good, because education isn’t nonexcludable. (That double negative just feels weird 😛 )
Well…Stiglitz was. The conversation Stiglitz was starting was explicitly about whether and to what degree the standard economic case for the public provision of education (public goods and externalities) actually applies in the real world. If you think Stiglitz is getting his economics wrong, your reasons would be interesting to read. If you think Stiglitz is succumbing to “market fundamentalism” as you defined it, that would be rather comical. But from what I can tell, the response you initially left makes no contact whatsoever with the actual topic under discussion – it’s a mix of changing the subject and red herrings.
Regarding that middle sentence – again, citation please, to a specific source making that specific claim. (Hopefully to an actual scholar or economist or philosopher – otherwise I can just find people on your side of an issue who have left dumb internet comments on a YouTube video somewhere and use those comments proof of what “you guys” really believe, despite your own protestations to the contrary.) Regarding the first and third sentences – again, this just shows you aren’t familiar with even basic or introductory economics. By your definition the failure of the market to provide a good would have to be a market failure? Seriously??? That doesn’t have anything to do with the standard definition of market failure. At all. While I’ve rarely agreed with you, I’ve usually assumed you were familiar with at least the basics of economics and libertarian thought (being the two most common topics on this blog), but a comment like that is forcing me to downgrade my estimation. It’s so far off base that it’s not even wrong.
This seems a bit silly. That would be like me identifying my preferred political candidates as the “right” ones, and then, if they aren’t elected, using that as proof that democracy has “failed.” Neither democracy nor the market are meant to be systems that ensure every single individual gets the society wide end results they personally want – such a goal is impossible anyway, because there are multitude of different preferred outcomes across a civilization which are incompatible with each other. To declare that the system is a failure because the end results were different from what you personally preferred seems much more like a fundamentalist (and, frankly, solipsistic) attitude to me.
Jon Murphy
Dec 20 2020 at 10:17am
No. A market failure is when the market process doesn’t take into account all the social benefits and social costs (see this free online textbook, page 278). In more precise technical terms, there are Pareto-relevant exchanges that could take place but do not (see James Buchanan and Craig Stubblebine’s 1962 paper Externality). But a market failure is not “whatever Phil H (or whomever is making the claim) dislikes.”
Now, it is true that any claim of market failure is ultimately normative, as it requires a normative assessment of the competency of government (see Carl Dahlman’s 1979 paper The Problem of Externality). But simply saying “I do not like this outcome” is insufficient for a market failure story.
Citation? In all the years I have been studying and publishing on market economics, I have never heard that claim made by serious scholars, and certainly never by any economist. Indeed, most free-market economists emphasize the role market failure has in promoting economic growth (see, for example, Don Boudreaux and Burt Folsom’s 1999 paper Microsoft and Standard Oil or Sandy Ikeda’s 1997 book The Dynamics of a Mixed Economy, in particular chapters 3 and 4. FA Hayek, L. Mises, I. Kirzner, S. Horwitz, D. Henderson, all emphasize the same, as do many textbooks).
A public good is a heavily theoretical idea in the same way that states of matter are a heavily theoretical idea as well. They’re classifications. In order for something to be classified as a gas, liquid, or solid, it must meet certain criteria. Same with a public good. And we can through empirical observation (that is “verifiable by observation or experience rather than pure theory” according to the Oxford English Dictionary) to see whether or not something meets those criteria. In pure theory, education may be a public good. Empirically, it is not, as seen by the EG West study (and many others).
No. Notice that your second sentence is not the opposite of the first. The key phrase is “better than any other means.” We argue that markets, in general, provide goods better than other arrangements. Thus, if the market fails to provide a good, it is not necessarily a market failure. Only if there are better alternative arrangements (see my comment above about market failure). For a more thorough discussion of the subtleties of this point, see Ronald Coase’s 1937 paper The Nature of the Firm
KevinDC
Dec 20 2020 at 11:39am
I seem to be really bad at hitting “reply” when I post comments, and I also seem to be good at writing things that attract the spam filter. I’ve got at least two comments right now percolating through the system that may as yet appear, but there is one more thing here that I wanted to address, because it’s just particularly egregious.
Really? Does this really represent your best, good faith effort to accurately summarize the views of the people you’re talking with? If you were trying to pass the Ideological Turing Test, is this really how you would describe the case? Because it’s so unrelated to what “we guys” claim that it’s not even wrong. If your best efforts to understand the views of libertarian oriented free market economists is that…then I am almost at a loss for words. So, I’ll just defer to a smarter man than me. You’d be hard pressed to find an economist more supportive of the free market and more skeptical of government intervention than Thomas Sowell. He’s an excerpt from his book Basic Economics:
This mindset and method of analysis is wildly different from the one you’re projecting. And this is unfortunate, because it makes it highly unlikely that I’m ever going to be able to learn anything from discussion with you. I’ve been persuaded to change my mind many times in my life, on topics both significant and trivial. But I have never been convinced to change my mind by someone who has repeatedly proven themselves incapable of giving even a minimally accurate description of what my views actually are.
Jon Murphy
Dec 20 2020 at 11:51am
KevinDC’s response here made me think of a better way of framing the objection to Phil’s understanding of “market failure” (I do not pretend that what follows is better than either Thomas Sewell’s objection above, Thomas Sowell’s objection described by KevinDC, or KevinDC’s own comments. It is just better than what I have already said).
If a market failure is a failure to provide goods, and as implied by Phil H’s comments, provided at a desired price, and that a market failure is also a matter of perception, then everyone to the right of the equilibrium point on a standard supply and demand curve would consider the market a market failure. The demanders would prefer to have the good at a lower price, and the suppliers would prefer to sell the good at a higher price. There is a failure to provide the good.
But note two things:
First: this definition of market failure would mean every market is inherently a failure. There is no “market success” to compare to. So, we have an empty, meaningless phrase. It exists neither as a theoretical situation or an empirical one.
Second: This definition of market failure is inherently contradictory as it simultaneously requires price to be too high and too low and no reference to tell us which it is.
In short, Phil H’s definition of market failure is not internally consistent.
KevinDC
Dec 20 2020 at 1:27pm
Hey John –
That is an interesting point, but it’s also neither better or worse than what I was getting at with Sowell’s quote. Instead, different topics 😛
Your point here is a good one, addressing Phil’s unorthodox redefinition of “market failure” from the way it’s used in economics into his own rather idiosyncratic definition. The redefinition is problematic enough – Stiglitz and all economists use “market failure” in a specific meaning, so to try to rebut the arguments by using your own personal measure of “market failure” just makes the whole exercise one big fallacy of equivocation. But I also agree it’s just a bad definition in its own right and one its own terms – although I hadn’t thought of the point you make, which is well put.
But the point I was getting at with Sowell was different. Sowell (and all free market economists) understand that in markets there will always be unmet needs and unfulfilled goals, there are never solutions, always trade offs, etc. So for Phil to say that by the free market economists own definition, the lack of a particular good or service being provided in the market must be evidence that the market has failed just shows a complete lack of understanding of how free market economists understand the market process. Not only is the idea that various goods will be unprovided not contrary to our understanding of market process – its integral to it, built in at the very basic, most ground level understanding of market process. It’s just completely flabbergasting to say something like that. The closest thing I can think of as a parallel is telling an evolutionary biologist that they must consider their theory be violated because characteristics are transmitted via genetics. That…doesn’t contradict anything in evolution – it’s built into it!
Jon Murphy
Dec 20 2020 at 3:44pm
You’re absolutely right about trade-offs, KevinDC. And I was reading your comment not quite in the manner you intended.
Sergio Martinez
Dec 19 2020 at 5:04am
I was about to say Joe Stiglitz, and then I saw that Jon Murphy got it first. I am glad, however, that I got the answer right as well. 🙂
Stiglitz wrote like a true economist back in the day. He wrote like one who took the economic way of thinking seriously. It is a shame that he is now fond of summoning all sorts of market failures to justify Big Brother.
The quote is great. I’d love to use it for a facebook page on economics that I manage.
David Henderson
Dec 20 2020 at 2:14pm
I think it’s a great idea to use it.
I’ve got more. I worked my way through his textbook recently, looking for something else, and found a lot of great qu0tes. I’ll be posting them over the next week or so.
KevinDC
Dec 19 2020 at 11:17am
Hey Phil –
As others have pointed out, you seem to be using “market failure” in a way that is wholly unrelated to how it’s used by economists in general and Stiglitz in this particular piece. Thus, pointing out that historical literacy rates prior to public education were less than universal and calling this a “market failure” makes no contact at all with the point Stiglitz is making and how market failure is defined for the purpose of that argument – that’s just a fallacy of equivocation. Similarly, discussing if something is a “public good” just addresses if a good or service is simultaneously nonrival and nonexcludable – and by this definition, education plainly isn’t a public good.
Pointing out that no countries have achieved universal literacy that didn’t also have public education just isn’t an example of doing good empirical work. That’s nothing more than the fallacy of correlation and causation. From the fact that highly literate societies have had public education, it just doesn’t follow that public education is therefore a necessary or sufficient condition for high levels of literacy. Nor is it effective to point out that literacy rates in various societies rose after implementing public education – that’s just the post hoc ergo propter hoc fallacy.
I think you might be overestimating the benefits of literacy for the average person a thousand years ago. At that time, virtually everyone lived at barely above subsistence. Productivity was astonishingly low compared to what we see today – to even survive required almost constant labor, every day, from as soon as one was physically able to work. In a world like that, the opportunity costs of learning to read were enormous, and the benefits would have been relatively tiny. Today literacy is all but essential – there are almost no jobs you can do if you’re illiterate. A thousand years ago, almost no jobs required literacy – hardly surprising in a world where almost everyone is illiterate. Being illiterate today shuts you out of almost everything, while being literate a thousand years ago barely opened any doors for you. Given the incredibly high opportunity cost and the extremely low personal benefit, the economically efficient level of literacy would be very low for most of human history.
As societies become wealthier and more productive, the trade off changes. The benefits of literacy rise, and the opportunity cost of learning to read falls. So we’d expect to see the rate of literacy rise in a way that tracks the increases in productivity and wealth – which is in fact what we see. As societies grew wealthier, the rate of literacy rose along with it. There’s no convincing evidence that the introduction of public education did anything for this trend. As societies grew wealthier, literacy increased, and as societies grew wealthier, they also implemented public education systems. The isolated data point about how highly literate societies also have public education is far too simplistic. Like Thomas pointed out, literacy had been on the rise for a long time in the US well before the introduction of public education. Wealth and productivity in the US continued to grow after public education was implemented, and literacy rates continued to grow as well.
The idea that public education was a critical component in rising literacy rates also makes specific predictions that the data simply don’t support. Thomas also pointed out that most societies these days have universal and compulsory public education, but many of those also have far from universal literacy. But there’s a more specific way of looking at it – if public education was a critical component (or of significantly greater importance than increasing wealth), then we should expect to see that show up in comparisons between countries in the historical data. If poorer country A adopted public education earlier than wealthier country B, we would expect to see that literacy level and its rate of change in A would be particularly advantaged against B – at least until B later adopts public education as well. But that simply isn’t the case. Historically, wealthier countries without public schooling still had higher literacy than poorer countries with it. Holding public schooling constant and controlling for wealth makes a huge difference in the data. But holding wealth constant and controlling for the presence of public education doesn’t make a significant difference.
KevinDC
Dec 20 2020 at 10:50am
Hey again Phil – I had also posted a different reply as well (I accidentally hit “submit comment” too soon) so my actual reply was as two parter, but the second half looks like it was also eaten by the spam filter. I swear it seems like half my comments get eaten here, but they usually show up after a few days. So, there’s more, but I’ll wait for the spam system to sort it out.
You said:
If that was your point, your reply still doesn’t support it. Not merely in a “not filling out all the details” sense – it provides no evidence whatsoever in support of the claim you are making at all. You quote an unnamed source as saying “Virtually from the time of settlement…in New England, schools were frequently organized and funded at the village or town level. It is likely that the U.S. had the most literate population in the world by 1800.” That provides no evidence that “in the 19th century literacy was far below the 80% level that TS was citing,” (and, for what it’s worth, TS didn’t claim literacy in the 19th century was 80%). All your quote says is that some local villages in New England had some local schools established, and that by 1800 the US (not merely New England – the entire US) was the most literate population in the world. That’s not evidence in support of the claims you made. Your claims might still be true, but this does nothing to support it.
This is a straw man. David Henderson certainly does argue that there were better options available than lockdowns. But when he’s argued against lockdowns, he’s never, ever argued that since people would choose options other than lockdowns, it proves those choices are correct. He gives specific reasons why he thinks lockdowns are suboptimal, and specific arguments for why alternate approaches would be better. He cites numbers, considers counterpoints, weighs trade offs, stuff like that. He has never once argued that the fact that people choose certain behaviors proves those choices were therefore correct or optimal. This is a silly oversimplification that completely sidesteps the case he actually makes.
Of TS, you said “He makes surmises about the relative levels of demand across genders, again based *only* on the actual literacy outcomes (which he claims are market outcomes). This is a textbook case of assuming that the fact that a market created outcome X proves that outcome X is optimal. Market fundamentalism in action!” This is wrong on many levels. First, he didn’t claim that the rates of literacy that existed at any given point were optimal – that’s entirely an invention on your part. His whole claim was about the relative contribution of markets and public schooling to literacy rates. He thinks market forces played a larger role relative to public schooling – you disagree. But TS never said anything to the which entails the idea that “in the absence of public schools the market provided X literacy and we know X literacy was optimal level because the market provided it.” (He might believe that for all I know, but he certainly didn’t say it. Given that I lack mind reading skills I’m not going to attribute that belief to him.)
Also, in your initial reply, you said “Incidentally, I’m not ‘just’ declaring, of course – I’m appealing to shared grounds or providing arguments that full literacy is good.” But this is false – at no point did you provide any arguments that full literacy is good. And that’s one of the points I covered in my initial (as yet, still eaten) reply – I make an argument that for much of history, full literacy would not have been good. And no, my case is not “the market didn’t provide full literacy therefore it obviously wasn’t good.” Assuming my comment does reappear, and you read the case that I make – if you come out of it thinking I’m claiming full literacy wouldn’t have been good because the market didn’t provide it you are misunderstanding my case. That seems worth specifying in advance for some reason 😛
Jerry Brown
Dec 20 2020 at 2:14pm
Well I thought Phil H’s comment at 4:37 was excellent and I would have been very proud to have written it.
It has obviously struck some nerve though- more has been written in opposition to it than the entirety of the original post by David Henderson.
Some points- the numbers Thomas Sewell provided about literacy increasing from 80% prior to public education to 90% afterwards are difficult to justify. There is for one thing different definitions of literacy that seem to be used which is a problem. I had spent about a half hour attempting to research estimates of historical literacy rates and came up with nothing near those numbers. The best I could find was for the UK where the estimate for literacy was 5% around 1500 and rose to slightly above 50% between 1820 and 1860 and then rose over time to about 99% now. I am not sure how that correlates with the history of public education in the UK – but those estimates are very far off of what Thomas provided.
When Phil states that Market fundamentalism is the doctrine that whatever the market provides is right- well I would say that is true as an observer and reader and student of many economists, who will throw in some caveats, but basically say just that when you boil it down. The general idea is that the market will usually come up with a better solution than any individual or authority will come up with.
My favorite part is Phil saying “Of course I can!” in response to someone saying you cant claim a market failure if it doesn’t match your preference. And of course we can and should when what ‘market outcomes’ provide drastically differ from what we hold to be correct or moral or right or however you want to think about it.
Jon Murphy
Dec 20 2020 at 3:09pm
To state that the market is always right is not the same as saying the market tends to work better than alternative arrangements. Again, the main crux of Austrian, UCLA, and Chicago-style economics is that the market is not always right. It frequently (almost always) is wrong. But those mistakes are what allow for economic growth and entrepreneurship. Competition exists to discover and overcome the “wrongs” in the market.
Again, if you want to argue that the market deviates from a “correct” or “moral” personal preference, that is fine. But that is not a market failure.
Jon Murphy
Dec 20 2020 at 3:54pm
Let me elaborate on the difference between a market failure and a personal preference difference.
I am a Christian. I believe in the Nicene Creed. I believe the entire world would be better off if everyone professed and lived the Gospels.
The fact the entire world is not Christian, that there are many different religions and sects of Christianity, is not an indication of a market failure. Indeed, the market is satisfying their various beliefs and creeds! If, through diktat, the entire world were forced to comply to my religious preferences, people would be made worse off. The social benefits would be less than the social costs. The market did not fail prior to the diktats. After the diktats, the markets did fail (because the diktats did not allow the market to adjust).
If society does not value things a certain way, it is not a market failure. At best, it’s a societal failure (though it’s not necessarily the case that it is a failure at all)
KevinDC
Dec 20 2020 at 4:45pm
Following up on this, because I find it interesting.
I am a vegan, for ethical reasons. I believe the ethical case for a vegan or vegetarian diet is very strong, and I find the moral critique of the farm industry very persuasive. (However, I’m definitely not looking to turn this into a debate on the ethics of meat eating – that would be far too much of a detour!) But it would be silly to call the success of the meat industry a “market failure” on that basis. I would argue that its a failure of society, not the market.
However, if I was economic policy king for a day, I’d definitely prioritize ending the massive subsidies given to the meat industry on that basis. Unfortunately, I can’t quite figure out where to apply for the position of economic policy king. It’s really slowing down my progress.
Jerry Brown
Dec 20 2020 at 4:59pm
Jon, I am probably missing something here but I just don’t see much difference between what I said and what you said. I don’t exactly understand the commenting protocols here, but I would agree that if we all lived according to what Jesus said the world would be a better place. Merry Christmas soon Jon!
Phil H
Dec 20 2020 at 3:56pm
Wow, that’s a lot of comments! There’s no way I’m going to get through all of them so, just some highlights…
On market failure: Jon & Kevin are both achingly keen to educate me on what this term means. But I don’t really care what the term means, and I avoided using it. I just note that there are no examples of places where education is provided only through market means, and literacy is also high. Whether that’s a “market failure” under any definition of that term is of no interest to me. It’s just something that market haven’t done. Maybe they could do it! But that would have to be argued for.
Jon: “if you want to argue that the market deviates from a “correct” or “moral” personal preference, that is fine. But that is not a market failure.”
Yes, exactly. I’m not an economist, and so it would always be unwise to read technical meanings into my uses of ordinary language.
On basic ability to read:
Kevin: “TS…didn’t claim that the rates of literacy that existed at any given point were optimal – that’s entirely an invention on your part.”
TS: “…literacy increases when there is more demand for it…That sounds like a market providing the correct amount of something…”
You’re on particularly condescending form today, Kevin, so you’ll forgive me for bringing you up short on stuff like… reading.
Jon Murphy
Dec 20 2020 at 4:08pm
No, you didn’t. You used it a lot and was proud of your usage even going so far as to create an idiosyncratic definition and attributing it to “market fundamentalists.” Heck, your very first comment was all about how education is a market failure because it doesn’t conform to your beliefs.
KevinDC
Dec 20 2020 at 4:15pm
Hey Phil –
There is huge difference between saying “literacy increases more when there is more demand for it, and that looks like the market provides the right amount,” which is what TC did say, and the view you ascribed to him, which is believing that the amount provided by the market at any given time was by definition optimal because it was the amount the market provided. Those are very different statements, and it seems just a tiny bit disingenuous to act like what TC said justifies your characterization.
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