Monday, March 19, 2007

Schools: Natural Monopolies?

Bad voucher ideas have given vouchers a bad name.

Monopolies are rarely a good thing. Economists have a concept of 'natural monopoly,' which refers to a situation where the cost of infrastructure is so great that once one entity stakes out the territory, there is no economic incentive for a competitor to build a parallel infrastructure. For example, once one company builds a natural gas distribution network through a city, no one else will bother. Generally, when such a natural monopoly exists, the government takes the role of regulator to protect the consumers. Hence the ICC and its offspring, the FCC, and all the state public utility commissions.

We used to think telephone networks were like this, which is why Congress granted AT&T monopoly status years ago. But technology changed (cable tv and cellular in particular) and now we have lots of choice in our local phone service -- at least if you live in a metro area.

We have a similar situation with the schools I think. Many believe school systems are a natural monopoly, but I don't think that's necessarily true. In a metro area, in Ohio at least, we typically have a poor urban core surrounded by a collection of wealthy suburbs. This is nothing more than new age segregation, just as surely as if there were "po' folks keep out" signs on the suburban town limits. I think one of two things should happen: a) all the metro area school districts should be merged and any kid in the district should be able to attend any school they want (transportation provided); or, b) every kid in the metro area is given a voucher worth the average per-student spending in the metro area, and that voucher can be used to pay 100% of the tuition in any school in any district in the area.

In the rural areas, the situation is different. Population density is too low to afford much in the way of choice. Land values are low as well. But there are two distinct situations here too. In the case of agricultural areas, there is a sustainable economy with high employment, but not a lot of wealth (land poor as they say). It is reasonable public policy, in my opinion, to make it worth being a farmer, and if that means subsidizing the schools, so be it.

But there are other rural areas which aren't farmland, such as southeastern Ohio. My family settled in Lawrence County in the 1790s (my gggggrandfather was a Revolutionary War veteran), and there are many generations of my family buried there. But there aren't so many of my relatives left there today. Just as my ancestors left Europe to seek a better economic climate, my generation bailed out of post-industrial Appalachia to find better places to raise our families. We should not subsidize the cost of living for families in places without a viable economy just because there are many who would rather take Welfare than move.

Therein lays the most difficult problem of all. How do you incent the parents to go find a better place to live, yet not punish the kids of the parents who are too stupid or lazy to move?

Sam Kinison once said we shouldn't be sending food to Ethiopia, we should be sending them U-Hauls.

Same idea.

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