XPost: soc.culture.nordic
From: ddfr@daviddfriedman.nopsam.com
In article ,
Anton wrote:
> [Followup-To: s.c.n and r.a.s.m]
>
> David Friedman kirjoitti:
,,,
> > By private provision of schooling, I mean that schools are ordinary
> > private firms, and parents choose which one to pay to educate their
> > children
>
> Ok. I understood it correctly then. The problem is, that in certain
> rural areas there is a chance for local monopolies to occur, and thus
> there will be no benefits of market competition at all.
I suspect that even in modern Finland, that situation is the exception,
not the rule. Economies of scale in schooling are not, in my
observation, nearly as large as the size of modern U.S. schools (I don't
know how big Finnish schools are) implies. The U.S. one room
schoolhouses seem to have worked tolerably well, and our children spent
some years in a very unconventional private school whose total
enrollment, covering all grades K-12 (except that it wasn't organized
that way), never passed thirty.
And even a local monopoly faces competition--the risk that, if customers
are dissatisfied, someone will start a new firm, take over the market,
and become the new monopoly.
> On the contrary
> unless education is subsidized for those who are less off, there will be
> disadvantages of this model (other than economical).
Certainly a widespread belief. E.G. West's work on the case of 19th
century Britain (_Education and the Industrial Revolution_) suggests
that the evidence for it isn't very good--prior to government
involvement, people much poorer than the modern poor were providing
schooling to their children, at a lower level than we are used to but
not obviously lower than contemporary state run systems (i.e. Prussia).
I've also seen an account of low cost private schools in the modern
third world, competing with free public schools for the business of poor
people dissatisfied with the very low quality of the latter.
But in any case, the point I was initially making was not that actual
privatization was always a good thing, although I think that comes close
to being true, but that it was a different thing from outsourcing by
state providers.
> Also, when the
> education is subsidized, the argument that private ownership cuts
> "costs" of "socialism" does not hold.
I don't think that's correct, if I understand you. If the subsidy is to
the parents rather than the schools, as in a voucher system, then the
arguments for the advantages of private provision still hold.
Consider the analogous case for food. There is a large difference
between a welfare system in which poor people get food stamps that can
be used to buy food at any grocery store and a system where food
production and distribution is run by the government.
> >, just as they now choose what private restaurant or private
> > grocery store to buy food from. That could occur either with a fully
> > private system, such as England c. 1830, or with a voucher system, where
> > some or all of the money was provided by the state to the parents.
>
> This way of subsidizing creates temptations for the provider to further
> increase the asking price for the service than it normally would, when
> the government by this subsidy is artificially improving the bying power
> of the buyer. So tax payers might basically end up from financing the
> upkeep of the service to finance increased dividends to those who own
> the stock of the service provider.
That assumes either a monopoly service provider or closed entry. Given
open entry and competition, the profits of the firm are driven down, for
the usual reasons, to the market return on capital.
>
> > By private provision of railway services, I mean that railroads are
> > private firms selling their services to anyone who want to buy them--the
> > way in which railroads in fact developed in the U.S. and (I think) the
> > U.K.
>
> The whole structure of this business even technically has such
> characteristics that in many cases there will be a privately owned
> monopoly.
I can't speak to the Finnish case, but in the U.S. it was considerably
more complicated than that. There was frequently a monopoly on the short
haul, between two towns that happened to lie on the same railroad line.
But there were a large number of different ways of getting goods from,
say, Chicago to New York, and a still larger number of ways of getting
them from Chicago to the east coast to be loaded onto ships bound for
export markets.
And even a private monopoly railroad is constrained by the competition
of other transport modes, such as barges. A government monopoly isn't so
constrained, since it can regulate the competitors to prevent
competition. That's what happened in the U.S. with the post office. The
Private Express Statutes made it illegal for anyone else to carry mail,
so when a private competitor appeared the Post Office had it put out of
business. Currently the laws still exist, but firms such as UPS have
found loopholes that allow them to provide a close substitute under the
rubric of package delivery.
In the case of the U.S. railroads, much the same thing eventually
happened, that time as a result of government regulation not ownership.
The ICC got control over first the barges and, later, trucking, and used
it to protect their initial regulatees, the railroads, from competition.
All of which I take as an argument for a private industry without
government regulation.
...
--
http://www.daviddfriedman.com/ http://daviddfriedman.blogspot.com/
Author of _Harald_, a fantasy without magic.
Published by Baen, paperback in bookstores now
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* Origin: you cannot sedate... all the things you hate (1:229/2)
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