Why it doesn’t make economic sense to run education like a business

If you have sent a child to college lately, or gone yourself, you know that high costs are a problem.

This situation has led a lot more people today to think that education ought to be run more like a business.  At first glance, this makes sense.  Education is expensive.   It often produces students with questionable academic qualities.  Businesses, meanwhile, are very good at cutting costs, increasing efficiency, and innovating to produce better products.  So, it is thought, we should think about students as “customers,” and education as a “product.” Apply business principles to education, and we will bring costs down and produce a better product!  Everybody wins!  Happy ending!

Nope.

Apply business principles to education and we will produce a worse product.  In fact, right now we may be producing a worse product and making education more expensive because we are increasingly treating education like a business.

"Student" or "Customer?"  Stay tuned for the answer.

“Student” or “Customer?” Stay tuned.

Education is a different animal.  Yes, there are economic dynamics to education that we need to think about carefully.  But if we actually take a close look at how things work on the ground – in the classroom – we will see that students don’t behave like customers in a capitalist society.  Nor do we improve education in the same way that we improve economic products.

Adam Smith should be taught but not implemented in the classroom. Adam Smith (as you all remember very well from your history courses, right?) was the Enlightenment thinker who laid out many of the essential principles of modern capitalism.  According to Smith, all of society benefits if businesses operate with a free hand in a system of competition.  Because a business owner wants to make more money, he or she (Smith did not think about “she,” actually) will do what can be done to lower costs, increase efficiency and produce a better product.  Customers will get lower costs and better products.  The business owner makes money.   “He intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention,” wrote Smith.  Everybody wins!   Happy ending!

But that doesn’t work in the classroom.  (Some would argue it doesn’t really work that well as a system of economics, but that’s a different issue).

To keep the reading more manageable, I’ll lay out my arguments over the next few blogs.  Tomorrow, I’ll post Barlow’s Law:  “Students Don’t Want Their Money’s Worth.”

(It’s my blog, so I was going to name the law after myself.  But I have to admit that I first remember hearing this phrase many years ago in a conversation with the late Jack Barlow, who was a history professor at Huntington University.  So I shouldn’t really name it after myself.  Rats.)

5 thoughts on “Why it doesn’t make economic sense to run education like a business

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