Every Industry Gets Worse When Government Gets Involved

This is easily provable with Public Choice Theory, and consistently proven in practice.

Contrary to the absurdly naive belief that monopolizing an industry will produce “efficiencies”, it has the opposite effect.  All the wrong things are incentivized and no one has any clear signal of what creates value. (See “Socialist Calculation Problem“)

Antony Davies shared this depressing graph with me last week.  If you’ve been to a health care provider in the last few years, you’ve felt the pain this causes in the realm of customer experience.

 

Non-Physicians in Health Care

How Change Happens – Higher Ed. Edition

The current higher education model is flawed.  If we’re serious about changing it, first we need to get serious about understanding how social change happens.  Intentions and action are not enough to bring about desired ends.  We need an understanding of the causal relationships involved in order to effectively bring about change.

The great truth that flies in the face of civics textbooks and popular myth is that politics is not the source of social change.  It’s more like the last in a line of indicators of cultural shifts that have already occurred.  Politicians and the policies they create only change after the new approach is sufficiently beneficial to the right interests, and sufficiently tolerable to the public at large to help, or at least not harm, political careers.  Of course some politicians guess wrong and suffer accordingly, but by and large the political marketplace tends toward preservation of the status quo until a new direction is imperative for survival.

An entire, and entirely fascinating, branch of political economy called Public Choice Theory examines the incentives at work in the political marketplace in depth, and I highly encourage anyone attracted to political action to gain a working knowledge of this field.  It reveals, in short, that incentives baked into the democratic system create and perpetuate policies that are bad for the public at large, and good for particular concentrated interests.  What Public Choice has a difficult time accounting for is the role of changing beliefs.  There are countless policies that, based purely on the incentives of various interests, ought to be in place but are not, or vice versa.  Some things are simply out of bounds, no matter how much a particular group might benefit and be willing to lobby, because the general public finds them unacceptable.

Contrary to the seemingly ironclad rule of interest driven politics, public beliefs can and do change, and dramatically sometimes, putting parameters around the area within which political actors can ply their trade.  Slavery is a striking example.  At one point, it would’ve been hard to get elected, at least in some areas, if you publicly supported abolition.  Not too many decades later, it’s unthinkable to get elected anywhere if you’ve ever even joked about supporting slavery.  There is certainly a complex relationship between changing economic incentives and public beliefs, but it is undeniable that the about-face on the ethics of slavery was more than a mere shift in power among competing interests.  What most of the public found tolerable they now find reprehensible.

Our institutions are formed by incentives, and incentives are constrained by beliefs.  That makes the beliefs of the public the ultimate key to change.  Smaller changes might occur within the window of things already publicly acceptable, but major change requires a shift in that window.  How to change those beliefs?  There are two primary drivers, both of which feed each other; ideas and experiences.

Ideas are the raw data that form beliefs.  If you accept the idea that minimum wage laws make lower skilled individuals less employable, and you accept the idea that a society with fewer unemployed persons is desirable, then you will have the belief that minimum wage laws are bad.  If, on the other hand, you’ve never really thought about the economics behind minimum wage at all, but your low skilled neighbor lost his job when minimum wage increased, that experience might also cause you to believe minimum wage laws are bad.

I spent a good part of my life focusing entirely on disseminating ideas as a way of changing belief.  It was fulfilling and, I think, valuable work.  But it wasn’t until relatively recently that I began to understand the immense value of experience as a vital second prong when it comes to changing beliefs and the world.

Consider the difficulty of convincing your mother that the New York City taxi cartel is inefficient or immoral.  It requires a great deal of economic theory or philosophizing about rights and coercion.  Your mom might have other things she enjoys more than reading books on these subjects.  Even if you convince her, her newfound belief will probably barely register among things she cares about.  Sure, taxis aren’t the greatest.  So what?  She’s never had that bad an experience.  Even if a policy change to end the cartel were possible, your mom mighn’t pay any attention, or she may be concerned about what the new world without cartels would look like in practice.

Now consider recommending your mom use Uber on her next trip in to Manhattan.  She uses it, likes it, and becomes a regular customer.  She may be completely ignorant of the current cab cartel and the problems with it, but she’s now a believer in an alternative system.  If Uber comes under attack from vested interests, she’ll defend it.  If the chance to end the cartel comes up, she won’t fear because she already knows what the world looks like without it.  She can’t easily be convinced out of her experience.

It is for this reason that dictatorial countries not only ban literature that propagates new ideas, but also goods and services that compete with government monopolies and let people experience something better.  The Soviet Union feared blue jeans, jazz, and Marlboro cigarettes as much as free market textbooks.

If we want to break out of the educational rut it requires new ideas and new experiences.  We mustn’t only talk about new approaches, we must build alternatives.  The best part is, you don’t have to wait on anyone.  You can take your own path right now, and by so doing not only improve your life, but serve as an example to others of what’s possible outside the status quo.  Educational entrepreneurs, not just intellectuals, will change the hidebound approach to education.  It’s already happening.

While policymakers, pundits, professors, and provosts squabble about the future of higher education and jockey to secure their position, entrepreneurs are busy creating and delivering alternatives across the globe.  The educational consumer is enjoying new experiences and getting new ideas about education in the process.  The old guard can argue any which way they like, but at the end of the day they’ll have to prove more valuable to the learner than the myriad new options.  All the protections and advantages in the world can’t stop competition now.  Technology has helped break it wide open.

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Excerpted from The Future of School.