Tuesday, 28 September 2010

Who should own schools?

Tim Worstall asks the following question:
If customer mutuals are such a great idea, you know Building Societies, the Co Op, organisations owned and ultimately managed by their customers, why are schools run by parents (acting, of course, in loco parent is for the ankle biters who are the real customers) such a bad idea?
Chris Dillow tries to answer it. Dillow draws on the work of Henry Hansmann and his excellent book The Ownership of Enterprise and thus takes a tranaction-costs approach to his answer.
1. Lock-in. Consumers don’t own fruit and veg stalls. But in American rural areas they often own utility companies. There’s a reason for this. With fruit and veg, a dissatisfied consumer can easily go to a different supplier. But a dissatisfied rural electricity customer cannot so easily shop around. They are locked into one supplier. Customer ownership stops this supplier ripping them off. It acts as a substitute for exit.
This suggests that the more students are locked into one school, the more they should own it.
But one could ask, How locked-in are students? In most cases there are alternative schools available if students, or their parents, want to move.
2. Monitoring. Ownership should flow to those best able to control an asset. Here, the case for parental ownership is mixed. On the one hand, they can monitor outputs very well - the progress their child is making. This argues for them controlling the school. But on the other hand, they (despite what they might think) know little about the inputs into education - the mechanics of teaching. This argues against them getting ownership.
But if the outputs are ok how much do they need to know about the inputs?
3. The dangers of predation. A good argument for mutual building societies is that bankers would otherwise be able to rip-off customers, by paying them low deposits and giving themselves high salaries. To the extent that there’s an analogous danger with schools, this argues for customer ownership. But is there? Dickens, Orwell and the Economist say yes. But most people’s experience of UK education, I suspect, suggests otherwise.
So does Dillow really think that the teacher unions do not take advantage of situation to make themselves better off if they can?
4. The costs of organizing. The harder it is to get hundreds of parents to agree upon how the school should be run, the weaker is the case for parental ownership.
One potential problem here is that parents will have different interests: some, say, will want the school to be strong in arts, others in science or sports. The more this is the case, the weaker the case for parental ownership.
Reasonable point. I have noted the problems with heterogeneous owners before. But the real question is a relative one, Is there a group with less heterogeneous intersts who could be the owners?
5. Risk bearing. Ownership should flow to those who bear the most risk. As it is students who suffer most from a bad school, this suggests a case for parental ownership.
Chris then argues that,
These principles suggest that parental ownership is not obviously stupid. But they are also consistent with teacher-ownership, especially if this is associated with competition: principles (2) and (4) might argue for this, whilst competition helps satisfy principles (1), (3) and (5).
One thing that argues against both parent and teacher ownership is who makes the investment in the school? Neither the teachers nor the parents may have the funds available to set up and maintain a school. Also even if they do have the funds, what happens when either the teacher or the child leave the school? How does the teacher or the parent get their investment back?

Chris Dillow continues,
But whilst the case for teacher vs. parental ownership is mixed according to these principles, the case for state ownership doesn’t leap out from them - unless we put great weight upon (4). Which raises the question: what can justify state ownership being the dominant form?
Funding may be the answer. As with most firms which are investor-owned, investors, the state in this case, may be the only group who has relatively homogeneous interests and the ability to fund the school.

The alternative is for schools to be private as many are now. Here they are owned by a group who are, by and large, neither parents nor teachers and who supply education on a not-for-profit or for-profit basis but this requires parents to pay for their ankle biters's eduction directly.

So in either case ownership of schools seems to come down to funding. Schools are owned by whoever, state or private, has the money to invest in them.

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