There are two basic ways to provide goods or services. The first is to let people sell whatever they choose as they seek profit (or do so on a nonprofit basis out of a sense of mission). Through a system of voluntary arrangements, businesses succeed or fail based on their talents, dumb luck and the fickle demands of consumers.
The second is to empower the government to extract money from the general population through taxes and fees. Instead of competing to lure consumers, public agencies provide goods and services at the direction of bureaucrats appointed by elected officials. “Customers” pay whatever they’re billed—and are stuck with whatever is offered.
Oddly, Americans increasingly believe that the second way best provides for the necessities of life even though it’s based on force and politics—rather than freedom and choice. Despite the ever-growing list of governmental failures, people want the government to offer healthcare and even educate our children.
Let’s take a small example from the world of public education. K-14 schools grab at least 40 percent of the state’s $267-billion general-fund budget. Private schools and publicly funded (but privately operated) charter schools handled the COVID-19 emergency with amazing efficiency and aplomb, by quickly transitioning to distance learning.
One need only read the news reports of the public schools’ disastrous attempts at online schooling—and at how the teachers’ unions dragged their heels on school re-openings. Despite these hard-to-ignore results, the Legislature is advancing legislation (Assembly Bill 1316) that clamps down on charter schools that specialize in distance learning. Bureaucracies really hate competition.
Meanwhile, the California State Auditor recently released a report about the state’s online charter school, known as Calbright. Created by former Gov. Jerry Brown in 2018, this state-run college has operated so incompetently that a Legislature that has never seen a government program it doesn’t like has been trying to shut it down.
The Legislature created Calbright because of a failure of the public community college system to provide adequate at-home learning for adults in the 25- to 34-year-old range who lack a college education. As usual, the reasons for creating a new government program were reasonable—but also, as usual, the resulting program is a disaster.
As the auditor explained, the college “did not develop a detailed strategy for how and when Calbright would spend the more than $175 million in state funding it expects to receive through June 2025 to accomplish key milestones. In the absence of such a plan, the purpose of its spending to date is unclear, and neither the Legislature nor the public can effectively assess its progress. The majority of its students have either dropped out or stopped making progress in their studies.”
If the first way were at work, a school that performed as poorly as Calbright would go out of business and students would choose a better alternative. With the government way, the state’s taxpayers lose tens of millions of dollars. In most cases of government incompetence, the agency might get even more tax money to address its problems.
The state legislature might actually shutter Calbright—but not because it is any more incompetent than other publicly run schools. In this case, unions and their supporters oppose Calbright’s existence because they want the money instead spent on more faculty for the brick-and-mortar community college system. None of this nonsense should surprise anyone.
Years ago, I attended a conference of government planners where a speaker mocked the first way, as epitomized by 18th century Scottish economist Adam Smith. “The rich,” Smith wrote, “are led by an Invisible Hand to make nearly the same distribution of the necessaries of life, which would have been made, had the Earth been divided into equal portions among all its inhabitants.”
The speaker thought it astounding that people still believe as Smith did—that allowing individuals to pursue their self-interest will lead to the greatest good for the vast majority of people. The Invisible Hand sounds incomprehensible compared to, say, letting experts direct the economy based on “science” and noble concepts of the “public good,” but it’s also the reason that we live in a relatively peaceful, productive and wealthy society.
Recently, I needed a specialized part to repair a bathroom faucet. I went to the hardware store and had several choices at minuscule cost. A planner in the California Department of Widgets didn’t figure out what plumbing assemblies should be produced and then sold at a neighborhood store. Instead, an invisible series of manufacturing, distribution, and retail arrangements accomplished that feat.
The same magical dynamic could work for education—and certainly for online schooling. Supporters of Calbright argued that the state needed to provide working students with an alternative to for-profit providers, but again we see that government direction never lives up to its grandiose promises. How many Calbrights do we need before we understand that point?
This column was first published by The Orange County Register.
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