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Comment by rayiner | Hacker News Reader

> Market failures abound: Education and health care are out of reach for many, child care is often prohibitively expensive (even as child care workers are woefully underpaid), and decent, affordable housing is scarce in many regions.

It’s utterly ridiculous to call these things “market failures.” Every single one of those areas is not a market but is heavily regulated in a way that limits supply. Education mostly a government service, even at the tertiary level. Fully 50% of college students attend a public school.

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If the market were able to solve the problem better, private schools could just provide better service at lower costs (compared to public school cost + state subsidy) and few would still go to public schools right? State subsidies for public schools are not that large anymore (34% of budget for UC Berkeley comes from tuition+fees while 13% comes from state of California).

These are actually IMO all examples of Baumol's Cost Disease as healthcare, child care, and education simply do not scale or require less workers with improved technology (at least so far). The fact that BCD hits so hard is evidence of most of the efficiency gains over the last decade(s) not being shared with the majority of people.

How are private schools supposed to offer better service at a lower cost, when public schools are effectively free?

This is hardly a market. Even if people wish to move their children out of public schools en masse, it's not like governments are going to reduce property taxes accordingly.

Well in the example I provided, state money only amounted to a 28% subsidy (assuming if the state funding were cut, the only way to raise as much money would be to raise tuition+fees). Doesn't seem effectively free to me.

Keep in mind I was replying to a critique of "Education and health care are out of reach for many" which obviously implies higher education

> public schools are effectively free

It's actually even worse than that because you pay for public education even if you don't use it.

So in that regard, if you send your kids to private schools, you're paying for their education twice.

This makes it very difficult to compete, and as a rayiner pointed out, isn't a real market.

I think the best solution to this is vouchers, which is a nice blend of public dollars but competitive schools.

Controversial opinion: I think everyone should have access to good education, and I don't see why a public system is incapable of providing it.

Private systems aren't outcome orientated, they're profit orientated. If a public school and a private school are both given $n to educate a kid, the private option will maximize the proportion they get to keep.

Elite schools are a different story because they have significantly more resources.

The free market is good at some things, but the public wellbeing isn't one of them.

A profit oriented system doesn’t make outcomes irrelevant. A grocery store could maximize their profit margins by selling rotten fruit at the same price as fresh fruit, but of course no one would buy it.

Maximizing your profit margin is one strategy for increasing profits, but growing market share by producing higher quality outcomes is another (arguably more common) strategy.

This is the case because markets have competition, which the public sector lacks. It’s why spending on public education continues to rise despite decreasing quality of outcomes.

This argument falls on deaf ears to be honest, considering Amazon deals with a very similar situation due to rampant fakes and yet it's more profitable for them to simply do nothing.

The problem is that for-profit industries only work when the consumer and business interests are aligned. In education the best way to earn a profit is by offering a low quality degree and spending the least on teaching, facility etc. That's the entire reason why McDegrees exist. Considering schools are also highly tied to physical locations, there's less possible competition than you think.

I think Amazon is a bad example. First, because the Amazon problems are fairly recent on the scale of human reaction, let's see how it will go in 3-5 years. Look at Facebook drop in users after the scandals like Cambridge Analytica, it is real and this is where Amazon is heading to. Sooner or later, the market is fixing problems, even if sometimes it's slow and painful.

This example actually show the fundamental value of separating infrastructure from service.

Amazon's infrastructure (1 day delivery) is good and valuable, but their service (products, etc) are severely lacking. It would be beneficial, in the free market sense, for the government to break up Amazon, split out that infrastructure part make it rentable, and have the rest of Amazon compete with other providers to provide a service on top of this infrastructure.

Same goes for all natural monopolies (e.g. gas pipelines, optic fibre internet, rail, ...).

This exactly. private education has a greater incentive for raising quality than government education does - which is why private schools produces better outcomes.

> I think everyone should have access to good education

How do you define everyone, access and good?

Does access === free where I currently live?

If parents can’t afford to live in an area with good schools should they be forced to get better jobs or moved to LCOL area so their kids get a better education?

or no matter where you live or how you live a third party should make sure your kids get a proper education?

>How do you define everyone, access and good?

Everyone means everyone. Access means that based on where you reside, there is a school within a reasonable distance, or transportation to one. Good is more tricky to define for me because I'm not an educator. The US has metrics and tests for math skills and reading comprehension. I'm sure we can gin up something. Use other developed countries as a benchmark.

>Does access === free where I currently live?

Sure.

> If parents can’t afford to live in an area with good schools should they be forced to get better jobs or moved to LCOL area so their kids get a better education?

The whole point of my comment is that people shouldn't have to make that decision.

> or no matter where you live or how you live a third party should make sure your kids get a proper education?

parents should have to send their kids to a nearby school. The rest should be taken care of.

You're introducing way more complexity into this. Good schools vs bad schools, HCOL vs LCOL. Not every school has to be exceptional, just bring up the average.

I am one that actually agrees with the spirit of what you're saying. Unfortunately, where I have to admit shortcomings with that philosophy is that there's no evidence that the government of the United States can reliably yield good education for students. My own public schooling was a nightmare, and I know many who had an equally bad experience.

Part of this is due to the fact that there isn't (and probably shouldn't be) a singular national system for education. Another part is the fact that quality education is insanely high-priced because a parent has to pay for the public and the private system concurrently. This pressure pushes private tuitions upward and makes the private schools more exclusive because they can't take on kids below certain income thresholds at all.

This is one case where I believe regulation has actually hurt the US citizens a lot. No child left behind was a staggering failure, and most people would be better off making their educational choices for their children based on what makes the most sense for them, not based on a legislated prescription of certain topics (or the intentional avoidance of others, namely human health and biology...)

Let's not forget that george jr. And Biden made college debt slavery a thing. And no child left behind was meant to cripple public education. So you have poor uneducated kids mad at the system voting conservative. And then you have kids that escaped and went to college to only strap them with so much debt, they to become conservative. Saying, well I had to pay, why do they not have to have decades of their lives paying back bad faith loans?

> Another part is the fact that quality education is insanely high-priced because a parent has to pay for the public and the private system concurrently. This pressure pushes private tuitions upward and makes the private schools more exclusive because they can't take on kids below certain income thresholds at all.

How does that hurt public schools? I would assume that would help public schools. Because instead of the top 50% of kids (e.g.) going to private schools, now only the top 10% of kids go to private schools. Thus public schools are filled with smarter kids.

Realistically, it hurts private schools by reducing the number of students they could take on. Public schools, however, are governmentally forced to abide by a certain curriculum, which hurts students dramatically (basic biology and sex education is a big one here).

Because of this, what actually happens is the top half of students that can't go to private schools get an underwhelming education. Compounding on that, local districts can mismanage funds and security to an extent that reduces the likelihood of a student's success in the classroom to near-zero.

Net result - <10% of students get a great education and greater opportunity. 40% come out 'fine' but not particularly ready for entering the workforce or higher education. The rest come out with an education that is measurably substandard, resulting in a significant hardship.

Example numbers, based on your comment.

> Private systems aren't outcome orientated, they're profit orientated

Based on what I've read about the US education system (primary schools), one of the main problems is the "no child left behind" policy, which makes the public system not "outcome oriented" either - kids simply have no incentive to even try (and are disruptive instead), as there's no valuable outcome to achieve - the (fake) "outcome" is the same for everybody (finishing school), regardless of their actual level of education.

It's a hard problem.

I like to think I'm not too ideological about which sectors should be public and which should be private (this is not a moral question as far as I'm concerned). I think some sectors work better privately and others work better publicly. Essentially I think letting the free market do its thing is a good idea if I can be confident that the profit motive broadly aligns with public interest (and using regulation where it doesn't, for instance for pollution). Education is a sector where I have very little faith that the free market profit motive aligns with the public interest.

The problem lies with evaluating the quality of education. Children aren't very capable of evaluating the quality of their own education (and if they are they often aren't taken seriously or they don't have any choice in the matter anyway), and parents are too far removed or often don't know the subject matter very well themselves. The only way (and even that is an inaccurate way) to evaluate schools is by doing statistical analysis on outcomes. The crucial point is: the only data you have is outdated by years, perhaps even a decade or so. Education is a strongly reputation-based sector for a reason: reputation is the only way people have to evaluate your product. I don't believe there's a way around this.

In a for-profit corporation, particularly in a publicly-traded one, there's often pressure to optimize profits on the short term. So if I'm the unscrupulous CEO of a for-profit school, I can always deliver very easily by simply cutting costs even if it dramatically hurts the quality of the education, confident in the knowledge that by the time the effects start getting noticeable I'm long gone. The short term profit motive of a publicly traded corporation works perversely here: there's always the temptation to sell the reputation you built up yesterday to turn a bigger profit today; no one will be any the wiser until it's too late (and they paid a lot of money for sub-par education).

Of course public or non-profit institutions are also vulnerable to bad management, but at least no one has a strong incentive to gut their expenses, as no one stands to gain.

Maybe there's a way to align incentives? E.g. schools are (partially) government-funded, but the funding is a function of the taxes that people who have attended the school pay.

Still there are a few issues that would need to be fixed, off the top of my head: (1) the function should simply be a mean, to make schools focus on desired outcomes (e.g. the minimal (or 5th percentile) education) - otherwise they'd just focus on producing a few outliers, like VCs; (2) there needs to be a "default" funding available (e.g. average of all schools) to enable innovation (starting new schools); (3) there needs to be some funding available for "non-profit" education (e.g. art) but maybe there should be a limit on the number of people that can attend such schools (for free).

Even if it’s not a public school they mostly get government guaranteed loans.

Childcare (aka mom has a child, goes back to work 6 weeks later, pays $x/week for daycare or a nurse) isn’t a government service and it’s very expensive. Why is it so expensive?

There is a child to caretaker ratio to maintain. And you have to pay for the caretaker wages and benefits, rent, liability insurance, support staff, etc. So those costs are divided among all who are paying for it. It will not scale any better than that.

What’s the solution? Don’t have children?

The government would have to subsidize it as a cost of keeping society functioning.

Would that not just directly lead to it swallowing an amount of federal tax revenue proportional to other services that are subsidized? E.g. healthcare/education? And then proceed to munch on GDP bit by bit?

It might counterbalance a bit. It might create jobs for people. And having affordable childcare means someone might get back into the workforce and contributing taxes.

What does education, healthcare, childcare, and housing have in common? They didn't get cheaper from outsourcing and automation.

The types of education that are most like an efficient market are recognized and necessary certification based training in fields like nursing and agricultural tech/safety (probably other “skilled trades” too), the product of regulation. When you “deregulate” education, you get predatory actors like ITT Tech that try to imitate real trade education.

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