Education / Fiscal policy

What Would Adam Smith Do About Public School Funding?

Public education seems to never die out from the political economic discourse, as it never should. Investing in the education of new generations has been rightly revered as the best method for ensuring a prosperous society. But the question remains, who should invest in it and to what level? Influential political economist Adam Smith’s work provides surprisingly timely directives in this regard and looking back to that may be beneficial at this time of political disarray around school choice, charter schools and funding for public schools.

Let me first make clear that Adam Smith is more in favor of public involvement in education than many hardcore libertarians and conservatives. Smith believed that common people (people without rank and fortune) should have access to the most essential parts of education and public funds should be used to defray the cost of this education so that common people could send their children to receive it. His rationale for the use of public fund hinged on his conviction that basic education has a great social benefit that outweighs its costs. Smith argued that public funding for basic education is justified because it leads to a more informed populace and a well-functioning society. An educated citizenry is always more decent and orderly than an uneducated one, according to him. He viewed basic public education as an instrument for the strengthening of democracy. As such, he argued that the cost of basic education of young children can be defrayed by the whole society without considering it a waste.

The cost of education would not be a waste as long as its social benefits exceed its costs. Public education, therefore, should be operated up to the level of basic reading, writing and mathematics because it serves the purposes stated above. However, the mechanism of public funding for basic education is further problematized by Smith as he introduces alternative methods of funding. Smith sees some advantage in funding the schools altogether by those who receive the immediate benefit of the education and instruction, or by the voluntary contribution from donors. Like highways, bridges, and canals, schools can be funded by the “toll” paid by the immediate consumer. Private schools funded by the immediate consumers and external donors provide higher quality of education because they have a higher incentive of maintaining quality to secure funds as they lack the guarantee of public funding. In the same way, if competition can be introduced in the market for public education, the public schools would have no choice but to try their best to be better.

Smith would probably support policy proposals like school-choice which let students and parents choose schools based on their performances regardless of their school districts and school-voucher programs that award funding to schools proportionate to the number of students they to attract. In existence of these policies, the students and their parents will choose the schools that provide the best services. The guaranteed funding system that stymies competition, innovation and efficiency would no longer exist because the funding for the schools and the salaries for the teachers would be contingent upon the quality of their service. As such, even public schools and the teachers who work there would have to compete in the marketplace and try to improve their services in order to secure their funds.

Public funding should be provided to institute an affordable method for the achievement of basic education that makes the common people more productive, well behaved and well informed. However, a more efficient form of education may be provided without public funding. Such education will have a higher quality than public education because of the elimination of the incentive problem that cripples public education. If both private and public education co-exist in the market, the problem of accessibility and the problem of quality assurance are both addressed by the two different modes. Public education can be further improved by exposing the institutions to market mechanisms through school choice and school voucher programs. If Adam Smith were calling the shots, we would probably see a strong public funding infrastructure for elementary, middle and high schools with broad school choice and school voucher programs across the board.