Bribes for privatization
Dec 5, 2009
3 minute read

The privatization of education is near the top of my policy wishlist. While I’d prefer radical privatization, I think that’s essentially impossible any time soon; but vouchers seem to be gaining support. Here is my proposal for putting them over the top.

We bribe people.

My plan is to bribe the educational establishment (teachers and administrators) in failing school districts with the assets of the failing schools. The local government could implement a voucher system, and under cover of some made-up reason like retaining the spirit of the public schools, give the building, land, and other assets of the local schools to the teachers and administrators. Equity could be determined by whatever method the establishment thought was fair, such as seniority. The new equity holders could decide whether to organize as a for-profit school, a non-profit school, or to divest the assets by selling them to entrepreneurs who wanted to start a new school or use the assets for other purposes.

I am convinced that this is good public policy. Consider the following two premises:

P1. Many schools, especially in the inner cities, produce little or nothing of value.

P2. The educational establishment is able to block any real efforts at reform.

If you buy these two premises, then the bribe is actually costless to the local government. Think about the property rights in the school assets as divisible into rights of control and residual claimancy. If you accept P2, then you concede that the establishment already has rights of control. Nothing can be done with the assets without the consent of the establishment. If you accept P1, then you must acknowledge that the right of residual claimancy is worthless to the local government. Giving residual claimancy to the establishment does not adversely affect the local government or its citizens because it wasn’t doing them any good in the first place. If in exchange for nothing the government gets real educational reform, then it is good public policy, no?

One may object that this is rewarding failure, which it is. But the status quo rewards failure on an ongoing basis. At least under my proposal, there is an end to the rewarding of failure.

Or is there? This is the real danger. If, after divesting the bribe, the establishment is able to resurrect demand for a public school system, then the local government will be in worse shape than where it started. It will continue to have schools that fail and it will have to pony up more money to reestablish the public schools. That would be a disaster, but nevertheless, I think the upside on the plan is good enough that someone should give it a try.