Education Reform and Cross-Sectoral Financing: A Practice-Based Approach

Abstract

Recently, the for-profit sector has dramatically increased its market share in the education market. Although many students who otherwise would not have received an education have benefited from this trend, there are worrisome aspects to this development. Evidences suggests for-profit education frequently fails to serve the best interest of its students. Also, for-profit education fuels the focus of public discourse on only the short- and medium-term economic benefits of education, at the expense of longer term benefits to society. One reason the long-term benefits of education tend to be ignored is because they are hard to measure. Short-term economic value is easy to quantify, and it is a value about which there is broad-based consensus among key decision makers. Public value, in contrast, is harder to measure and harder to agree on. Most theoretical frameworks tend to reinforce this shortcoming by assuming, for example, that individual, utility-maximizing agents have pre-given preferences in a relatively static institutional environment. We challenge these assumptions by focusing on a meso-level conception of practices that mediates the relationship between dynamically conceived entities — namely, macro-level institutions and micro-level individuals. Inspired particularly by Alasdair MacIntyre, we present a theory of practices built from the ground up on managerial decision-making practices. In doing so, we uncover the practical mechanisms by which myopic economic values crowd out public values. Legal structures reinforce a strict boundary between for-profit and nonprofit institutions, effectively reinforcing the weaknesses of each: for-profit institutions have good access to financing, but drive out public values; nonprofit institutions foster public values, but fail to find sufficient financing. Legal reform can address these problems by encouraging collaborative financing efforts in a way that is sensitive to the strengths and weaknesses of each sector. Low-profit limited liability companies (L3Cs), for example, offer a way for nonprofit stakeholders and for-profit investors to collaborate, but there are dangers in bringing these different sectors together. Cross-sectoral legal reform must therefore prevent economic interests from co-opting other, public-values-based practices. This could be done, for example, by placing limits on the payouts or take-over provisions of for-profit investors can receive. This would prevent economic, profit-maximizing incentives from dominating the culture of mission-driven institutions, while still allowing mission-driven stakeholders to access financing in ways that are currently not possible.