Managed Competition and School Choice

Abstract

Health care and education are key agenda items for most business firms, the former because of firms' efforts to control escalating costs and the latter because of the adverse impact of low quality education on worker productivity. There are currently proposals that offer market-directed solutions to these critical problems. In health care, there is growing support at both the federal and state levels for managed competition. In education, legislation has been enacted in some states and cities that introduces competition by extending parental choice to school selection. I will evaluate the extent to which these market-directed proposals are compatible with ethical principles. Since health care and education have been criticized for their inefficiency and inequity, the ethical principles selected for this evaluation are utilitarianism and distributive justice; utilitarianism because of its link to efficiency and effectiveness, and distributive justice because of its close ties to fairness and equity. At first blush, the above statements may seem strange to some readers. After all, it is commonly asserted that markets themselves are the main source of unethical business behavior, the type of behavior that has been widely publicized in the scandals surrounding Michael Milken, Salomon Brothers and E.F. Hutton. Since markets promote seeking self-interest, to some it is a series of inevitable small steps from self interest to greed to fraud and injustice. Moreover, not-for-profit institutions, which have long played a dominant role in the provision of health care and education, are typically perceived as operating outside or at the fringe of the market economy. In fact, it has been argued that