The Financing and Administration of Education

Abstract

Defining the functions of the state is a favorite pastime of economists. Where we place the frontier between the public and the private sectors depends in part on our analytical tools, in part on our value judgments-some would say, our prejudices-and in part on our practical judgments regarding the actual performance of market processes and political processes in particular countries and at particular times. John Stuart Mill for example, held that the government of what we would today call an underdeveloped country would do well to undertake functions he preferred to see discharged by private enterprise in the Britain of his day.' There is nothing sacrosanct about a given assignment of functions. There is a tendency, none the less, for public opinion to regard any assignment of a function to the public sector as irreversible. You can't turn the clock back. Yet the whole development of the last generation represents in many respects a turning of the clock back to the mercantilist period. If we are not to drift into some sort of unwanted totalitarianism all of us, economists and noneconomists alike, should be constantly re-examining the frontier to make sure that the boundary line reflects our present values and our present economic and political techniques. No function should be immune from re-examination-not even education. In fact, that is what we propose to do in this paper. Why should the state be any more concerned with education than it is with religion ? If it should be, should the concern be limited to subsidizing education, or should it take the form of administering it as well? Up to what level should the support extend? Is the responsibility, if any, primarily federal or primarily local? Assuming that there is a public responsibility, how are we to know when it has been adequately discharged? strictly economic arguments in favor of public support of education are known. Education is both a consumer good and a capital good. It is called into existence by demand. Private demand will be adequate if it attracts resources into the field up to the point at which the last dollar invested yields no more and no less than the last dollar invested in all other alternatives. This is our economic test of adequacy. It rests on the belief that decisions reached by dollar votes cast in the market place are as worthy of respect as those cast in the quiet of the voting booth. It assumes that people who vote their dollars stupidly are apt to do the same with their political votes. Yet there are a number of reasons why the dollar votes for education may fall so far short of the number required under this test of adequacy as to justify use of the political process, imperfect as it may be, to make good the deficiency. Education is an acquired taste. Left to themselves, many children will demand very little of it. Up to a certain point it must be forced upon them. But this does not prove that the state must do the forcing. basic consumer unit in a free society, as Frank Knight has so often pointed out, is not the individual but the family, and within the family the decision making function is exercised by the head of the family. It is up to him to exercise the compulsion. (We shall not enter into the delicate question as to who, in fact, is the head of the family.) But if the head of the family is not educated he may not appreciate the need for educating 'The ideas presented in this paper are obviously not original. To anyone familiar with the literature in this field it will be apparent that we have borrowed freely from many sources, particularly from John Stuart Mill and from two men separated more in time than in approach-Adam Smith and Milton Friedman. See Adam Smith, Wealth of Nations, Bk. V, Ch. 1, Art. 2, and Milton Friedman, The Role of Government in Education, in Robert A. Solo, ed., Economics and the Public Interest (New Brunswick: Rutgers University Press, 1955). Anyone who has read the unpublished paper given at a 1958 meeting of the Mont Pelerin Society in Switzerland, or the excerpts from it which appeared in the editorial pages of the Wall Street Journal (May 4 and May 8, 1959), will also realize the extent of the author's indebtedness to his colleague, Dean Benjamin A. Rogge.