Even though it's not directly germane to the topic, I'd like to expand upon
this further. Setting aside the theological implications of its metaphor,
the "invisible hand" of Adam Smith does not work well with non-fungible
assets for the simple reason that it requires extensive information on
_both_ price and utility; an industry cannot be guided toward efficiency
unless it has, through price signals, a clear grasp of the benefit-cost
ratios of competing allocations of resources. This is the essence of what a
"market" means.
Let me give an example that, superficially, is far more "concrete" than
education. Sectors of the health-care industry where fungible goods are
bought and sold, hospital gowns or drugs with the same chemical formula for
example, are transacted under (more or less) smoothly functioning,
competitive market conditions. The system breaks down when it comes to the
cost-driving essence of medical care -- physician and hospital services. In
this arena, there is no relationship between the cost of services and their
value. Consider that five cardiovascular specialists, examining the same
patient with blocked arteries, might come to five entirely different
conclusions about what procedures are indicated, from "free" (lifestyle and
diet changes) to extremely expensive (triple bypass). On this range of price
options, there is no consumer cross-check. It is impossible, unlike true
free-market arenas where the buyer can easily discern whether features are
as advertised, for the "buyer" (patient) to know which purchase has the best
benefit-cost ratio. The question for the patient is: what will make me live
longer--improve my life. The answer provided by "the market" can only be:
keep it cheap because we don't have the faintest idea: in short, a moral &
budgetary assessment, not a market one.
Therefore, these kinds of situations -- standard in medicine and _a
fortiori_ standard in education -- establish no usable price signal
information. This more than anything else is why competition backfires in
health care and why it is an inappropriate model for education. What indeed
is the cost-benefit ratio of a good life? Of citizenship?
Regards, Rolfe
Granovetter, M. (1988). The Sociological and Economic Approaches to Labor
Market Analysis: A Social Structural View. In G. Farkas & P. England (Eds.),
_Industries, Firms, and Jobs: Sociological and Economic Approaches_. New
York: Plenum Press.
Rolfe Windward [UCLA GSE&IS: Curriculum & Teaching]
e-mail: rwindwar who-is-at ucla.edu (Text/BinHex/MIME/Uuencode)
70014.0646 who-is-at compuserve.com (text/binary/GIF/JPG)