Why Don’t Economists Understand Innovation in Education?

Chicago Booth School of Business hosts The Initiative on Global Markets which explores the extent to which economists agree or disagree on major policy initiatives.  In this poll, they are asked,

“Public school students would receive a higher quality education if they all had the option of taking the government money (local, state, federal) currently being spent on their own education and turning that money into vouchers that they could use towards covering the costs of any private school or public school of their choice (e.g. charter schools).”

The (modestly) good news is that the preponderance of opinion in this particular example agrees with the statement (29% agree and 7% strongly agree vs. 17% disagree and 2% strongly disagree).

What is most discouraging, however, is the fact that there is little appreciation in their comments that the dynamics of innovation would apply in the case of education.  I would hope that at this point most economists understand that the extraordinary increase in wealth around the world that we’ve seen in the past two hundred years is the result of Smithian effects (endlessly refined division of labor, leading to ever more granular niche identification, specialization of technique, and continuous expansion of the gains from trade from ever more nuanced applications of the law of comparative advantage) combined with Schumpeterian effects (the endless process of creative destruction in which new entrepreneurs combine ideas and resources in new ways that satisfy human needs more effectively than before).

When we allow this process to take place in education, we will see extraordinary increases in human happiness and well-being, analogous to the gains in material well-being that we’ve seen in the world of technology.  But because every economy on earth has introduced large-scale coercive tax-financed education as soon as they they have begun to become prosperous, humanity has never allowed both Smithian and Schumpeterian effects at scale over time in the realm of human development.  Thus we have not unleashed the fundamental dynamics of innovation and prosperity creation in the realm of human development.

As I’ve written elsewhere, charter schools, or narrowly-defined voucher programs, will not allow the full benefits of a market in human development to come into being.  In order to obtain access to these benefits we need to create profitable opportunities for educational entrepreneurs that are outside the dominant, government-defined operating system of education.  In addition, we need to allow for a much broader understanding of human development, one which is not dictated by the educated manderins.  As long as “success” in our society is defined by those whose personalities and upbringings are adapted to conventional schooling, we will be unfairly and unnecessarily harming those whose personalities and upbringings are not so adapted.

To be fair, the economists apparently only had 140 characters in which to express their thoughts.  That said, especially those who were hostile to the proposal showed no evidence of any awareness that the most fundamental dynamics of innovation in the global economy would also apply to education if allowed to do so.

About Michael Strong

Co-founder, Ko School + Incubator, Conscious Capitalism, Radical Social Entrepreneurs, lead author of Be the Solution: How Entrepreneurs and Conscious Capitalists Can Solve All the World's Problems, author of The Habit of Thought: From Socratic Seminars to Socratic Practice.
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