Some of the nation's top business and policy leaders assembled in Washington recently for the Commerce Department's "Summit on American Competitiveness." Among the speakers were the CEOs of Intel, FedEx, and GM, along with other illustrious participants. Improving the skills of American high-school graduates was near the top of the agenda, but the summit will likely do little good; because when most business people turn their attention to education, they ignore everything they know about economics.
Case in point: San Diego's High Tech High, a public school so impressive that its cheerleaders include the world's most successful businessman, Bill Gates, and its most successful businesswoman, Oprah Winfrey. Back in 2000, the Bill and Melinda Gates Foundation awarded the school a grant to reproduce its winning formula nationwide. Little progress toward that goal was made and, last year, High Tech High formally dissolved its ties with the few schools outside California that had been modeled after it. High Tech High continues to operate a handful of schools within its home state.
How could a national scale-up effort fail despite such eminent supporters, a generous grant, and a 100 percent college acceptance rate among graduates? A better question is how could it have succeeded. Expanding any enterprise is a difficult and risky undertaking. To manage rapid growth while maintaining quality, entrepreneurs and investors must have powerful incentives that outweigh the risks, and they must enjoy the freedom to replicate their successful model in every essential detail. Only one system for organizing human exchanges has proven capable of consistently meeting those requirements: capitalism.
Markets routinely identify, perpetuate, and replicate best practices because they combine consumer choice, competition, low entry-barriers, the profit motive, free-floating prices, and managerial autonomy. Most business people understand this perfectly well when it comes to their own fields, but they almost always fail to apply that understanding to the field of education.
The Gates Foundation, for instance, began with the following theory as to how exemplary schools would be scaled up nationwide: "demonstration of the effectiveness... of small-school alternatives will stimulate demand for such schools," and that demand would lead, automagically, to their "replication and proliferation." That is a reasonable assumption in a free market. Assuming that it would also hold under our existing monopoly school system is the most common and damaging mistake in education policy.
Why is it that many of the most brilliant business people on Earth ignore what they know about markets and monopolies when they take on the role of education reformers? Perhaps they have bought into the notion that teachers are not like other people; are not motivated by rational self-interest to look out for themselves and their families. Or perhaps they imagine that education would not respond to the market forces that rapidly disseminate excellent products and services in the rest of the economy.
The central issues in public school employee contract negotiations mirror those of every other field: salary, benefits, workload. Teachers' salaries are directly correlated with the share of college graduates entering the education labor pool and with the length of time teachers stay on the job. And as for the expansion of popular providers, the for-profit tutoring chain Kumon, founded in the 1950s, now enrolls 3 million students in 42 countries.
But well-meaning CEOs and philanthropists need not familiarize themselves with the academic research or the international precedents. They can simply learn from their own failed efforts at reforming public schools. In this respect, the Gates Foundation is to be commended, for it has acknowledged that its initial "theory of change" was misguided. Foundation staffers note that "district hiring procedures... limited schools' ability to attract teachers who bought into their educational models." They also recognize that restrictions induced by the federal No Child Left Behind act "have made it more difficult for high schools to take a radically different approach to curriculum and instruction." In other words, the autonomy required for the replication of successful enterprises is currently stifled by central planning.