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A Convo on Monopolies and Public Education

Tuesday, February 7th, 2012

Dr. Dan Abbott a.k.a TDAXP, PhD. is one of the oldest of the ZP blogfriends, perhaps one of my earliest readers. At TDAXP, Dan’s highly creative intellect roams widely, and while he delights in playing devil’s advocate and skewering sacred cows, his colorful observations are frequently ingenious. Even when I think Dr. Abbott is wrong, he is moving issues outside their tired, old, boxes and challenging conventional authorities to provide better answers.

On and off, for the past year, Dan and I have been discussing and debating public education and corporate ed reform on several social media platforms, including Twitter. It has been an interesting conversation, partly because conversations with Dan are always stimulating and partly because we draw different normative conclusions while agreeing on most points of fact, second order effects and political dynamics. Twitter’s 140 character limit and Facebook threads sometimes truncate arguments to caricature or one-liners, so recently Dan responded to one of my tweets with a post.

I suggest you read TDAXP, PhD. in full before reading my rebuttal so that you get a fair and coherent impression of his argument:

Monopoly! 

My friend Mark Safranski leads a dual life online, running the fantastic honest-broker site Zenpundit that focuses on military-security issues, and critiquing education reform on twitter from the perspective of a labor activist. Recently on twitter Mark made thefollowing comment [edited to account for twitter’s telegraphic character limit):

There will be no evaluation of test quality, barring a PR disaster. Education publishers are dividing the market – i.e. forming a cartel – not competing.

I think the general principle behind this comment is that any organization in a monopoly position is unconcerned with quality. This viewpoint is generally held, and wrong.

Monopolies differ from other competitors in three primary ways:

1. They are able to exploit massive economies of scale
2. They are able to extract an “economic profit” from their business
3. They are regulated by the political-economic system, rather than just by its subset, the economic system

“Economy of scale” refers to the decreasing per-unit costs experienced when a given fixed cost is split over a larger production run. This is a well known concept, and I won’t talk more about it here....

Read the rest here.

I do treat posting and moderating at ZP differently than commenting elsewhere or, especially, on a site like Twitter which is better suited for demonstrations of wit or making quick connections than depth. ZP is deliberately open to different POV by design, so a Clausewitzian is as welcome to guest post here as a Boydian, left of center commenters can talk with conservatives. Generally, the comment section here is remarkably intelligent, civil and positive, even when people disagree sharply.

Insofar as I tweet on education reform, I am far less evenhanded primarily because  a) Twitter is not a forum for which I have any moderating responsibility, and b) Many of the best known proponents of corporate Ed Reform, such as Mayor Mike Bloomberg,  Jonathan Alter,  Secretary of Education Arne Duncan, Governor ChristieGovernor Snyder, Governor Walker and various itinerant billionaires, are engaged in a well-funded, well-orchestrated IO to demonize public education, teachers and their unions. Intellectual honesty has not been a hallmark of their political campaign against public education or of the self-dealing nature of their reforms,  or of  their results.

When I get a more substantive critique of public education or ed reform, like Dan's post, I treat that with greater seriousness than pronunciamentos from oligarchic charlatans. Let's dig into TDAXP!:

I think the general principle behind this comment is that any organization in a monopoly position is unconcerned with quality. This viewpoint is generally held, and wrong.

Actually, I had not thought that far down the road as modulating quality levels because a monopoly has not yet been established. Pearson, in alliance with the Gates Foundation, the National Governor's Conference, many smaller Ed Reform players and the Obama administration, is *aspiring* to monopoly status in the ed publishing industry by becoming the official "go-to" publisher for school districts with material and standardized tests that meet the Common Core Standards.

[ The Gates Foundation, BTW,  is in this for the long haul, they started down this road with Acheive, Inc. in the mid 1990's. This has been a far more strategic campaign in terms of planning than, say, US foreign policy in Afpak. Maybe we should put Bill Gates on the NSC or JCS]

The current state of the ed publishing industry after years of corporate mergers, is  technically one of oligopoly. How likely is Pearson to succeed in this gambit of acquiring monopoly status?  They are in different stages with the fifty states, but my advice is: buy lots of Pearson stock. There will be other publishers meeting niche needs (special ed, ELL etc.), or specific ed standards set by quirky, ideological, states like Texas and California, but Pearson will be the 800 lb gorilla. Regular publishers have no interest in entering the complex (in terms of non-market barriers to entry) textbook business and psychometric testing is even further afield for them.

Pearson is well placed to acquire the monopoly advantages discussed at TDAXP.

Dan’s post becomes very interesting here:

The third point is the most important here. All firms can fail by lack of understanding — that is, thru the economic system — whether they are monopolies or not. Both GM (a monopoly) and Wang Laboratories (not a monopoly) saw their position decline because of terrible product and marketing decisions. While monopolies have a greater buffer and farther to fall (because of their economies of scale and economic profits), sustained stupidity can still do the monopoly in.

Monopolies, however face an additional risk. They can fail by lack of empathy. A monopoly that fails to flatter sources of political power can be broken through political means, regardless of economic realities. The Bell Systems, for example, flouted the ideal of unregulated competition (thus alienating a radicalized political right) at the same time they were a major supporter of hard sciences research and engineering (thus alienating a radicalized political left). Even though AT&T consistently understood the market’s desire for a reliable, predictable, and always-on communication layer undergirding business, AT&T’s monopoly was destroyed due to their lack of empathy.

While “empathy” is an odd term in an economic discussions, it is particularly relevant concept to monopolies that are not natural -ie – ones established and maintained at least in part through favorable governmental regulation or subsidies and relationships with powerful politicians. So while I disagree on some technicalities (neither GM nor teacher’s unions are formally monopolies), that is unimportant in relation to Dan’s larger point – sensitivity to and accurate orientation of the political environment is critical where the free market is not in play and the government is determining market entry and other “rules of the game”.

By being obtuse, the leadership of the NEA and the AFT were largely asleep at the wheel as an elite nexus of billionaires, corporate interests, hedge fund managers, Harvard University’s College of Education and various ideologues quietly isolated them from their traditional power base in the Democratic Party, cultivated influential supporters in the major media and crafted a powerful ed reform narrative (that this narrative is exaggerated or at times false is irrelevant to whether or not it succeeds in becoming conventional wisdom). When the attack on public ed was launched in earnest after 2008, union leaders were paralyzed as ed reformers had gotten into their OODA Loop. 

Teacher’s unions  have recovered their footing at the state level, primarily because state level politicians through whom the ed reformers work are now aware that ed reformers have a pile of money but bring very few votes to the table on election day. By contrast,  ”reforms” rammed through state legislatures that threaten widespread disruption of family life (such was where one’s children go to school), seem designed to benefit elite corporate interests and are nakedly hostile to teachers create a voter backlash.  At the national level, the teacher’s unions still seem to believe that the Obama administration is their ally. Legacy thinking  they will come to rue.

In the education sector, the monopoly held by teachers front organizations. By failing to provide the services they were supposed to provide — educating the young  — the teachers drove parents into debt, employers into the immigration debate, and States into powerlessness over education policy, teachers displayed a lack of empathy. This unconcern for the well-being of other stakeholders has consequences.

Here, TDAXP operates from the premise that all public school systems are failing and the primary or sole cause is incompetent teaching and that teacher’s unions have a monopoly control over the labor pool. All of these claims are false due to their sweeping nature. Some schools and districts are excellent, some are average and some are failing. The failing schools have more than their share of ineffective teachers but ineffective teachers are not the only cause of school failure – a bankrupt district without a tax base and a student population in poverty won’t be able to hire enough teachers, much less attract the best candidates.

That the NEA and AFT have not done enough to change failing schools is true, but where corporate ed reform holds sway, these vulnerable but difficult to educate students are being abandoned by charter operators whose corporate existence is predicated on serving those very children, while subsidizing  the wealthiest.

Publishers are as self-interested and greedy as teachers. They also, like teachers, aspire to monopoly bargaining power. But this does not mean that publishers won’t create tests, evaluate tests, or even improve tests.

Publishers will create materials that will satisfy statutory bidding and educational regulatory requirements when selling to public education entities. Tests are only as useful as their validity, reliability and the competence of their administration. Selling an invalid state test eventually costs a vendor a contract, as it did in Illinois ( though it took years and much wasted taxpayer dollars to do so). The highest quality tests, in psychometric terms, are fairly expensive products and usually are not sold on a mass-market basis to public schools, though they buy some of them, mainly IQ tests, for one-on-one student testing. The best business strategy for a publisher is to create tests slightly above regulatory requirements in psychometric quality and slightly below their leading competitor’s test in terms of price.

The perfect task for a monopoly.

 

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