Creative destruction is not what the market does
November 21st 2007 @ 3:45 pm Wisdom of markets

Some people fear competition because they have an abhorrent hatred of the word ‘privatisation or ‘market'’. Others, more prosaically, believe that the education of our children is far too important to leave to mere mortals and in a perfect world, infinitely altruistic and patient fairies would dispense knowledge with a flutter of their gentle wings and sprinkling of brain dust. The whiff of lucre can therefore transform this benevolence to an impure transaction, tainting receiver and giver - as if a teacher motivated to be a better teacher in order that he feed himself is somehow worse than a teacher acting out of ‘pure’ generosity.

But I wonder if the main reason people object to competition in the schools sector is because they perceive markets to be destructive places rather than constructive.

The myth of markets as an anonymous process imposing random order like a faceless grim-reaping accountant endures because of phrases like ‘creative destruction’, and simple analogies with Darwinian evolution. That may be inconsequential if all it means is we have to walk somewhere else for our shopping, but when faced with the images of uneducated, dislocated children; coughing masses wheeling themselves from one crumbling hospital to another, then naturally we question the motives of the Reaper.

But why do people forget that markets’ main goal is to build things, as evolutions main goal is to build life. The competitive process (by and large) by rooting out bad ideas, necessarily constructs the best ones. The simple Darwinian analogy is misunderstood; yes species do go extinct, but evolution is all about relative survival, not total annihilation. Perhaps it’s better that a local school with pretensions of grandeur is reduced to supplying more restricted but better quality education services to adults. Or perhaps its teachers are better suited to working in charity. The point is that the competitive process is inherently constructive, not destructive.

It is possible, fantastic thought it sounds, for two schools, to be in competition for evermore, spurring each other to even greater heights of excellence, and even better, dragging in others who fancy a piece of the action. Naturally some schools may go very bad and fail, but why is it a good thing for a bad thing to succeed, no matter how intense and generous the spirit behind the transaction?

I find this more baffling when the actual transaction occurs free at the point of use, but competition remains anyway because of customer choice, as in this example.

A valid criticism may be that with competition, there will be low quality schools, but at least with public provision, the bar is set high enough. That is the wrong way round though. The key advantage of the market is that parents effectively set the bar, not some education bureaucrat

-william
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