> Why shouldn't businesses provide i.e. (K-12) education? Because, unless every single student goes to work for the company, then the value they create is lost to them. So you cannot align the interests of the business with providing quality education.
But this ignores the fact that private schools do exist and are successful in many countries. The incentives are aligned in some cases - if the education is bad, the parents will take their kids to a different school, or never go to the bad school in the first place. If it's good, they'll be willing to pay higher fees.
I'm not sure what is meant by "unless every single student goes to work for the company, then the value they create is lost to them" - (some of) the value they create is captured by the school by charging fees. Isn't that the whole point of private education? This is the idea of markets in general: when a voluntary transaction takes place, both sides believe they benefit. If fees are $10,000, the parent will only pay this if they value the education at more than $10,000, although they may not think about it in these terms. Some parents will make gigantic sacrifices in the millions of dollars (in lost earning potential if nothing else) for their kids.
You are right that private schools don't always have an incentive to provide good education. The schools have that incentive if and only if the parents care about the child's education and have the ability to choose schools. In many cases they don't care, and the children are the innocent victims in that case. In many cases parents care, but cannot afford to move and the school effectively has a local monopoly on poor people forced to go there. No market system can really work with a monopoly.
Agreed that universal private education wouldn't be the best, but I think it's because the buyer of the service and the beneficiary are different, and there is an element of monopoly. I don't think it's because the schools lack a mechanism to capture value, they can just charge fees.
You're ignoring the possibility that the value of the private school is in network effects via filtering out poorer people. That would be beneficial to the students who attend, but neutral or even negative for society as a whole.
>>>>>>You are right that private schools don't always have an incentive to provide good education. The schools have that incentive if and only if the parents care about the child's education and have the ability to choose schools. In many cases they don't care, and the children are the innocent victims in that case.
You are missing out on a key feature of the free market.
I know someone that is very well off but is very specific when buying grocieries. This person will resort to going to a supermarket 10min farther away.
Supermarket chains know this and offer prices for such people. Now, this person may reflect 5% of the population. However, note the positive externality:
Thanks to this person, we dont have to worry about prices, yet we benefit from the penny pincher's efforts.
This is why a free market works in education. Parents may not care, but schools will cater to all parents including those that do and everyone benefits.
Of course, for this to work, there cannot be public (or private) monopolies
But this ignores the fact that private schools do exist and are successful in many countries. The incentives are aligned in some cases - if the education is bad, the parents will take their kids to a different school, or never go to the bad school in the first place. If it's good, they'll be willing to pay higher fees.
I'm not sure what is meant by "unless every single student goes to work for the company, then the value they create is lost to them" - (some of) the value they create is captured by the school by charging fees. Isn't that the whole point of private education? This is the idea of markets in general: when a voluntary transaction takes place, both sides believe they benefit. If fees are $10,000, the parent will only pay this if they value the education at more than $10,000, although they may not think about it in these terms. Some parents will make gigantic sacrifices in the millions of dollars (in lost earning potential if nothing else) for their kids.
You are right that private schools don't always have an incentive to provide good education. The schools have that incentive if and only if the parents care about the child's education and have the ability to choose schools. In many cases they don't care, and the children are the innocent victims in that case. In many cases parents care, but cannot afford to move and the school effectively has a local monopoly on poor people forced to go there. No market system can really work with a monopoly.
Agreed that universal private education wouldn't be the best, but I think it's because the buyer of the service and the beneficiary are different, and there is an element of monopoly. I don't think it's because the schools lack a mechanism to capture value, they can just charge fees.