February 22, 2024

Horse 3305 - Private Education Is A Veblen Good, So Why Must We As Taxpayers Pay For It?

https://www.heraldsun.com.au/victoria-education/student-background-the-big-difference-between-private-and-public-school-results/news-story/35f531679417cb03def4b571913b6035

Despite some charging almost $50,000 a year, a new study has found that education at private schools is nothing special in comparison to government and independent schools.

- Herald Sun, 9th Feb 2024

This isn't the first time that 'a new study' has found that education at private schools is not any better at delivering educational excellence and results than public education.

https://link.springer.com/epdf/10.1007/s13384-021-00498-w

No differences were evident after controlling for socioeconomic status and prior NAPLAN achievement. Using longitudinal modelling, we also found no sector differences in the rate of growth for reading and numeracy between Year 3 and Year 9. Results indicate that already higher achieving students are more likely to attend private schools, but private school attendance does not alter academic trajectories, thus undermining conceptions of private schools adding value to student outcomes.

- The Australian Association for Research in Education, Inc, 2nd Mar 2021

Okay, so maybe this is a recent phenomenon...

https://www.theage.com.au/education/fourth-study-this-year-confirms-private-schools-no-better-than-public-20141110-11jlgn.html

The fourth study this year has found Australian private schools produce no better results than public schools, when students' socio-economic backgrounds are taken into account.

Stéphane Mahuteau and Kostas Mavromaras, academics at the National Institute for Labour Studies at Flinders University, conducted the latest study, which found a strong and positive association between the socio-economic status of a student and their test scores. The core result of the paper is that, after controlling for a number of school and student characteristics, "school quality does not depend directly on the sector of the school". The main determinant of the higher raw test scores observed in private schools is the higher socio-economic status (SES) of students attending private schools, the report found.

- The Age, 10 Nov 2014

...no, it isn't.

I shan't bore you with repeated studies which happen again and again, which prove exactly the same thing because the further that we go back into the past, the less relevance they have to modern schooling. Suffice to say that in looking through newspaper archives, I have found roughly the same thing being reported roughly once ever three years going back all the way until 1974. That's fifty years of telling us exactly the same thing; namely that private education despite its expense, provides no actual educational benefit to the children who go there.

There is an old adage which says that 'Madness is doing the same thing over and over and expecting a different result'. When it comes to education in Australia not only do we have multiple studies which prove that private schools do not provide better educational outcomes but we also have decent modelling which demonstrates that private schools don't actually save taxpayers any money either:

https://www.sydney.edu.au/news-opinion/news/2020/03/16/myth-busted--private-schools-don-t-save-taxpayers--dollars.html

https://drive.google.com/file/d/1rnn0w1nWYreOMRSsDfzt4n8KXHaGbw2h/view

Given all of this, why do we do it? Why do we as a nation deliberately choose to spend public monies on private schooling, which is by nature exclusionary, when it produces no educational benefit and actually has negative financial benefit? Because politics is a demand driven system and parents demand that they get to send their kids to private schools which are subsidised by the taxpayer. If this was any sane commercial market, it would be quite rightly seen as open corruption and there would be a Royal Commission into it. 

The question then is, what do parents get out of private education? As private schools still charge private fees, parents obviously think that they derive some kind of benefit because as at least semi-rational beings, they want something to show for their many dollarpounds that they have parted with. If it is not better educational outcomes then they must be buying something else while claiming that they have the moral right to demand that we the good and fair people of the Commonwealth pay a second time when we already are obligated to provide public education.

What I think is going on, after having worked in legal and legal adjacent workplaces such as the law courts and an accounting firm, is that what parents are actually buying when it comes to private schooling for their children is in fact a Veblen good.

American economist Thorstein Veblen in his 1899 work "The Theory of the Leisure Class" noted that there were certain kinds of goods such as artwork, jewellery, watches, yachts, and the relatively new fangled invention of the motor car, actually had an increase in demand as the price went up. These things were purchased because the person who bought them, perceived an increase in displayed status. Quite literally these goods were 'status symbols' and the term that Veblen used to describe them was 'conspicuous consumption'. The whole class of goods in turn would eventually be come to be known as Veblen Goods as a result of his work.

The weird thing about Veblen goods is that they appear to violate the basic law of demand, which states that quantity demanded has an inverse relationship with price. That is, that as the price goes up, people want less. Imagine a Mars bar. If they are $2, you might only want 1. If they are $1, you can have 2. If they go up to $2.30, you might not want any. Veblen goods don't do that. If the price goes up, people actually want more of them. These are not normal things. In fact, Veblen likened the purchase and display of things for conspicuous consumption to that of the tail feathers of a peacock. These things were bought precisely because there was an emotional appeal of their exclusivity; which the majority of the population simply would not or could not purchase.

Human beings are otherwise semi-rational electro-mechanical meatbags who economics assumes are looking to maximise their happiness and/or utility with the things that they purchase. Veblen goods are less about satisfying raw utility and more about maximise people's happiness. In making someone more exclusive and important, the purchase of a Veblen good actually makes them believe that they have purchased something of high quality that is out of reach for others. In turn, they then believe this is worth the premium they pay.

Generally speaking, when a particular good or service has a higher price, consumers will assume it to be of better quality; including when that is untrue and simply not the case. As I have demonstrated a repeated interest in motor cars, then my prime example of this is BMW; which has a reputation for pushing out technology way too early and being notably unreliable. Likewise, people generall perceive that the Toyota Hilux is of better quality than the GWM Cannon; even though maintenance costs prove this to be untrue.

The exclusivity of Veblen goods is also useful because if something is perceived as difficult to purchase or expensive, and the majority of the population will not or cannot purchase them, then this might actually increase its attraction to those for whom status is important, because it is now even farther out of reach for the average consumer.

The thing about private schools is that precisely because they charge fees, this acts as a barrier to entry. School fees actively keep out those students whose parents can not afford to pay. Granted that there are occasionally a few scholarships and other conditions where some parents are exempted from paying either entirely or partially, but these are not the majority. Scholarships for private schools are generally only awarded to students on academic grounds where the presence of the student actively bolsters the school's academic standings in official reporting, or those legacy cases where a school might have been started as a ministry of a church and there are still some vestigial appendages which exist.

Private schools can and will eject a student for poor academic performance. Private schools can and will eject a student for behavioural reasons. This means that these students are placed back into the hands of the public school system; which also has the added benefit of bolstering a private school's academic standings in official reporting. 

It is true that some parents will buy private schooling for their children because of some perceived advantage in behaviour of the students. It is true that some parents will buy private schooling for their children because of some perceived advantage in extra-curricular activities such as a music program, a sports program, or other non-core program. However, there is not an insignificant proportion of parents buy private schooling for their children because of the imparted economic signal that going to a private school provides. A Higher School Certificate with the name of a private school on it, is an advantage when that child who is now 17, 18, or even 19 and 20, applies for a job. A Higher School Certificate with the name of a private school on it, is an advantage in professions like law, finance, banking, and other managerial positions. That Higher School Certificate with the name of a private school on it, is undeniably an economic signal that the person who has it, is not riff-raff.

Remember, Thorstein Veblen wrote about 'conspicuous consumption' of goods because the person who bought them, perceived an increase in displayed status. A 'status symbol' is not just an abstract concept but a physical embodiment that the person who has it, has been approved (or approved themselves) as having acquired status. Purchasing a Higher School Certificate with the name of a private school on it, is the purchase of status for one's child.

The moral question which practically nobody wants to answer because they have to confront the fact that this is ugly, is why the general public should be forced to subsidise the purchase of what amounts to status symbols and economic symbols for the privileged few? Moreover why should be forced to subsidise the purchase of what amounts to status symbols and economic symbols for the privileged few when those same privileged few have rejected public education, which the general public is already obligated to provide?

I find it utterly maddening that the excuse of 'choice' is used as a cudgel to beat the general public with, in order to justify perpetuating the public subsidy of a Veblen good. Admittedly it is very good business to show favoritism to rich people and look down on poor people but the commonwealth is not a business but a commonwealth. What is the point of a nation? Suppose there was someone in very expensive clothes and with valuable gold rings on his fingers, and at the same moment someone else comes in who is poor and dressed in threadbare clothes. If make a lot of fuss over the rich person and give them the best seat in the house but say to the poor man, "You can stand over there if you like or else sit on the floor" then this just looks like sycophancy. Why do we need to do this as nation when all it results in is further social stratification? 

"The accumulation of wealth at the upper end of the pecuniary scale implies privation at the lower end of the scale. The members of the leisure class planning events and parties does not actually help anyone in the long run. What results from this behavior, is a society characterized by the waste of time and money."

- Thorstein Veblen, The Theory of the Leisure Class (1899)

Madness is doing the same thing over and over and expecting a different result... why do we do it? Moreover why must we pay for a thing when as a society, it benefits a few at the expense of the least well off?

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