After years of toiling for
unions that protect lazy teachers and allow them to harm innocent children,
I’ve finally come to my senses and bought into the neo-liberal agenda.
Privatization, choice, competition and markets….think of this as my reverse
Diane Ravitch moment. If you can’t beat’em, join’em.
This is my ticket to the gravy train and I want to share some great ideas I’ve
come up with.
We have a problem. As
taxes on the wealthy approach zero, foundations are no longer going to be
necessary to shelter the wealth of the rich from taxation. Revenues will
decline as the middle class (the people who get taxed) shrinks. How are
we going to fund our schools with neither revenue, nor foundations?
The answer lies in the
financial markets. Wall Street has the talent and the capacity to develop
innovative investment instruments that can save our schools. Why did this
never occur to me before? There are so many smart people on Wall Street –
I know this is true because they have more money than I do. If we unlock
the genius of Wall Street everything will be OK.
There are a couple of key
innovations that make this financial miracle possible. First of all,
thanks to standardized tests, education has become a commodity. It can be
traded just like pork bellies or Brent crude. Second, when a product
becomes a commodity, the efficiency of the market allows the producer to be
paid below the rate needed to sustain life, meaning that education costs cannot
only be controlled, but radically cut. The commoditization of education provides
a way to quantify costs per unit output (test scores.)
I propose that investors be
able to make direct investments schools – in essence, buy shares. The
value of the investment will fluctuate according to the value of the school,
which will be a function of test scores and per pupil spending. Like any
good commodities business, schools that can squeeze higher test scores at lower
unit costs will be more valuable. When this occurs, the value of the
security will rise.
This market could be part of
the Chicago Mercantile Exchange. Investors will be able to use put and
call options so they can bet either for or against student learning. In
addition, a futures market would allow accurate predictions of test scores at
individual schools through the price fluctuations of these securities.
With securities pricing information in hand, management could bring resources
to bear on problems pro-actively. The miracle of the invisible hand will
improve schools even as everyone gets rich – and all with no messy revenues to
raise!
One difficulty this poses for
the wealthy investor is exposure to conditions in individual schools. For
example an outbreak of flu, or an inconvenient school shooting during testing
could cause an investor to lose money. Plus, statisticians have warned us
of the instability of VAM when applied to the relatively small student populations
of individual schools and teachers’ classrooms – what rational investor would
want to be exposed to this sort of risk?
Luckily, we can use derivatives
to hedge against these risks. Individual school securities can be sliced
up and bundled with other schools with similar characteristics. These
derivatives could be sliced and bundled a second time to allow creative money
managers to customize investment portfolios for the risk profiles of their
wealthy investors. Investors would be able to hedge their risks and bet
for and against student learning simultaneously, while continuing to make
money. These derivatives could become so divorced from the underlying value
of student test scores that they increase in value indefinitely. This
will encourage the wealthy to pour their money into schools, now guaranteed
money makers.
I believe that similar
mechanisms can be employed on other public goods. A prime example is
infant mortality rates – a candidate for commoditization if there ever was
one. We have a statistic which can float up and down, and a measurable
unit cost. The use of derivatives in this case would create an efficient
market that would allow infant mortality rates in a community like East St.
Louis to settle to an economically sustainable level.
The miracle of the market is
that by removing irrational considerations, like ethics, that distort the
economic system and lead to inefficiencies, like doctors and hospitals, we can
achieve the best possible rates of infant mortality at the lowest cost.
Self interest flows naturally to the public good, with no sacrifices.
I am so glad to have discovered
the power of unregulated markets. I’d like to pitch this idea to Goldman
Sachs, and the Gates Foundation. I don’t think I’ll bother with the US
Government, since there won’t be much of it left in a few years.
Steve, sorry to see you go the way of the market-based reform... oh, it's common sense all right, but I like the status quo just fine, thank you.
ReplyDeleteCome on David! Get your seat on the gravy train! You too can be both rich and ethical.
ReplyDeleteHelp me out here - all morning long I've been trying to stuff this camel through the eye of a needle. I've discovered that it takes a lot of Crisco to grease a camel. Any suggestions?
Ah, yes--the irrationality of morality.
ReplyDeleteMy only suggestion would be to fancy up your modest proposal with rich-but-ethical language.
Take a look at the StudentsFirst website, for example. They call bumping out expensive veteran educators "saving the best teachers." Or check out Democrats for Education Reform, which produces articles praising charter schools, like the one entitled "Serving All Kids in All Public Schools." There's also this article on DFER's website: "Tennessee, Don't Put the Breaks [sic] on Reform" (suggesting that someone didn't get a very good education, at least when it comes to easily quantifiable subjects, like spelling).
Warms my heart to read this piece, Steve. Will tweet wildly. Welcome aboard.
Brilliant! Dean Swift would be proud. Scary, however, is the likelihood that there are people out there who would read this piece and take it seriously, think it a good idea. After all aren't people just like widgets?
ReplyDelete