Alternative Perspectives

Up until now we have focused on the strength of the market system: its tendency to be more efficient than command or traditional systems. However, there are times when markets get the wrong (inefficient) answer. Sometimes it will over-produce things like pollution and under-produce things like property rights enforcement. At other times markets will create social havoc through recessions and depressions. And there are times when markets conflict with core values like equity and justice. These situations are called market failures and we will be examining them for the remainder of the class.

What we judge to be a market failure and how we decide to deal with that market failure depends in large part on our analytical framework. Sometimes frameworks are called perspectives or paradigms, but the essential feature of each is that it provides a theoretical window where one can view this very complicated economic system. By using multiple theoretical windows you should get a more complete grasp on how the system really works. Imagine that you are in a house and only looked out one window, how much would you know about what is outside of the house? Obviously that would depend on how similar the rest of the environment is to that one outside your window. But you would never know unless you were able to look out other windows in the house. One window might look out on a flower garden, another on a parking lot, while another looks out on a school yard. I’m sure you would agree that by looking out the different windows you would get a much better idea of the environment outside your house.

Our goal for the rest of the class is to examine market failures from differing analytical frameworks (windows) in order to more completely understand how the system works. Not only do I hope you get some further insights into how the market system works, but also why very bright people disagree on how well it serves society and what to do when it fails.

Within economics there are three basic frameworks: neoclassical, radical and Keynesian. The dominant, or orthodox, analytical framework in economics is referred to as neoclassical economics. (All these frameworks have several names in order to confuse students…at least that is the only explanation I can come up with.) Usually when critics say something to the effect that “economists” don’t understand some social phenomenon, they are referring to neoclassical economics. This is because the neoclassical framework currently dominates most of the profession.

One of the more confusing things about this label is that the orthodox school is sometimes referred to as the classical liberal or liberal perspective…even though we would now call it conservative. This is because Adam Smith is considered the father of this perspective and, as we have already noted, he was arguing against the mainstream thought (mercantilist) of his time. So in his day he was a liberal (arguing for change) arguing against conservatives (arguing for the status quo).

Much of what you learned so far in this class has relied heavily on the orthodox perspective, but I do want to add two points. First, this perspective does not maintain there is no need for government. Here’s Milton Friedman addressing this in his book Capitalism and Freedom:

A government which maintained law and order, defined property rights served as a means whereby we could modify property rights and other rules of the economic game, adjudicated disputes about the interpretation of the rules, enforced contracts, promoted competition, provided a monetary framework, engaged in activities to counter technical monopolies and overcome neighborhood effects widely regarded as sufficiently important to justify government intervention, and which supplemented private charity and private family in protecting the irresponsible whether, madman or child—such a government would clearly have important functions to perform. The consistent liberal (see above) is not an anarchist.

Second, the orthodox framework values individuals making their own choice. Here’s Friedman again:

We take freedom of the individual…as the ultimate goal in judging social arrangements…In a society freedom has nothing to say about what an individual does with his freedom; it is not an all-embracing ethic. Indeed, a major aim of the liberal is to leave the ethical problem for the individual to wrestle with.

The political party that most heavily relies on the orthodox perspective is the Republican Party. However, because they tend to want to regulate individual behavior when it comes to social issues like abortion, sexual preference, religious activities, drug use and the like, they don’t consistently fall within the classical liberal perspective. The party that follows the orthodox perspective most closely would be the Libertarian Party (To get the flavor of this perspective when it is carried out to its logical conclusion look at http://www.capitalism.org).

However, not everyone agreed with Professor Smith’s rather rosy predictions about the efficiency of the market system. Several economists debated where the system would eventually end up. Early in the 19^th Century there was a very famous debate between two English economists, David Ricardo (1772-1823) and Rev. Thomas Malthus (1766-1834). Ricardo argued that the system would collapse because land could not expand the way capital and labor can, this would mean that the price of land would increase as the prices of labor and capital fell. Eventually the “unproductive” landlords would end up with all the wealth. Malthus argued that as production increased wages would increase. But far from being good, these increase wages would lead to population increases until it exceeded the carrying capacity of the environment. Thus the system would end up in starvation and other unpleasant consequences. This rather pessimistic debate earned economics the title of “the dismal science.” However, Ricardo and Malthus accepted much of Smith’s basic analysis and are included in the classical school.

There are two main alternatives to the orthodox framework: radical and Keynesian.

One political economist in particular, Karl Marx (1818-1883), examined the long run prospects of this new economic system, which he named capitalism, and came up with a series of radical conclusions. The most important one being that capitalism will inevitably be replaced by the much more just systems of socialism and communism.

Currently, it is popular to dismiss Marx as the man who created the intellectual foundations for the Soviet bloc, a clear historical failure. This would be a grave error. Marx may well be the most astute economic thinker when it comes to analyzing the dynamics of capitalism as a system. Few economists have tried to do this and even fewer could claim the insights brought to light by his work. At this point I recommend that you drop your preconceived notions of Marx and try to understand his work.

One the first differences between Smith and Marx is how they view society. Smith saw society made up of fairly free individuals pursuing there own interests. Marx, on the other hand, saw society made up of classes of people who tend to follow their class interest. For example, you were born into a certain class (blue collar working class, white collar middle class, and wealthy elite) and, based on your class we can fairly easily predict your political party, the value you place on owning a home, or whether government should provide free education. Thus, when the government considers a change in the tax code, we don’t agree or disagree with it based on our own self interest; instead, we tend to examine it through the lens of our class. A tax on illegal immigrants is likely to raise the ire of Spanish speaking Americans because that is a group they tend to identify with. Meanwhile, our position on the inheritance tax (now referred to as the death tax) is likely based on our position in society. The working poor usually have very little objection to this kind of tax, while the wealthy elite see it as unjust.

When Marx looked at how capitalism historically evolved he noted that there ended up being two basic classes. One class was made up of people (the proletariat) who couldn’t afford the big expensive machinery brought into being after the industrial revolution. All they have to sell is their labor. The second class was made up of those people (the bourgeoisie) who could afford these new machines, and who would then hire the proletariat to work for them. Marx argued that there was an inherent tendency for the more powerful owners of capital to take advantage of the poorer, less powerful, working class. Or, that at base, capitalism was built on the exploitation of the workers by the capitalist.

Think about it. Do you have the same level of power as the owners of the business where you work? If they have more power, what’s to keep them from abusing it? If you tried to form a union, how would they respond?

There has been a lot of talk about how our politicians are being controlled by lobbyists. Where does the lobbyist’s money come from? What do you think they are lobbying for? Do you think that Marx would be surprised about this? Indeed, this framework argues that the government is an instrument of the ruling (capitalist) class. This has significant implications if one is trying to fix market failures with government intervention.

Marx said that the capitalist not only would, but must, use his power to lower wages. If he doesn’t, then other capitalist will and he won’t be able to compete. You hear these kinds of arguments today. Listen to reasons why Nike “had” to open up shoe factories in Asia, paying workers very low wages or why Boeing has to “outsource” its manufacturing process. Capitalists must put profit above all else (justice, morality, etc.) because if they don’t they will cease to exist. Since wages are one of the main expenses firms face, they must always try to find ways to push them downward.

Marx concluded that this continual downward pressure on wages would lead to a very uneven distribution of income. Eventually, the income would be so concentrated in the hands of the wealthy that the workers would no longer be able to afford the items they were producing. This would then lead to an economic downturn we call a recession or depression. He was among the first to make the correct observation that capitalism would have repeated economic swings between boom and bust. He then argued that these swings would get larger and larger until the have-nots would rise against the haves. After all, if you find yourself in an ever increasing miserable condition, you will not just sit by passively watching your family starve. The very structure of the relationship between the economic actors would create the inevitable demise of the system.

Critics of Marx will say that this is the proof that his model is wrong. That is, there was no great downturn; there was no great revolution. His supporters will point to the Great Depression (1929-1941) and say that if it hadn’t been for W.W.II, we just might have seen a revolution in the U.S. Read Grapes of Wrath by John Steinbeck (you can rent the movie if you feel like you have too much reading) to see how one young man becomes radicalized during this time. The story chronicles his growing moral outrage against a system that won’t allow him and this family to make a decent living, despite their willingness to work hard and follow their self interest. One can only guess what would have happened if those unemployed young men had not be drafted into the war with Hitler’s answer to the failure of capitalism (fascism).

The Great Depression was a time when the very existence of capitalism was threatened. In fact, many argue that, as the result of the policies begun in the thirties, we have moved much closer to socialism than before the market crash of 1929, proving Marx right about the inevitable collapse of pure capitalism.

However, it would be a mistake to think that Marx had the last word to say about this framework. Just as many theorists built on the foundation of Smith in the orthodox perspective, there have been many who have built on Marx’s basic insights. Since Marx argued that one must look at the structure of how economic actors relate to one another, this framework is often called structuralist.

One of the most important groups that started with Marx’s structuralist perspective wrote in the 60s and 70s and is referred to as the New Left. These theorists (Paul Baran, Paul Sweezy, James O’Conner, Doug Dowd, to name a few) dropped Marx’s conclusion about the inevitability of capitalism’s collapse and sought to explain why it continued to thrive in the 20^th Century. They have three main explanations that center on the same theme of why the radicalization of the working class failed to happen.

First, capitalism has continued to thrive because corporations have moved the worst of their exploitation away from their home country to the less powerful and less developed regions. By exploiting these regions, home wages and living standards have been able to rise. (The name most commonly given this phenomenon these days is globalization.) This means that the home workforce sees supporting the status quo as in its own interest. Rather than being radicalized the working class is “conservatized.”

A second way that capitalism has continued to thrive is the ability of the capitalist class to control the information that the population can access. Since the news media is either owned or financed by capitalists, information that goes against their interests will be suppressed. By controlling the information going to the public, capitalists can control public opinion. This can be best illustrated by the difference between how the mainstream and the left press handled the 911 tragedy. The mainstream press spent a great deal of time and energy to paint itself as loyal, the victims as innocent and the terrorists as evil. As a result of this many Americans supported the actions of their government. The left argued that the attack was brought about by the systematic exploitation of the Middle Eastern resources (oil) and suppression of indigenous political and cultural movements by Western corporations and governments. This explanation was either ignored or marginalized by the mainstream press thus allowing the full force of the US military to be unleashed in the Middle East in order to destroy all those who oppose Western interests in the region. The basic tenant here is that by controlling the information flowing to the public, public opinion is systematically manipulated so as to further the interests of the capitalist class.

In addition to controlling the news media the New Left is very critical of the university system as well. Here the argument goes that in order to succeed (get tenure) in the academic environment scholars must get published. Since most of the editorial boards of academic publications are part of mainstream analytical framework, radical analysis is less likely to be published. This lack of an outlet for critical analysis means that any heterodox perspective is under-represented in academia. Consequently students are overwhelmingly exposed to mainstream analysis that supports the status quo. (For further readings in this area I suggest “Journalism, Democracy and Class Struggle” by Robert McChesney in Nov. 2000 issue of Monthly Review.)

Finally, the New Left argues that the government can’t just be an instrument of the capitalist class. In order to maintain legitimacy within a democratic political system the state must allow for political movements to have at least some degree of success, even if these don’t further the interest of the capitalist class. So things like social security, unemployment insurance, union rights, and progressive income taxes were able to overcome the resistance of the capitalist class because they were the result of a popular democratic action and to overturn this action would bring into question the legitimacy of the government. In this way much of the social friction between the working class and the capitalist class is vented off by these populist movements.

The political parties most associated with this framework are the Socialist Party and the Green Party.

While socialists were pointing to the inevitable collapse of capitalism other economists such Friedrich List (1789-1846) and John Hobson (1858-1940) and were suggesting that government should step in and correct for the problems generated by the market system. The idea that government can correct for some of the problems of capitalism is the central theme of liberals. Unlike the orthodox perspective Keynesians find many flaws in the market system; unlike the socialists who think capitalism is an untenable system, Keynesians advocate fixing the system with government intervention.

Keynesians came to dominate economic thinking after the Great Depression (1929-1940) when it looked like Marx was right. A brilliant English economist named John Maynard Keynes (pronounced “canes” not “keens”) (1883-1946) successfully argued that government could stop the depression through deficit spending. Just as Smith and Marx forever changed how we see and understand the market system, so did Keynes. Some see him as the savior of capitalism, while others would place him as the man who destroyed free market capitalism. But it goes without challenge that this economist had a huge impact on the way our economy has developed since World War II. He is the father of the modern mixed economy that characterizes all industrialized economies today. A mixed economy is one that has a much larger role assigned to government than Smith argued in favor of; it mixes the market economy and the command economy. Here are the words of the American economist Alvin Hansen (1887-1975) in his book The American Economy written in 1957:

Within the last few decades the role of the economist has profoundly changed. And why? The reason is that economics has become operational. It has become operational because we have at long last developed a mixed public-private economy. This society is committed to the welfare state and full employment. This government is firmly in the driver’s seat. In such a world, practical policy problems became grist for the mill of economic analysis. Keynes, more than any other economist of our time, has helped to rescue economics from the negative position to which it had fallen to become once again a science of the Wealth of Nations and the art of Political Economy.

Keynes disagreed sharply with the orthodox approach of laissez-faire. He advocated in his book The General Theory of Employment, Interest and Money (1936) for active government involvement in the economy. In other words, the government should freely engage in deficit spending when the need arose, not passively wait for the invisible hand to work. Indeed, in his heated debates with the traditional economists, he tired of them saying in the long run the invisible hand of price adjustments will cause the economy to correct any imbalances. His oft quoted reply was “in the long run we are all dead!”

To understand Keynes, we must put him into historical context. He was writing during the Great Depression. There was a sense of urgency among many of the world’s leaders trying to deal with this economic calamity. Between one quarter to one third of those people who wanted to work in the U.S., could not find it. When the government announced the construction of Hoover Dam, people who had never had a construction job in there lives camped out for more than six months hoping to be hired on. It certainly appeared that Karl Marx was right. These people might soon become desperate enough to engage in revolutionary acts.

What did orthodox economics have to say about this? At the time, they argued that the markets would self-correct. If there was a lot of unemployment, wages would fall and people would get back their jobs. When it was pointed out that investment spending by business had collapsed, thus throwing workers in that industry out of work, the reply was that interest rates would fall because business wasn’t borrowing and investing and that would provide the incentive for business to begin spending. When it was pointed out that both these were happening but the economy had yet to recover, the reply was it will in the long run, give it more time.

Well, you know what Keynes said about the long run. What he advocated was that government should step in and borrow and spend the money that the business sector wouldn’t. Not because business wanted to continue the depression, but they felt that they had to be conservative in order to survive. Keynes said that the lack in aggregated demand had to be turned around by the government. World War II proved his point for him. The U.S. had been mired in depression for over 10 years until the massive government deficit spending for the war effort got the economy to full employment in one year.

After the war the U.S. government, along with its people, believed that it was the responsibility of government to smooth out the booms and busts that constantly occur in a market system. This, along with the political movement associated with the Roosevelt’s New Deal, led to a dramatic expansion of the public sector in the U.S., as well as other advanced industrial economies, in the last half the Twentieth Century. In fact, the general public began to view the government as the ultimate solution for many economic problems. From poverty to pollution, health care to monopoly, governments are now expected to change market outcomes.

Other than in large macroeconomic terms, Keynes did not write much about government intervention into market outcomes. But it is safe to say that his followers, called Keynesians, are fairly comfortable with government going into all kinds of the markets. A significant difference between the Keynesian and neoclassical schools is the nature of markets. The neoclassical school view markets as natural phenomenon arising wherever people are allowed the freedom to trade. As Smith put it people have an inherent “disposition to truck, barter, and exchange.” Keynesians see markets as the product of government policy. Governments provide the necessary underpinnings of markets such as money, property rights, product safety, product information, contract enforcement and so forth. For example, when you go to the grocery store you expect the product labels to be accurate, the meat to be fresh, the headache medicine to be safe, the vegetables to be stored and handled in a sanitary fashion and more. Keynesians argue that these features of the modern store didn’t come about as the result of the free market. This is because cost of making sure all this happens is too high for the individual undertake. Rather, we rely on government regulations and inspections to assure us that these will occur.

From the Keynesian perspective, since governments create the foundations for markets they can, and should, directly intervene with purchases, taxes and subsidies, or indirectly intervene with laws and regulations in order for them to more effectively meet societies needs. For example, a backup bell on a truck is not a market driven good. Businesses tend to see them as unnecessary expenditures adding to the cost of production and therefore the price of the good. But government has determined that these should be on all commercial trucks in order to make the workplace safer. Here’s another example, most of you would not be in college without the direct and indirect government subsidies you get for education. Now, many of you are being subsidized through tax credits. Without these subsidies the cost of education would increase and according to the law of demand fewer people would enroll in college. In both cases government is trying to change market outcomes, something that liberals frequently advocate.

While these are the three main frameworks used by economists, don’t get the idea that all economists fit into one or other of them. In fact, some of the most exciting work in economics falls outside these categories. These other frameworks frequently end up being incorporated into one or more of the three major schools. Here are a few examples of these alternative perspectives:

The central theme here is that rules make all the difference. For example, if I set up a game where the object is to put a round ball in hoop 10 feet off the ground, I’ve already determined who will win the game…tall men. If the game doesn’t accomplish what society wants, the answer is to change the rules of the game. Let’s go back to basketball (my apologies to all you non-sports fans). One of the ways to win the game is to never let you opponent have the ball once you have the lead. A coach devised a winning strategy called “four corners” based on this idea. After his team got a lead they stood on each of the four corners of the court and passed the ball to one another. It worked and it was boring to watch. The answer? You got it, change the rules of the game. In this case the 24 second shot clock was introduced.

Consider this. Three people get together, one owns a wood lot, another owns a saw, hammer and some nails and another owns the skill to combine these all together to make a table. Separately these resources are all worth $200. But after they are combined the resulting table is worth $600. The $400 gain is called the value added. Now the question becomes, how is $400 to be split up? How this is split up will have a significant impact on the nature of the society. If the owner of the wood gets the lions share, people will have incentives to acquire more land. If the owner of the tools gets the lions share, people will have the incentive acquire more tools. The rules of feudalism tended to favor the land owner, the rules of capitalism the tool owner. In an ideal socialist society, the worker would get the lions share.

They critique the orthodox perspective for portraying women as free economic agents choosing to give away their work as family care givers or freely selecting lower paying jobs, ignoring the cultural context within which men and women live. Worse yet, according the feminist critique of the orthodox perspective, women are blamed for their own low wages by a) over-supplying such fields as teaching and nursing (the term that describes this is occupational crowding), b) leaving jobs for family rearing or c) working fewer hours in order to free up time to work on household duties.

The Keynesians are chided for tending to ignore differing impacts of policy measures on men and women. They point to government policies that favor programs such as highway building and other construction projects that further male dominated industries rather than child care or other female dominated industries. They note the feminization of poverty of the post WWII era, a period dominated by the Keynesians and orthodox perspectives.

Marxists are also criticized for ignoring women, lumping them into class analysis rather than recognizing the ubiquitous exploitation of women around the world. They point out that women are invariably placed in the lowest paying and least appealing of jobs: housemaids, garment workers and field work. Rather than recognizing the systematic tendency of capitalism to divide production based on gender (waged males and unwaged females) and the resulting “super-exploitation” of women, Marxists rely on class analysis thereby missing the key role that unpaid women played in the success of capitalism.

Game theory is useful because the world does not usually conform to the orthodox ideals of perfect competition. Information is not complete; some decision makers have advantages of size and history. Have you ever noticed that when American Airlines raises its prices other airlines do the same? Game theory tries to describe and predict when such price leadership collusions will work and when they won’t.

Each one of these philosophies should add to the depth of your understanding as to how this relatively new economic system called capitalism works. Each framework reflects the historical period in which it evolved. Smith, writing at the emerging period of this new system reflected the optimism of that time. Marx, writing at the time when industrialization was engaged in some of its worst abuses, reflected the deep feeling of unfairness common to that time. And finally Keynes, a pragmatic man who believed in the market system but saw it flawed by recession and depression and proposed reforms so it would run more smoothly.

Are these three men the only big thinkers in economics? Absolutely not. But this section is not meant to be a complete accounting of the major economic thinkers. This section is trying to point out that economic theory is important. So many times I have heard that economics is too theoretical. Well, flapdoodle I say! All our lives are dominated by some theory as to how the world works. You have a theory as to how to meet your goals. Maybe its study hard, get good grades and all the rest of life will fall into place. Maybe it’s “what goes around comes around, be good and the world will be good back to you”. Or, maybe that it is a dog eat dog world out there and you better bite before someone else bits you. Each theory would cause you to act differently. Which one is right? At times maybe all of them, at other times maybe none of them. Knowing which one is right at which time will result in you meeting your goals.

What I can say is that everyone, whether they think so or not, has a theory and bases their actions off that theory. It can be simple minded, like the idea that if I drink a certain brand of beer women will flock to me...in slow motion. Or it can be very complex: men are from Mars and women are from Venus, and they can only understand one another if they learn a new language. But theories are how we try to understand the world. Here is how Keynes put it in 1936:

The ideas of economists, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed, the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back.

It is the same with economics. We need to have a theory as to how the world works. This theory allows us to take actions so that we can meet our goals. The theory itself begins to determine what we think are the appropriate actions.

These perspectives are very powerful, in fact when someone becomes convinced that one or another perspective is correct, that perspective becomes an ideology. They will analyze social problems from that one point of view and their solutions will be based on that point of view. They are also moving from positive to normative analysis, from what is to what ought to be. Since these ideologies often reflect core values, such as individual rights versus obligation to the community, be ready to hear passionate debates when these frameworks present their analysis and policy recommendations.

Don’t be put off by the concept of ideology. It is part and parcel of any of the social sciences. Unlike natural sciences, social scientists are legitimately asked to weigh in on policy discussions. It is perfectly valid to ask the economist if we should increase income taxes. The astronomer is never asked this type of question (should the sun set in the east). When answering such questions economists end up relying heavily on their ideology. They can’t avoid it. Your task is to understand the ideological framework so that you can better evaluate the advice of these experts.

Let’s look at one of the current issues surrounding public schools in order to flesh this out a bit. At first you may think that this is not an economics issue but education can be seen as a public and/or positive externalities good. Either way the free market system tends to under-produce it (we’ll talk more about this in the next reading). Early in the twentieth century the United States decided to use the intervention tool of government production, i.e. own and operate schools, to compensate for this inefficient underproduction. This was fairly successful and, until recently, public schools have been the way that most Americans have been educated. However, more and more children are being educated outside the public school system due to a growing dissatisfaction with public schools.

Many people argue that today’s public schools have failed. We have to be careful here since simply because many people say something is so, doesn’t make it so. History is full of examples of people complaining about something that just isn’t true. In order to find out if the schools are failing or not, we should use positive analysis. This is trickier than it first appears. How we would go about determining public schools are in failure could well be based on ideology. An orthodox perspective might compare SAT scores between private schools and public schools. This might be criticized by a behaviorist since the SAT exam is designed for students competing for college so those not intending to go to college are less likely to expend the same effort as those intending to go to college. An institutionalist is likely to point out the race bias of SAT scores, while the Marxist would point out the correlation between family income and SAT scores. Keynesians are apt to point to the systematic under funding of public education in the past thirty years. So, even positive analysis can be ideological. But let’s assume there is a problem, how should we deal with it?

Orthodox economists tend to propose solutions to market failures that rely on markets principles as much as possible. An educational reform proposed by the conservative economist Milton Friedman that has gained momentum recently is the school voucher program. In this scheme, each parent would get a government voucher worth some amount of money for each child’s education. According the orthodox perspective, schools (public and private) would then compete for each child the way that any business would compete for customers: by providing the best good possible for the money spent. Schools that fail to educate children would go out of business; schools that successfully educate children would expand and spawn imitators. The self-interested parent and self-interested school would lead to the harmony of the best educated society possible for the money spent. Problem solved, right? Sure, if you’re of the orthodox persuasion. But what if you’re not?

Keynesians oppose this solution based on a number of arguments. They would point out the difficulty that parents would face in determining what school is best for their children. Parents may not have the time, or perhaps the ability, to determine what school provides a quality education. Parents and their children might be inundated with advertising from schools making all sorts of claims, such as college ratings and number of athletes going on to the professional level.[1] They would also point out that parents are not going to live with the consequences of poor choices. After all, it is the child who is going to be educated and succeed or fail based on that education, not the parent. Unfortunately, our society has many examples of parents who neglect, mistreat and generally put their interests before their children’s interest (economists call this problem the principle-agency problem). A Keynesian might well speak of society’s responsibility to provide a free and equal education to all children to further the value of meritocracy (succeed on one’s merits rather than on one’s family background). They argue that the only way to provide that is through public education. They would point out that education is a public investment and key to the functioning a democratic society. They might assert that when people within a society share a common experience like public education they are more likely to overcome differences like race, gender or income. Their conclusion is that education is too important to leave to the workings of the market system. So you’ve got two choices as to which way to go…right? Well let’s look at the issue from another perspective.

Marxists are likely to point out the flaws in each of the preceding positions. First of all, each is based on the idea education is outside the existing class structure. They would argue that it is not a coincidence that the best public schools serve the wealthiest neighborhoods and the worst public schools serve the poorest neighborhoods and any school reform is likely to further serve the interest of the wealthy. They would point to the futility of the project and that any reform that truly levels the field for school age people will either be defeated or modified until the well-off end up winners. They would also point out that education is limited to those things that the business sector values: skilled and compliant workers. Schools are limited in their ability to create critical thinkers because this might lead to workers questioning their share of the productive wealth.

Feminists might also critique education as reinforcing gender stereotypes. Things like boys as doctors and girls as nurses. They would note that many of the private schools have cultural subtexts, such as religious schools, which are patriarchal in nature. They might site recent studies showing that teachers have a tendency to call on boys more than girls. They might argue that the issue is not about public versus private education but gender bias versus gender neutral education.

As I hope I have made clear ideology matters. It matters in how (or even if) someone sees a problem and what policies they are likely to propose. Unless you are alert to the ideological battle underlying policy debates you may well find yourself supporting policies that are antithetical to your core values.

From this point on we will look at some of the economics issues and examine them from a variety of ideological perspectives.

[1] At this point an institutionalist might point out that schools would have incentives to manipulate their student body, not accepting those who don’t want to go to college or play professional sports. They might point to the current practices by four-year colleges and universities that encourage high school students to apply only to reject them so as to increase their “selectivity” ratings.

Alternative Economic Frameworks