ANDREW P. KELLYAMERICAN ENTERPRISE INSTITUTE

FEBRUARY 21 , 2013

Private Enterprise in American Education

The Debate About Private Sector in Ed.

Or

For-Profits in Ed: Good, Evil, or . . .?

“Public Schools Lost Millions to Crooks and Cheaters”

Tampa Bay Times

For-Profits in Ed: Good, Evil, or . . .?

“How Online Learning Companies Bought America’s Schools”

The Nation

For-Profits in Ed: Good, Evil, or . . .?

Diane Ravitch: “I find myself uncomfortable about the very idea of making a profit by providing public education”

…Unfairly Persecuted?

“At bottom, the crusade to keep private-sector innovation out of education is about resisting such change. It's also a species of the same blind dogma that brands all profit-seeking as morally suspect.”

Joel Klein, The Atlantic

…Unfairly Persecuted?

“[Schools] are not being victimized by a group of evil geniuses looking to manipulate their administrators into handing over boatloads of money. . . When I hear people crying foul and pointing fingers at a few bad apples . . . I have an easy answer for them: don’t buy those products.”

Tom Segal, EdSurge

AEI’s Private Enterprise In American Education

Or

Reality: Neither Side is Right

Inadequate quality control and accountability mechanisms lead to abuses and scandal in supplemental educational services, virtual schooling, and others.

Also true that private sector is often barred from participation based on tax status: For-profits ineligible for federal i3 and SIG grants (as

independent participants. As of 2008, 16 states barred for-profits from operating

charters (concession in New York for raising charter cap).

Reality: Public Money to Private Sector is Norm

ARRA funds to for-profit green energy firms

$6 billion in NASA money for private space travel competition

$20 billion in federal money for Electronic Medical Records

It’s Also the Norm in Education…

Public doesn’t flinch when education funding flows to:

Source: Phi Delta Kappan Poll, 2001

Favor Oppose Don’t Know

School bus and other transportation

75 23 2

School building and facilities maintenance

75 23 2

Food services 75 22 3

Source: Phi Delta Kappan Poll, 2001

But Things Get Dicey RE: School Management

Favor Oppose Don’t Know

School bus and other transportation

75 23 2

School building and facilities maintenance

75 23 2

Food services 75 22 3

Running the entire school operation 26 72 2

Source: Phi Delta Kappan Poll, 2001

AEI’s Private Enterprise In American Education

Goal is not to prove or disprove the value of for-profit provision.

Project aimed to shed light the strengths and weaknesses that private sector ventures bring to education.

Series of papers and convenings bringing together entrepreneurs, researchers, and policy wonks to role of private enterprise.

Private Sector Strengths

1. Ability to attract capital.

2. Ability to attract talent.

3. Ability to scale.

4. Incentive to serve customer and innovate.

Private Sector Weaknesses

1. “The customer is always right:” consumers sometimes value things unrelated to quality.

2. Temptation to scale through mass marketing, deceptive advertising, and cut-rate provision.

3. Reluctant to be evaluated.

Tensions

Incumbents vs. New Ventures.

Research and transparency.

Philanthropy and the “crowding out” problem.

Policymakers’ understanding of profit-motive.

Trust and legitimacy must be earned.

Takeaways

1. Stop fixating on tax status as key signifier of quality or merit.

2. Acknowledge that private ventures bring both strengths and weaknesses to schooling.

3. Researchers should study for-profits more intently.

4. Private ventures need to state the value proposition to policymakers and the public.

Papers Available On Our Website

http://www.aei.org/policy/education/private-enterprise/