I have long been suspicious of the standard line among economists that the market underproduces goods or services where there are positive externalities. Such alleged market failures provide the justification for various government programs of subsidy or direct provision, especially in education. But what does it mean to say that education is “under-produced?”
Prior to the advent of government schools in the US, did we have too little education? Under the economic theory, that should have been the case. What’s the evidence for it though? We had a high rate of literacy — probably higher than we do today. Nearly everyone was well-trained in his trade, craft, or occupation. When people wanted to expand their knowledge on something, they could seek out books or individuals who had expertise in that particular field. Early Americans could and did learn whatever they needed or desired to without a system of education supported by the state. If we could take a time machine back, I doubt that we would find any of them saying or thinking, “There aren’t enough educational opportunities available.”
The flaw in the theory, at least as it applies to education, I believe is this: Education does not have to be produced as most goods are. It can be offered by firms seeking to make a profit, but it can also be the result of individual action or non-pecuniary interaction with others. Much education is acquired outside of the normal “market” means, and as long as government does not get in the way of people’s efforts to learn, I believe that they will just about always get the optimal amount of it. If we’d had government education in the 18th century, the result would not have been a more educated populace, but merely one that spent more time in classrooms.
