Saturday, December 03, 2005

Education is Not a Public Good

For those of you who may not have followed the extensive comments section in my post earlier this week, the discussion evolved into one of whether education is a public good. For those who believe that it is the responsibility of government to take your money to pay for public goods, answering this question is important.

A public good is defined as, "one which is capable of being used by many persons at the same time without reducing the amount available for any other person."[1] We say that a public good exhibits two characteristics: it is both non-excludable and non-rival. We might also term this inexcludability of consumption and jointness of supply. The value of pi, 3.1415926....., is a public good. Its production costs (or discovery costs, as the case may be), are entirely fixed; there are no variable or marginal costs. I can use this constant repeatedly without paying anything and can use it at the same time as mathematicians around the world. As a result, I may utilize this constant to make unnecessary calculations. At the same time, my use does not preclude others from simultaneously using pi to perform their own calculations and no one pays a fee each time they make calculations with pi. The true "value" to "society" of pi's discovery remains unknown. Perhaps I valued my first use of pi at $10 and the thousandth use I value at only $0.01. Because I am not paying for each use, one cannot observe my demand for pi.

Some have argued that education is a public good. However, it clearly does not exhibit the same characteristics described above. When people claim that education falls under the definition of a public good, what they mean to say is that some results of education are public goods -- results like the discovery of pi.

However, most results of education are entirely excludable. I reserve the use of my ability to perform financial analyses for the company that pays for it. I was not educated for the benefit of society, but for my own benefit and the benefit of the company that will pay me the most for it. In fact, the company that I work for did its best to ensure that I exclude its competitors from the use of my knowledge for some time, by requiring me to sign a non-compete agreement in exchange for my salary.

Even though I'm sure many of my tax dollars go to educating children that live nearby, I'm not allowed to go over to little Suzie's house and demand that since I helped pay for her to learn to read, she needs to read at least one entry in my blog. Education goes to the person receiving it, to use as he pleases. An individual's knowledge cannot be consumed by everyone simultaneously.

[1] Alchian, Armen A. and Allen, William R. Exchange and Production: Competition, Coordination, and Control, 3rd Ed., Wadsworth, Inc., 1983.

No comments: