The reality is that privatization of inelastic demand services, such as electricity, prisons, and education, will never lead to a decrease in cost or an increase in quality. This is fairly easy to understand for many economists, but I’ll try to break it down here.
In every market, the supply and demand curves respond to the necessity of the service being sold. The necessity of the service determines the demand curves “elasticity.” As a service becomes more necessary, the demand curve is seen to be inflexibly vertical, or “inelastic.” If the customers can decide the quantity of service purchased as the price increases, the demand curve is seen to be increasingly horizontal, or “elastic.”
My examples were electricity, prisons, and education. Electricity is a necessity because we have people in our nation who live in extreme temperatures which requires electricity to make habitable. Prisons are a necessity because certain criminals need to be removed from society. Education is a necessity because it is increasingly difficult to make ends meet on minimum wage (and it is determined by law to be a right in many states).
When the demand curve for a service is inelastic, any change in price yields little or no change in demand. When for-profit companies are allowed to enter these markets, they have no need to keep prices low. The purpose of every for-profit company to maximize revenues while minimizing costs to create the maximum profit for its shareholders. It is the inelasticity of demand that these companies wish to capitalize from. They can charge as much as they want and the demand remains the same. To cut costs, they decrease their salaries expense by hiring less qualified teachers. Online schools increase the number of students per teacher and eliminate any hands-on learning.
The truth of the privatization push that no politician will tell you is that they have conflated competition in an elastic demand market with competition in an inelastic demand market. They have two completely different results, and those who wish to make a fortune off of education are very aware.
Keep up the good work, Mrs. Ravitch.
Loving husband of a 3rd grade teacher
Education: The Civil Rights Issue Of....Wait A Minute!
Reformers love to tell us that education is the civil rights issue of our time. But they don't tell you they are scamming the shit out of you. The following is a comment left at Diane's blog that explains how the privatizers are using the civil rights meme to scam us.
By Teacher Rich at 6/27/2012 11:48:00 AM