Knowledge,Ignorance and Government Schools; S. Richman

The problem with government, or so-called public, schools is identical to that of social ism. As the Austrian school of economics teaches, socialism (because it lacks private property and prices) founders on its inability to discover crucial knowledge that is spon taneously produced and widely dispersed in society. A small group of planners simply cannot know what the market will reveal through the competitive process. The knowledge, or calculation, problem also sinks government schools. There is a certain ironic justice to the fact that government schools are plagued by systemic ignorance. Open vs. Closed-Endedness The Austrian-school economist Israel Kirzner has elaborated on the knowledge Mr. Richman is the author o/Separating School and State: How to Liberate America's Families, published by the Future ofFreedom Foundation in Fairfax, Virginia. problem by distinguishing economic ap proaches that see the world as closed and open-ended. A closed universe, writes Kirzner, is . . . one in which relevant alternatives present themselves to decisionmakers in definitely perceived form. The decision maker sees himself confronted by a lim ited number of clearly marked out possi ble courses of action, each leading to a definitely perceived outcome. Once the parameters of this closed universe have been identified, once the decisionmaker's preferences among the given set of alter native possible outcomes have been rec ognized, the decisionmaking process be comes strictly mechanical. Given these parameters and preferences, choice is completely predictable and determined. 2 In other words, in a closed universe, every thing of relevance is known to the decision maker. He must merely engage in a calcu lation of costs and benefits to arrive at his choice.

But in an open-ended universe, things are rather different. As Kirzner tells us: "De cisionmaking in the open-ended universe occurs within a context in which key ele ments required for deliberate, calculative decisionmaking are totally absent. While some possible courses of action may be more or less clearly perceived, others are not seen at all. While some possible out comes (of given courses of action) may be 340 glimpsed, others are not recognized. ,,3 Re ality, in this approach, is more like a gem stone than a flat, two-dimensional painting. There are facets not in view. But more than that, one may not even be aware that those facets exist. Thus, Kirzner writes: "The possibility of utter surprise is central to the open-ended universe.,,4 One may come upon informa tion unexpectedly. Serendipity happens. "Such a universe," he adds, "provides ample scope for-in fact, it imperiously demands-the imagination, creativity, and prescience of the decisionmaker. . . . Suc cessful decisionmaking, in the open-ended universe, consists rather in creatively antic ipating the as yet unknown, in imaginatively filling in the missing contours of the appar ently open-ended environment.,,5 One must understand that Kirzner is not talking about mere "imperfect knowledge."

There is much we do not know because knowing it is not worth the cost. I am ignorant of the chief export of Burkina Faso. But I know I lack that knowledge, and, further, I know how to fill in that knowledge gap. I will do so when I believe the benefits outweigh the costs. Thus, my ignorance is known in the economics literature as "ra tional ignorance. ' , But there is another, more fundamental kind of ignorance: ignorance of which I am unaware, utter ignorance. For example ... well, of course I can't give an example. If I could it wouldn't be utter ignorance. (Hy pothetically, if I hadn't heard of Burkina Faso, I wouldn't know that I was ignorant about it.) Obviously, the real world is of the open ended variety. We don't know what we will learn tomorrow. We are capable of being surprised. Discovery is commonplace. It should go without saying that discovery is vital to our wellbeing. The enhancement of life, then, depends on our having institutions that encourage discovery. The important question is which set of institutions is more appropriate to an open-ended universe in the provision of services, such as educa tional services: government or the market, bureaucracy or entrepreneurship? Which 341 way of doing things both recognizes our pervasive utter ignorance and increases the chances of discovery and utter surprise? We know from the collapse of communist econ omies around the world that political insti tutions have fared badly at the provision of goods and services. One reason for that is socialism's inability to cope with the open ended world.

The market, on the other hand, does quite well when allowed to operate, and it does so precisely because it is not a unitary thing. The market, as Thomas Sowell has written, is "the freedom to choose among many existing or still-to-be-created possibili ties.,,6 As such, the market is best suited to the open-ended nature of reality. Why? Because it provides a powerful incentive for people to be open to utter surprise and discovery: the profit and loss system. When people stand to profit from their discoveries, they are more likely to locate (or create) opportunities that would otherwise be lost.7 Government Schools We may now judge government schools by the criterion of ability to cope with open-endedness. The distinguishing feature of a government school system is that it is a virtual monopoly financed through the co ercive mechanism of taxation. People must surrender their money to the system even if they don't use the schools or are dissat isfied with them. Although parents are le gally permitted to send their children to independent schools, tax financing pre cludes that option for about 90 percent of families. Most people simply cannot afford tuition for independent schools after paying their school taxes. Thus, the market for independent education is artificially con stricted, consisting mainly of highly affluent people. Many fewer independent schools exist than would otherwise be the case but for the existence of a tax-supported system.

The variety of schools is likewise artificially constricted. As a result, most decisions about educa tion are made by small groups of elected or appointed government officials. Their deci342 THE FREEMAN • JUNE 1995 sions apply to everyone in their jurisdiction. The only way for most people to avoid their directives is to move from the jurisdiction, a costly alternative. One can see that political decisionmaking is not suited to coping with an open-ended world. There's no reason to think that the small group of decisionmakers knows ev erything, and there is no profit and loss system pushing them to make entrepreneur ial discoveries. For example, methods of teaching are selected by government school officials. By virtue of the political system, they have the power to impose those meth ods on everyone within their jurisdiction. There might be better methods that this small group of officialsdoesn't know about.

Someone in the jurisdiction might even know such a method. But the system creates obstacles to his offering an innovation to parents and children. An innovative educa tor could try to open his own school, but as we have already noted, most taxpayers can't afford the tuition. Alternatively, he could attempt to per suade the government school officials to adopt his methods. But he may find unre ceptive ears because the officials are unfa miliar with his ideas or acceptance of them might offend entrenched interests. Even if the school officials humbly acknowledge that they do not know everything, they nevertheless claim the exclusive power to recognize whose ideas are worth carrying out and whose are not. The bureaucrats may decide to look for new educational methods, but their system lacks the reality check of the marketplace. If parents are unhappy with new methods selected by officials, they can't take their business and money elsewhere. Dissatisfied parents could try to unseat elected officials.

But, compared to consumer power in the marketplace, that is a costly, complicated, and indirect form of recourse. Besides, organized interests, such as the teachers' union, are more likely to prevail. The upshot is that a government school system lacks the entrepreneurial element that has so powerfully lifted living standards around the world. In a free market, innovators are free to tryout new ideas. But consumers are free to reject them. Compet itors may simultaneously offer different services for consumers to choose among. Competing ideas clash in the arena of the market-to the benefit of consumers. To be sure, an entrepreneur may have to persuade a lender to finance a project. But lenders too are aiming to make money, which can only be done by pleasing consenting consumers. Private business people can go bankrupt, school officialscannot. There, in a nutshell, is the difference. Contracting Out All these considerations indicate why some of the fashionable reforms proposed for government schools miss the point. A few school districts have contracted out the management of their schools to private firms. Some hail such a measure as a cure for what's wrong with education. But it is not.

Contracting out merely exchanges' 'public" monopoly managers for "private" monop oly managers. Consumers still cannot readily take their business elsewhere. The ends of the educational system are still set by the same small group of officials, who are protected from competition. The means are left to a private management firm that has an effective monopoly for the term of its contract. Charter Schools The charter school movement is similarly flawed. Under this reform, schools, public or private, may apply for special status under which they are free, to some extent, of central control by the school district and students' tuition is paid from tax revenues. The reform is a limited version of the voucher plan, under which children may attend any school, and, like the voucher plan, charters will tend to corrupt formerly independent schools. But leaving that aside, the charter plan suffers from the same de fect-what F. A. Hayek called the "pre tense of knowledge" -as a conventional government school system: A small group of officials, whose knowledge is necessarily limited, decides which schools and educa tional philosophies are eligible for partici pation and which are not. Those that are excluded are badly handicapped by the political system.