Academic journal article AEI Paper & Studies

Odd Man Out: How Government Supports Private-Sector Innovation, except in Education

Academic journal article AEI Paper & Studies

Odd Man Out: How Government Supports Private-Sector Innovation, except in Education

Article excerpt


For decades, for-profit educational provision has been merely tolerated, often grudgingly. In the world of charter schooling, for-profit providers are lambasted and sometimes prohibited. In higher education, for-profit institutions have grown rapidly, enrolling millions of nontraditional students and earning enmity, suspicion, and now investigative and regulatory actions from the federal government. When it comes to student lending, teacher quality, and school turnarounds, there is a profound preference for nonprofit or public alternatives. All of this is so familiar as to be unremarkable.

The problem is that K--12 and higher education are desperately in need of the innovative thinking and nimble adaptation that for-profits can provide in a landscape characterized by healthy markets and well-designed incentives. As critics have noted, for-profits do indeed have incentives to cut corners, aggressively pursue customers, and seek profits. But these traits are the flip side of valuable characteristics: the inclination to grow rapidly, readily tap capital and talent, maximize cost effectiveness, and accommodate customer needs. Alongside nonprofit and public providers, for-profits have a crucial role to play in meeting America's twenty-first century educational challenges cost-effectively and at scale.

However, we rarely address for-profit provision in this fashion. Most statutory and regulatory discussion focuses on how to rein in for-profit providers, largely ignoring what it would take to harness the potential of such providers while establishing the incentives and accountability measures to ensure a level, dynamic, and performance-oriented playing field.

AEI's new Private Enterprise in American Education series is designed to pivot away from the tendency to reflexively demonize or celebrate for-profits and instead understand what it takes for for-profits to promote quality and cost effectiveness at scale. In this third installment of the series, John Bailey of Whiteboard Advisors demonstrates how for-profit educational providers are singularly excluded from federal governmental efforts to engage private-sector actors. Bailey notes that policymakers and government officials are comfortable with for-profits routinely playing a substantial role in addressing pressing social problems in areas like health care or green energy, but not in education. "When it comes to other crucial challenges our country faces--creating a more reliable health care system, finding efficient sources of clean energy, or improving space exploration--policymakers do not ask whether they should engage for-profit companies, but how they should," Bailey writes, continuing, "It's time for education policymakers to follow suit."

Given that the federal government is seeking to play a more catalytic role in promoting school improvement, it would seem a useful time to revisit this double standard. To be clear, the point is not to advocate for federal subsidies or a manipulation of the marketplace, but instead to encourage policymakers to regard for-profits in education as they do in other sensitive domestic policy areas. As Bailey writes, "[A]n entrepreneurial education landscape is not one in which the government or foundations simply pick winners and losers. Rather, it is one in which these entities help remove barriers to entry for quality providers and think deeply about the impact their policy or philanthropic decisions will have on the broader educational marketplace and potential investors or entrepreneurs in the field." I am confident that you will find Bailey's piece as eye-opening and informative as I have. For further information on the paper, John Bailey can be reached at For other AEI working papers in this series, please visit For additional information on the activities of AEI's education policy program, please visit or contact Jenna Schuette Talbot at jenna. …

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