NCPA - National Center for Policy Analysis

Private Sector Participation in Education Lags

October 19, 2011

Despite the fact that collaboration with the private sector has been fruitful in the past, government on all levels continues to stymie or entirely block private efforts to improve education, says John Bailey, director of Whiteboard Advisors.

Success stories abound regarding cooperation between public and private actors in achieving societal goods.

  • With the retirement of NASA's space shuttle program in 2011, NASA has begun to partner with commercial entities in order to design and construct a new space vehicle.
  • With billions of dollars offered in potential contract money, private firms are now scrambling to contend for the space flight deal, bringing long-awaited competition to the sector.
  • In the area of health care, which is analogous to education insofar as both industries face potentially disastrous obstacles in the not-distant future, the federal government has used $20 billion in incentives to encourage private sector use of electronic health records (EHRs), which it estimates will prevent up to 195,000 deaths that occur each year from medical mistakes.
  • In energy, the government's use of tax credits has proliferated in recent years in order to harness private market motivations to achieve policy goals.

Despite the success of cooperation in these other sectors, private sector participation in education lags far behind.  Government officials see as taboo the possibility of entrenched, for-profit involvement in the education system, and continue to block market entrance for that reason.  Even those initiatives that seek to bring about innovativeness and experimentation within schools, such as the $650 million i3 fund allotted by the 2009 American Recovery and Reinvestment Act, are almost completely unavailable to for-profit entities.  This overly-restrictive market structure perpetuates the status quo -- at which only .03 percent of the public education budget is spent on research and development -- instead of allowing the entrance of private-sector firms that average 100 times that percentage.  Therefore, by using government control over education to prohibit market entrance of for-profit entities, policymakers are stifling potential for the very inventiveness that they purport to desire.

Source: John Bailey, "Odd Man Out," American Enterprise Institute, October 2011.

For text:


Browse more articles on Education Issues