The Economic Effects of a Schooled Generation

*originally written 08/31/16*

In my original writing of this piece, I discussed seven different effects of mandatory public schooling on the economy. However, the full exposition was necessarily lengthy and, in an effort to keep my articles within a reasonable word count, I was forced to reduce the scope of this piece. All this to say that, although I only talk about two more-often-overlooked effects, I am not unaware of other issues like actual money costs, limits on workforce participation, and degree inflation (partially discussed elsewhere).

The first issue I’d like to address is the public schools’ attack on diversity. In rhetoric, certainly, schools appear to praise the existence of diversity. However, diversity simply means “the existence of difference,” and schools systematically attempt to eliminate the differences between their students. Schools assume that everyone starts out with the same knowledge and abilities, assumes that everyone learns and develops at the same pace, and, by teaching everyone the same material, attempts to create a population where everyone has the same knowledge and skills.

This is, in effect, an attack on the division of labor. Economic growth is based on social cooperation, which is, in turn, based on recognition of two fundamental economic principles: The Inequality of Nature and The Law of Association (more commonly known as the Law of Comparative Advantage). The Inequality of Nature means that every individual has different preferences, laboring abilities, and resources upon which to labor. The Law of Association states that when people specialize in the work that they’re relatively better at (the type of labor with the smallest opportunity cost for them) and then trade the product of their work for the product of others who also specialized in the work that they were relatively better at, productivity is increased and all parties are made better off. Social cooperation and economic growth are not about having more people who can work together to create bigger things; they are about having more different people who can exploit their differences to increase total production of many different things. Hayek put it like this: “It is, then, not simply more men, but more different men, which brings an increase in productivity. Men have become powerful because they have become so different: new possibilities of specialization – depending not so much on any increase in individual intelligence but on growing differentiation of individuals – provide the basis for a more successful use of the earth’s resources.”

Differences, in knowledge, in skills, in inclinations, are therefore valuable to an economy. By attempting to eliminate (or at least severely limit the development of) these differences, public schools weaken the very foundations of our division-of-labor-based economy. They therefore limit the pace and extent of economic growth, resulting in a lower standard of living for all.

The second issue that I’d like to write about is the schooled mindset and its contribution to the decline in entrepreneurship. Now, there is a myth being spread in this country that tons of young people are starting their own businesses and becoming entrepreneurs. Unfortunately, it’s only a myth. According to data from the Federal Reserve, less than 4% of adults under 30 own stakes in private companies, down from more than 10% in 1990. There are many reasons for this trend: increased regulation, taxes, occupational licensing, and student debt. However, I believe that another major contributing factor is the psychological effects of spending 12-16 years in school.

To clarify, an entrepreneur is an individual who begins producing a good today knowing that it will only be of use at some future date, but not knowing what the value of the good will be at that future date. His uncertainty is what sets him apart; he produces for tomorrow without knowing what tomorrow will need. If his predictions are accurate, he will make a profit. If not, he will suffer a loss. A successful entrepreneur, then, makes a profit by correctly predicting a future change in demand and by acting to meet this future demand. Moreover, he must foresee this change more clearly than his fellow industrialists, who would otherwise also move to meet the future demand and bid away the entrepreneur’s profits.

In light of our preceding discussion on schools’ attack on diversity, we can easily see one way that schooling hurts entrepreneurship. By reducing differences between students and by forcing them all to learn the same material, schools make it difficult for students to think independently and plan for the future in ways different than their peers. However, schools do much worse than this: they create a mindset in their students that excludes entrepreneurial tendencies.

Schools encourage conformity. To succeed in school is to do exactly what you’re told to do, to meet or exceed the expectations on a standardized rubric. If you try something else different, you run the risk of “failing.” Outside of the classroom the situation is quite similar. To be a success in the social scene of the school, one must emulate one’s peers as much as possible, up to and including one’s hairstyle.

Schools also encourage passivity. Students sit passively at their desks all day long, with raw information being fed to them. They passively do their homework like they’re told, using the methods that they’re taught. They passively cycle through the school system, one grade at a time, taking the various subjects in the order that they’re prescribed. They passively apply to college in their senior year, without much thought of alternatives. And, when they’re done with college, they passively send out their resumes and wait for someone to call them back and just give them a good job. The schooling system assures students that it will take care of everything, and the students passively accept this. 

Finally, schools encourage a submissive, permission-based mindset. One cannot offer an opinion on a subject unless he is an expert. The teacher always knows better. The student cannot do or build anything with his knowledge until the teacher decides that he knows everything he needs to know (through testing) to do so. If the choices are A through D, the answer cannot be E. Everything is pass/fail; there is no way to grade “different.” Everything is planned by someone else and assigned. Students are conditioned to sit quietly, raise their hands when they wish to speak, ask permission to go to the bathroom, and accept the teacher’s views as authoritative.

Through all of this mental warping, by encouraging conformity, passivity, and submissiveness, schools reduce their students’ creative and entrepreneurial capacities. This hurts our economy by reducing our ability to envision and create a better future, resulting in a reduction in everyone’s living standards from what they might have been. 

These are just two ways in which mandatory public schooling hurts our economy (by hurting our children). There are other ways that they hurt the economy (at least five) and, while any one of them might have a small effect on the economy (though doubtful), together they no doubt have a quite substantial effect. This is not to say that public schooling has no economic benefits; it does. However, it is in no way conclusive that schools are an economic boon on net. In fact, when we consider the possibility of a free market in education providing all of the benefits and none of the disadvantages of the government version, it seems all the more likely that the opposite is true.