Why Markets Are Important (And What They Could Do for Public Education)

By Denis P. Doyle

As everyone knows, free markets are important because they voluntarily bring together willing buyers and sellers. Supply and demand are the sine qua non of economics. In fact, so important is their function that, in classical economic theory, a free market occurs only when no single buyer or seller can determine price. This bears restating: In classical economic theory, cost does not determine price; price is set by what sellers and buyers agree to. That’s why prices climb (and quality eventually falls) when monopolists are in the saddle, and prices fall when goods and services are abundant.

To be sure, no producer deliberately sets out to sell below cost—they do so only reluctantly—but the choice is not the producers’ to make (except under duress). Markets, of course, reward efficiency and productivity. Put most simply, the effective capitalist holds quality constant while cutting costs and increasing output enough to achieve profitability.

What does this have to do with education? There are four...