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Rick Hess Straight Up

Education policy maven Rick Hess of the American Enterprise Institute think tank offers straight talk on matters of policy, politics, research, and reform.

Money & Finance Opinion

The Feds’ For-Profit Double Standard in Ed

By Rick Hess — October 12, 2011 3 min read

I’m frequently frustrated by our inability to talk sensibly about the role of for-profits in schooling. Most discussion amounts to reflexive demonization, occasionally interspersed with hired-gun salesmanship or protestations of good intentions. Nearly absent is thinking about the role for-profits can play in promoting quality and cost-effectiveness at scale, or what it’ll take to make that happen.

This black-and-white storyline plays out in education, even as other sensitive areas of domestic public policy (like health care or environmental protection) prove far more comfortable with the role that for-profits play. In an invaluable new analysis, John Bailey of Whiteboard Advisors--and veteran of the White House, the U.S. Department of Education, and the U.S. Department of Commerce--examines how the federal government excludes for-profit educational providers even as it welcomes for-profits in a raft of other vital areas (Full disclosure: Bailey’s piece is published by my shop at AEI, as part of my ongoing series on “Private Enterprise in American Education.”)

Bailey notes, “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 surveys key federal agencies that are actively engaging for-profits as collaborators. For example, NASA, with President Obama’s approval, set aside $6 billion to support private ventures that will compete to build and operate spacecraft, with NASA overseeing quality assurance and safety. The upside of tapping into private sector capabilities can be immense. Space Exploration Technologies Corporation (SpaceX) recently launched into orbit their Dragon capsule, designed to transport humans and cargo into space. The total cost of the Dragon was $800 million--compared to the $10 billion NASA spent on similar models in the past six years. By utilizing private companies like SpaceX, NASA can access innovators who would likely never choose to work in the public sector. SpaceX CEO Elon Musk, for instance, also founded PayPal and Tesla Motors. Let’s be honest: Musk wasn’t going to work for NASA.

Bailey notes a similar comfort with for-profit ventures in the fields of electronic medical records and energy. The dreaded emphasis on profitability means that private sector ventures have much more cause to pursue efficiency and scale than do non-profits or public ventures. They also have the luxury of operating free from much of the red tape and bureaucratic culture that characterizes government agencies.

When it comes to education, however, policymakers create unique policy and funding barriers that apply to for-profit entities. Citing numerous examples, Bailey observes, “Federal policy toward private-sector education companies lags compared to other sectors. As a result, education remains one of the only public policy areas where private companies have difficulty entering and thriving.” Restrictive laws, limited funding, and numerous regulations limit for-profit providers from entering the education space. Such measures are visible in i3, school improvement, and the Obama administration’s gainful employment proposal--making it hard for even high-quality for-profits to compete on a level field.

Given the Obama administration’s goal of having the feds play a catalytic role in school improvement, it’s a useful time to revisit this state of affairs. Let’s be clear: the point is not to advocate for federal subsidies or marketplace manipulation, but for policymakers to relax the anti-for-profit mentality that is uniquely evident when it comes to schooling. As Bailey writes, "[A]n entrepreneurial education landscape...is one in which [government and foundations] 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.”

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The opinions expressed in Rick Hess Straight Up are strictly those of the author(s) and do not reflect the opinions or endorsement of Editorial Projects in Education, or any of its publications.

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