Profiting from Education: Incentive Issues in Contracting Out. EPI Policy Paper #1.

The privatization of schools and school services is strenuously opposed by trade unions representing school district employees. This paper examines the opposing arguments advanced by the National Education Association and finds that the objections involve two distinct points: (1) the economic role of profit; and (2) idealism in the schools. The paper discusses each of the points, which are central issues in the debate between capitalism and socialism. The first point is based on the notion that profits are superfluous payments made to well-positioned, but undeserving, individuals; profits play no constructive economic role in an enterprise like a public school. The paper asserts, however, that two less visible costs are involved--capital and risk. The second point is based on the idea that profit-seeking is an unsound and potentially corrupting motive for the delivery of a public service, which should be based on altruistic, service-oriented motives. A conclusion is that the involvement of profit in the privatization of public schools should not be considered an objection. Profits, it is argued, are a way of recognizing costs that exist in all school settings, and the seeking of profits is no more selfish than the seeking of higher salaries, promotions, or job security. (LMI)