Sunday, August 28, 2011

Why tuitions always go up

The crummy school my kids attend wants another 3 percent in tuition this year. I'd switch them out, only there aren't many other choices. Plus, the kids like this school. They have friends, and history here. It would be no easy thing to start over somewhere else.

Naturally the schools know this. Its why they can raise their rates with such impunity. To put it simply we're trapped. As crummy as this school is, other schools might be worse, and the kids might be unhappier elsewhere. This imperfect knowledge gives the schools an advantage in any negotiation, and it is one of the things that protects them from ordinary market forces like customer dissatisfaction. How can I risk moving my kids to a new school when there's such uncertainty about what I might get somewhere else? Its not like I can go on the internet and get concrete information about the product at other schools. I cant punish the school for its bad performance, if I can't be sure the alternatives are any better.

If it was possible for me to acquire that kind of information, I could switch schools with less difficulty, and I'd have more negotiating power. Instead of carrying on with no improvement the schools would have to respond with better service, better prices and more accountability. They'd have to address their specific, identifiable falngs, or risk losing me as a customer. Unfortunately, the same imperfect knowledge that restricts my ability to make an informed consumer decision also allows the school to address every shortfall with a tuition hike. My inability to switch schools on a dime is part of what makes it possible for them to force me carry the costs of their bad management decisions.

Ironically, the solution to this problem is not more competition but less. A consumer will never be able to acquire perfect knowledge about an 8 or 12 year education product. There are just too many variables, and the most significant ones, namely the make up of the class and how the class responds to a particular teacher, are impossible to evaluate in advance. A child might flourish with one set of classmates and flounder with another. Until it becomes possible to see the future, parents will never know ahead of time which combination of classmates and teachers will, over a long educational career, produce the best results for a particular child. As long as education remains this kind of crap shoot, parents are restricted in their ability to switch schools. More competition won't solve this problem.

If each community had one school, funded by the residents and transparently managed by professional educators and a lay board of directors, the problem wouldn't be solved, but it would be mitigated. Parents would still not have the power to change schools, but they would have a stronger say in how the school was run. Tuition hikes would not pass without the consent of the community, and an adminstrator who failed to control costs would be let go, not rewarded with a pay raise. Also, combining all of our yeshivot into one institution would provide economies of scale that would also help to control tuition costs.

The only thing preventing this sort of reasonable solution is the narcissim of the yeshiva owners, and the narcissim of small differences. Every yeshiva owner is wrongly convinced of his own schools excellence, and even in a homogenous neighborhood, neary every parent is foolishly terrified of exposing his kids to the wrong kind of orthodox jew. Until these two forms of narcism are overcome, tuitions will only go up.

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