Faith and the Power of Free Markets

In his book, One market under God: Extreme Capitalism, Market Populism, and the End of Economic Democracy, Thomas Frank documents the quasi-religious faith many Americans place in the power of the free market to regulate the economy and the behavior of ordinary people. This faith in the power of free markets stands behind a wide range of educational reforms including teacher merit pay, charter schools, vouchers, and paying students for doing well on tests (or just coming to school). Vouchers, for example, are based on the assumption that schools will (necessarily) have to reform themselves if they have to compete for students. Chronically underperforming schools will disappear because parents (read: consumers) will not choose them for their children. In a free market environment schools will have to respond to market demands (for higher test scores) by either improving or going out of business.

This faith in the power of the free market to reform schools is largely ideological, unsupported by research. The evidence does not support the claim that free markets necessarily result in higher quality. The de-regulation the broadcast industry, for example, certainly has not resulted in better TV programming (we get over 300 channels and still can’t find much worth watching).

But reports on the economy over the last few months ought to shake the faith of even the most committed believers in the power of unfettered free markets. The commitment to unregulated free market capitalism has left financial markets in shambles and most of us are going to suffer the pain. My 401K plan has taken a beating the last six months or so.

This experience ought to give us all pause when we consider educational reforms based on unquestioned faith in free markets. As current events indicate, the invisible hand of the free market is capable of delivering a painful blow.