School Board Advertising is a Public Good: Advertising is a sign of an innovative market and interested customers

Commentary, David Seymour, Education, Uncategorized

 

The Star Phoenix recently reported that the advertising budget of the Saskatoon Public School Division has risen 70 per cent over the past four years while the Catholic School Division’s bill for advertising and related services has quadrupled over the same period. The tone of the article and the response of commentators interviewed suggested this expenditure is a sign of waste and extravagance; actually, it could equally be argued that this expenditure is far too low, because it reflects a lack of competition and choice in the education system.
As a percentage of the School Boards’ overall operating budgets, it was reported, advertising expenditure is now 0.11 per cent of the Public School Board’s total budget, and 0.06 per cent for the Catholic Division. But Statistics Canada reports that revenue for advertising and related services is much greater for the broader economy. It’s around six billion dollars, or 0.40 per cent of GDP.
At four to eight times less, school division advertising is a drop in the ocean compared to what businesses in the mainstream economy spend. Whether that’s a good thing or not depends on your view of advertising generally, and the ideal structure of the education system.
As the Concise Encyclopaedia of Economics records, “advertising promotes competition and lowers the costs of providing information to consumers and distributing goods. Today, most economists side with the defenders [of advertising] most of the time.”
 In other words, advertising makes it worthwhile to innovate and offer better or more affordable products. That’s because potential customers who know about your innovations will be more likely to come to you rather than your competitors. Conversely, a market without advertising is a disjointed set of little monopolies.
As empirical evidence of this theoretical claim, a famous study from the 1970s found that advertising drove down the prices of reading glasses in American States where it was allowed for them. (Some states banned advertising for reading glasses). Even in the Soviet Union, which often struggled to keep pesky market principles out of its grand schemes, central planners gave factories brands so that they could monitor the quality of different factories’ outputs.
As one wag once put it, we know half the money we spend on advertising is wasted; we just don’t know which half. Some budget brands certainly do eschew advertising, promising customers the saving of advertising expenses, if only those customers can find their products. In reality, advertising has been fairly consistent as a percentage of GDP over the last decade (no prior statistics available), suggesting that either millions of decision makers are delusional, or advertising makes the economy more efficient.
All of that is well and good, one might reply, but education is not a market activity. Students are not consumers and school divisions are not supposed to be competing businesses but rather co-operating public institutions. That is certainly one view expressed by an interviewee in the Star Phoenix article, but how well does it stack up? 
To believe that advertising as a lesser place in education than it does in other parts of the economy, you’d have to believe either: There is less of a place for competition and innovation in the education system than in other parts of the economy, or; that parents are less able to discern what a better education is so it is pointless to inform them.
In a review of fifty-five studies covering over 20 countries, Andrew Coulson of the Cato institute found that the academic literature comes out on the side of more market-like school systems against more monopolistic systems by a ratio of seventeen to one. That’s just one study from an institute with an avowed aim of opening up U.S. education to more competition, but the studies it reviewed weren’t, and its result has a certain logic behind it. The government of Canada knows that competition is better than monopoly, that’s why it has the Competition Bureau with the mission: “to protect and promote competitive markets.”
It’s as naïve to think that there is one best way to educate every child as it is to think every child is the same. It’s even more naïve to think we’ve already found that best way, or that parents can’t identify improvements in education for their children. If the level of advertising in Saskatoon’s school divisions is a reflection of anything, it’s the largely monopolistic structure of education compared to other parts of the economy. If more advertising reflects more competition and choice, then let’s have it.