All the great schools I know are not-for-profit institutions. That may or may not be a coincidence but it is striking, and it raises two questions: is there any in-principle reason for this, and what does the evidence suggest?
In terms of principle, I have explained elsewhere (The Economies of Education) why I think there might be something fundamental about certain elements of human society that renders them different from usual market structures, and that education may be one of these elements. The basic point is that extracting profit from some things (sex, religion, blood) risks devaluing them. Is education one of those things? If so, then there may be differences between the capabilities of for-profit and not-for-profit educational organisations.
I’ve been discussing this with an old friend who does not see it that way. He argues that there is no in-principle reason why a profit-driven institution should not deliver the very best that can possibly be achieved in education, because to succeed, the people within it will be more highly motivated than those in a not-for-profit organisation to deliver an exceptional experience to their customers. Only this, he argues, will deliver a sustainable return to shareholders.
So his position is that the profit motive incentivises people more than anything else, even more than idealism and mission. I do not believe that to be true – it certainly is not for me or my colleagues – but then again we work in an idealistic, mission-driven school. But whether the profit motive incentivises people more than idealism is a factual question rather than one of principle, and my friend may be right in general – different things motivate different people after all. But my intuition is that the many of the best educators may not be primarily driven by the prospect of generating a sustainable return for shareholders.
This difference in perspective naturally led our discussion towards a broader philosophical debate: whether the pursuit of economic logic can, in some domains, become a limiting creed rather than merely a powerful methodological tool. As ever, there are different views. Christopher Llewellyn Smith once remarked, “When I ask an economist, the answer always seems to boil down to just bribing people.” Milton Friedman, by contrast, famously argued that “the most important single central fact about a free market is that no exchange takes place unless both parties benefit.” No wonder we sometimes seem to be talking past each other when we discuss education through such different lenses.
My friend and I, close as we are, both regard the other as an ideologue – and we are probably both right. That said, being perceived as an ideologue who dismisses the commercial engine sits uncomfortably with me. Self-serving talk is cheap, and I am, in fact, convinced that the profit motive is, overall, a powerful force for good. Perhaps all we differ on is the scope of the force.
Turning back to for-profit education, there is at least some empirical data. While I have not seen recent international-school evidence, and the US data is now more than a decade old, I have come across some striking findings relating to for-profit and not-for-profit universities in the United States. The Economist’s report on a US Senate investigation found that in the 2009–10 academic year, for-profit colleges:
- Received $32bn from the US government in student aid
- Charged far higher tuition fees than comparable state universities
- Spent much less per student on instruction
- Typically spent far more on marketing than on teaching
- Had very high dropout rates (in 2008–09, the median length of study was just four months)
The Economist inferred that for-profit universities recruited anyone eligible for federal funding but showed little concern for what happened to them afterwards.
US higher education is not a perfect proxy for international K–12 schooling — particularly in places like Singapore, where families operate in a highly competitive, high-fee, globally mobile market — but the underlying pattern is nonetheless instructive. Do these findings suggest that the profit motive can, in some contexts, be an ineffective mechanism for allocating resources towards educational excellence, prioritising marketing spend over the substance of instruction?
As I write this, I realise that much of the tension lies in the final phrase of that question. ‘Educational excellence’ to a prospective family may be something quite different from ‘educational value’ to a prospective institutional investor. However, the broader idea – that profit-first pressures can corrode educational purpose through systematic misallocation of resources away from teaching – gives serious pause for thought. It raises uncomfortable questions and appears to align with the intuition that there may be something about education that is compromised when it is exposed not merely to market discipline (which all schools face), but to the specific demands of profit extraction.
I would like to think that a not-for-profit structure functions as a form of long-term quality assurance, ensuring that all revenue is reinvested in the student experience rather than diverted away from education through dividend payments. Perhaps this, rather than short-term financial return, is the most meaningful return on investment for parents’ tuition dollars.
References
- Senate Committee Report 2012: For Profit Higher Education: The Failure to Safeguard the Federal Investment and Ensure Student Success
- The Economist Explains, 2013: Why do Americans mistrust for-profit universities?
