Standardized Testing Creates Captive Markets

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It’s easy to do business when the customer is forced to buy.

But is it fair, is it just, or does it create a situation where people are coerced into purchases they wouldn’t make if they had a say in the matter?

For example, school children as young as 8-years-old are forced to take a battery of standardized tests in public schools. Would educators prescribe such assessments if it were up to them? Would parents demand children be treated this way if they were consulted? Or is this just a corporate scam perpetrated by our government for the sole benefit of a particular industry that funnels a portion of the profits to our lawmakers as political donations?

Let’s look at it economically.

Say you sold widgets – you know, those hypothetical doodads we use whenever we want to talk about selling something without importing the emotional baggage of a particular product.

You sell widgets. The best widgets. Grade A, primo, first class widgets.

Your goal in life is to sell the most widgets possible and thus generate the highest profit.

Unfortunately, the demand for widgets is fixed. Whatever they are, people only want so many of them. But if you could increase the demand and thus expand the market, you would likewise boost your profits and better meet your goals.

There are many ways you could do this. You could advertise and try to convince consumers that they need more widgets. You could encourage doctors and world health organizations to prescribe widgets as part of a healthy lifestyle. Or you could convince the government to mandate the market.

That’s right – force people to buy your products.

That doesn’t sound very American does it?

In a Democratic society, we generally don’t want the government telling us what to purchase. Recall the hysteria around the Obamacare individual mandate requiring people who could afford to buy healthcare coverage to do so or else face a financial tax penalty. In this case, one might argue that it was justified because everyone wants healthcare. No one wants to let themselves die from a preventable disease or allow free riders to bump up the cost for everyone else.

However, it’s still a captive market though perhaps an innocuous one. Most are far more pernicious.

According to dictionary.com, a captive market is “a group of consumers who are obliged… to buy a particular product, thus giving the supplier a monopoly” or oligopoly. This could be because of lack of competition, shortages, or other factors.

In the case of government mandating consumers to buy a particular product, it’s perhaps the strongest case of a captive market. Consumers have no choice but to comply and thus have little to no protection from abuse. They are at the mercy of the supplier.

It’s a terrible position to be in for consumers, but a powerful one for businesspeople. And it’s exactly the situation for public schools and the standardized testing industry.

Let’s break it down.

These huge corporations don’t sell widgets, they sell tests. In fact, they sell more than just that, but let’s focus right now on just that – the multiple choice, fill-in-the-bubble assessments.

Why do our public schools give these tests? Because peer-reviewed research shows they fairly and accurately demonstrate student learning? Because they’ve been proven by independent observers to be an invaluable part of the learning process and help students continue to learn new things?

No and no.

The reason public schools give these tests is because the government forces them. The Elementary and Secondary Education Act (ESEA) requires that all students in grades 3-8 and once in high school take certain approved standardized assessments. Parents are allowed to refuse the tests for their children, but otherwise they have to take them.

It wasn’t always this way. When the act was first passed in 1965, it focused almost entirely on providing students with equitable resources. That all changed in 2001, with the passage of No Child Left Behind, a reauthorization of this original bill. And ever since, through every subsequent reauthorization and name change, the federal law governing K-12 schools has required the same standardized testing.

The testing corporations don’t have to prove their products. Those products are required by law.

It’s one of the largest captive markets in existence. That’s some 50.4 million children forced to take standardized assessments. The largest such corporation, Pearson, boasts profits of $9 billion annually. It’s largest competitor, CBT/ McGraw-Hill, makes $2 billion annually. Others include Education Testing Services and Riverside Publishing better known through its parent company Houghton Mifflin Harcourt.

If many of these companies sound like book publishers, that’s because they are or their parent companies are. And that’s no coincidence. It’s another way they bolster their own market.

Not only do many of these testing corporations make, provide and score standardized assessments, they make and provide the remedial resources used to help students pass.

So if your students are having difficulty passing the state test, often the same company has a series of workbooks or a software package to help remediate them. It’s a good business model. Cash in before kids take the test. Cash in when they take it. And if kids fail, cash in again to remediate them.

Ever wonder why our test scores are so low? Because it’s profitable! The money is all on the side of failure, not success. In fact, from an economic point of view, there is a disincentive to succeed. Not for teachers and students, but for the people who make and grade the tests.

But that’s not all.

Once you have a system in place, things can become static. Once districts already have the books and resources to pass the tests, the testing corporation has less to sell them, the market stagnates and thus their profits go down or at least stop growing.

The solution once again is to create yet another captive market. That’s why Common Core was created.

These are new academic standards written almost exclusively by the testing corporations and forced on districts by federal and state governments. Under President Barack Obama’s Race to the Top initiative, $500 million in federal education grants were tied to adopting these new standards. States were coerced to push Common Core on their districts or else lose out on much needed funding.

This resulted in the need for districts to buy all new materials – new text books, new workbooks, new software, etc. It also required the states to order brand new standardized tests. So once again the testing industry cashed in at both ends.

And these tests were more needlessly difficult so more children would fail and need costly remediation.

Was there a pressing academic need for these new standards? Was there any evidence that these standards would increase student learning? Were there even any independent studies conducted to attempt to prove a need?

No. This was a total money grab. It was naked greed from one industry completely enabled by our lawmakers at the federal and state levels.

Republicans made noises against it, and some still do. But consider this – the overwhelming majority of state houses are controlled by the GOP. They have the power to repeal Common Core at any time. Yet almost none of them did or do.

Ask yourself why. It has nothing to do with the Democrats. Republicans are owned by the same masters as the so-called liberals – these same test corporations.

You have to understand that our government is no longer ruled by the principle of one person, one vote. Money has become speech so wealthy corporations get a huge say in what our government does.

If an industry gets big enough and makes enough donations to enough lawmakers, they get the legislation they want. In many cases, the corporations write the legislation and then tell lawmakers to pass it. And this is true for lawmakers on both sides of the aisle.

Standardized testing and Common Core are one pernicious example of our new captive market capitalism collapsing into plutocracy.

Our tax dollars are given away to big business and our voices are silenced.

Forget selling widgets. Our children have BECOME widgets, hostage consumers, and access to them is being bought and sold.

We are all slaves to this new runaway capitalism that has freed itself from the burden of self-rule.

How long will we continue to put up with it?

How long will we continue to be hostages to these captive markets?

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26 thoughts on “Standardized Testing Creates Captive Markets

  1. Would you also say that students in the public school system are in “a group of consumers who are obliged… to buy a particular product, thus giving the supplier a monopoly”? It appears to fit the definition, but I would certainly be interested in an argument that tries to differentiate between requiring students to take a particular standardized exam in the classroom and requiring students to be in that particular classroom to begin with.

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    • Students are in a captive market in so far as they’re required to get an education, but considering that no one really wants to go without one, this is a rather innocuous example. But I fear you’re trying to draw a comparison with the school choice debate. I’m not sure it really applies. Parents and students have tremendous choice within our public school system. They can choose which schools to attend, which teachers and classes to take and even if they want a traditional public school or a charter school. But the largest choices are given to privatizers who run charter schools and voucher schools. They get to pick their students and which laws they choose to abide by. Once again, it is the businesspeople who have all the power and the consumers who are disempowered.

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      • Students are required to take exams and parents are required to pay for them because students are must do the things that the public school system requires them to do (if the parents can not afford a private school) and parents must pay for anything that the people in authority in the school system decide to purchase because they are required to pay taxes by law. The obligation to buy and use a particular standardized exam, just like the obligation to buy and read a particular textbook, buy and sit at particular brand of desk, or buy and ride in a particular brand of school bus comes from the obligation to attend the school.

        I must say that if your district allows students to transfer between schools and choose teachers at will it is very different from my school district. My street address determined the schools that my children attended. The school board does allow some students to transfer if they were assigned to a relatively low SES school and wish to transfer to a higher SES school (my middle child did this, going from a junior high with only 40% of students eligible for free or reduced price lunch to a physically much closer junior high with 60% of students eligible for free or reduced price lunch). The school board does hold the line on high schools, however, saying that personal preference is not an acceptable reason to transfer from the assigned high school. I know several families that moved in order to change high school catchment zones. As for choosing teachers, again a very aggressive parent might get a child transferred to the other teacher’s class (my assigned elementary school had two teachers in each grade) but obviously this could only happen for relatively few students.

        What does your district do when the teacher with the worst reputation in a school ends up with no students in the class?

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      • Nothing like that has ever happened at any school I’ve ever taught at. Teachers who are bad at the job either get fired or move along on their own. Parents who are active in their child’s education generally get what they want. The districts where I’ve taught haven’t been so big that there are multiple middle or high schools to choose from. Though there are sometimes multiple elementaries.

        In any case, I think you’re glossing over an important point. Most things public schools do are decided by the duly elected local school board. Parents have a direct say in it. When the state and/or federal government steps in to mandate certain things, parental voices get trampled on. THAT’S the issue I think.

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      • Steven,

        I didn’t mean to suggest that there were any bad teachers in your school district. I am sure that every teacher there is at least good, and some are no doubt fantastic. If I am given the choice between a good teacher and a fantastic teacher for my child. I, and I think the majority of parents, would choose the fantastic teacher. That would leave few students for the merely good teacher.

        I suspect that classrooms of the merely good teachers are not under enrolled in your district because there is a good deal less choice available than your comment suggests. You did, after all say that parents and students can choose which schools to attend, but that is not possible in the districts you have taught in because they typically only had a single middle or high school.

        But this is a side point. You say “In the case of government mandating consumers to buy a particular product, it’s perhaps the strongest case of a captive market”. Did you mean that it is only when the government in question is the state government or federal government its perhaps the strongest case of a captive market? That if the local government mandates consumer to buy a particular product there is no case for a captive market? This would be a puzzling position given that the population of New York City is larger than all but 12 of the states and even our tenth largest city, San Jose California, has a higher population than the states of Delaware, South Dakota, North Dakota, Alaska, Vermont, or Wyoming. If you believe that parental voices are trampled upon when the state government of Vermont (with a population of about 625,000) makes a decision about education, how much more trampled upon are parents rights in Oklahoma City, Memphis, Boston, Denver, Charlotte, Columbus, Austin, or the other 20 cities with higher populations than Vermont?

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      • Gloria M,

        Certainly we would agree that Pearson, a publisher of textbooks, and Steelcase, a furniture manufacturer, and Thomas Built Buses, Inc, are all private companies desiring to make a profit. If a government, at whatever level, decides that Pearson texts will be used in the classrooms, the students will have to use those texts and the local taxpayers will have to pay for them in exactly the same way that students have to take this or that standardized exam and taxpayers have to pay for them. Steven is wrong when he says that standardized testing creates captive markets. It is the structure of the public school systems that create captive markets.

        Audhilly,

        I am curious about what you mean when you call something a “public good” and what implications that should have on how we provide it. Economists have a definition for a “public good” and education does not fit that definition. What is your definition?

        The fact that all people will benefit from receiving a good or service does not mean that the best way to produce that good or service is by having the government produce it. I think we can both agree that it is demonstrably true that food will benefit the child and that they should have food. This does not mean, however, that governments should be the overwhelmingly dominant food producer in the country. Long and bitter experience has taught us that agricultural collectivization reduces food production and has led to tragic famines in many instances. The best way we have found to insure food security is to have the food be privately produced, but work to ensure that all people have access to the food. Food stamps, for example, function as a voucher system for food consumption.

        As for your second point, my own children were most stressed by teacher written final exams in high school. These exams, after all, impacted their ability to graduate from high school, class standing, college admission, and financial aid decisions. Do you know of any evidence that there are personal benefits to students from taking final exams? It would seem to me that the many final exams students take a year would be a greater problem than a single standardized test.

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      • Dear teachingeconomist,

        It is always a pleasure to talk to you. You may not recall, but we’ve had the discussion about whether or not public education is a public good as defined by economists before. You have me at a disadvantage in that you are an economist, and I am not… but you may remember that I did offer an argument that public education can be rendered non excludable and available to all. I believe you argued that district boundaries make it excludable, and I rejoined that by arguing that a coherent delivery system is merely practical and if we provide all schools with equitable funding, it is not unlike the soldier who can only be in one place at a time (remember now?) Even if you argue that one community may provide better public education than another, it is no different in that respect than the public good of fresh air. The quality of air in an urban center is lower than the quality of air in a rural area. All of this was said before. We could also avoid restating the argument that public education is rivalrous. It is non rivalrous (except where the state falls down on its essential task which it could do with any public good you might define) I also argued that the public good of public education is in the educated citizen who because he or she is educated makes better choices at the polling booth and in life which is a non excludable and non rivalrous good for all citizens and their pocket books.

        While I continue to view public education as a public good in that it would be under provided by market mechanisms which prioritize profit over offering… that sweet spot where the public accepts less so that the provider can scoop up more…. ‘m going to save us the time of arguing this all again (paralepsis) and agree to use a different word which allows us to move from argument of definition to argument of policy. Let’s call it public interest.

        It is in the public interest that the dollars for education spent go to the citizens in terms of educational offerings, infrastructure, resources and salaries. Every tax dollar should go back into the system for that purpose. Where there is extra, it should be plowed back into the schools. There is little reason to believe and next to no evidence to support the notion that a privatized public education system does this. Experience of the last several years demonstrates the exact opposition. Multiple charter scandals, attrition of talent and student attrition, diminished offerings, NAEP scores, graft … all argue that privatization of public education is not in the public interest. I would also argue that defunding of public schools to preference charters is a not free market but libertarian paternalism … a means to force a specific choice upon the public that they would not otherwise want by creating an environment of no other choice. Parents are forced to navigate offerings and when they make a mistake, their child loses. Private schools (while a different animal) are very mixed in their quality. Vouchers will not provide entry to the best private schools which gate keep their offerings by being prohibitively expensive and who sell future access through monopolistic agreement to act as feeder schools. Parents with the resources are encouraged out of public education so that their child can go from feeder school into private universities into best jobs. It is less a meritocracy than a wink wink club membership forcing the public to compete for the few remaining seats.

        As to your second point, let’s unpack the state exam a bit. They use untested “aspirational” standards that require all students to be in the top 1/3 of students or at a 1650 SAT (or better). That is absurd on its face. The test is an inaccurate measure of schools and teachers. A reading teacher who brings up a 7th grade student three levels from non reader to 3rd grade level in a single year will still be rated ineffective by the state test scores because the tests do not measure so far below grade. (a colleague of mine.. not a hypothetical). A teacher of the gifted can be rated ineffective by a single extra question wrong on a state test of her gifted students. The American Statistical Association and Lederman v King argues very effectively that these tests are not an appropriate measure of teacher effectiveness at all. Take also into consideration that they are high stakes for all stakeholders except the takers. How much more ridiculous does it get? These tests provide no information to the student or teacher and are of no benefit to either. All of this is perversely ignored by reformers. Any informed person knows that HSTs are weapons designed like trojan horses to dislodge public education where ever possible and reduce public satisfaction with public schools by forcing them into increased test prep and reduced offerings. It is disingenuous to argue that we are discussing”just a single standardized test.” Of course, we are not.

        As to the personal benefit of final exams… that’s a different conversation. I’m not sure what the benefit of a final exam is. I think I prefer a capstone project. But, at least they are aligned specifically to the curriculum and what has been taught by that teacher in that year.

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      • Audhily,

        I believe I used the lighthouse example before to illustrate what economists mean by non-rival and non-excludable, but perhaps it is worth looking at it again. We can not prevent any ship from using any lighthouse without preventing all ships from using all lighthouses. Thus lighthouse services are not excludable. We can, and do, prevent students from attending almost every school in the country while allowing some students to attend every school. Thus education is excludable.

        If we double or triple the number of ships passing by a light house, that does not reduce the ability of the ships to use the lighthouse to avoid the rocks. It does not double or triple the amount of electricity used, the number of lighthouse keepers, the required maintenance expenses of the light house, etc. Doubling or tripling the the number of ships using the lighthouse does not impact the usefulness of the lighthouse to this ships even if we do not increase the resources devoted to the light house. Doubling or tripling the number of students in a school, school district, or the nation would reduce each individuals student’s learning in the class if we held resources constant. If we bring more resources to the school in order to make up for the increase enrollment, we reduce the resources available to other things. If we double the number of teachers, we will have fewer physicians, social workers, plumbers, construction workers, etc. If we double the size of schools, we will have fewer resources to build affordable housing, shopping malls, or nature trails. Thus education is rival because adding student either results in a worse education of students if we don’t add resources or worse other things because we have taken resources from other things to add to education.

        Markets do under provide public goods because of the problem of non-excludability, but markets also under provide goods that have significant positive externalities. I, along with most economists, would put education in this category. Lets think about food consumption, for example. You and I both benefit from my fellow citizens having enough to eat. We benefit because well feed people are more productive and we benefit from living in a more productive society and we benefit because it is socially just and we benefit from living in a socially just society. This does not mean, as I argued before, that we should have the government produce the food. That has typically turned out badly and occasionally been catastrophic. Instead, we allow the private production of food and subsidize low income peoples access to food. Just because the market under provides a good does not mean the government should be the producer of the good.

        We do have a system like this in higher education. Students receive a subsidy voucher from the federal government, a Pell grant, that they are fee to use at private universities like Harvard or public universities like my own. If students choose to go to public universities in their state (but not outside of their state), they get additional subsidies. This privatized education system has worked reasonably well, so I would say it is evidence that a privatized education system can work reasonably well.

        As for final exams, I agree it is another conversation, but if you really want to condemn exams that provide no personal benefit to students, shouldn’t you begin the conversation with the the most commonly given exams of that type given in public schools rather than the least common?

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    • Teachingeconomist, the public schools are not suppliers, they are public institutions. They don’t exist to make money, and the students who attend are not consumers. If communities do not like the “product,” it is up to them to elect school board members who will change the policies that shape schools. I agree with many Republicans that much more control over education should be restored to local school districts. I know a lot of school choice proponents talk about parents “voting with their feet,” but all of us (and not just parents) who fund public and charter schools should be able to vote with our votes.

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    • False equivalence. It is demonstrably true that an education will benefit the child and that they should have one. At some point you have to be in a particular classroom. A free public education that insures your access to education is not a monopoly but a public good.

      There is no evidence to suggest personal benefit to a student taking an annual high stakes test of a narrow band of skills linked to aspirational standards that correlate to a 1650 on the SAT. In fact, it appears that such literal minded attempts to raise standards has had the opposite effect.

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  2. […] In the case of government mandating consumers to buy a particular product, it’s perhaps the strongest case of a captive market. Consumers have no choice but to comply and thus have little to no protection from abuse. They are at the mercy of the supplier.   It’s a terrible position to be in for consumers, but a powerful one for businesspeople. And it’s exactly the situation for public schools and the standardized testing industry.   Let’s break it down.   These huge corporations don’t sell widgets, they sell tests. In fact, they sell more than just that, but let’s focus right now on just that – the multiple choice, fill-in-the-bubble assessments.   Why do our public schools give these tests? Because peer-reviewed research shows they fairly and accurately demonstrate student learning? Because they’ve been proven by independent observers to be an invaluable part of the learning process and help students continue to learn new things?   No and no. (gadflyonthewallblog) […]

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