How do we make poor people rich? If you ask many Western humanitarians, you might get answers ranging from direct relief (“give them food”) to ideas for development-oriented projects that become the stuff of specific development projects, holiday-season humanitarian appeals, church mission trips, and “alternative spring breaks” for college students. Dig wells. Buy them water filters, sewing machines, or goats. Build schools.

There might be merit to a lot of those proposals, but I think we need to look beyond our good intentions and see the world’s poor people not as an abstract lump of benighted and poverty-stricken humanity, but as people with minds, with goals, and with capabilities. Indeed, we need to see them as people who act, rather than people who are acted upon.

This is the approach taken by Newcastle University senior lecturer Pauline Dixon in her new book, International Aid and Private Schools for the Poor. In it, Dixon argues that, around the world, low-cost private schools are succeeding in very poor areas where governments are failing. She quotes Milton Friedman, noting that it is a “gratuitous insult” to the poor to think that we can know better than they do how to educate their children. The book shows us how poor people are providing low-cost, private alternatives to government education—and low-cost alternatives that do as well as or better than the government on many margins.

Dixon’s book is a refreshing and inspiring contribution to the debate over how to help the least of these among us. She writes: “The accepted wisdom is that the poor need free government schools to educate them. This accepted wisdom is misguided.” It’s appropriate that this book is part of the Edward Elgar series “New Thinking in Political Economy” and featuring an insignia of a Venn diagram intersecting politics, philosophy, and economics. It would also be appropriate if it showed someone shooting a sacred cow because there are few cows as sacred to what the economist Daniel Klein calls “the people’s romance” between polities and states as government-financed, free-and-compulsory education. That education is the government’s job is an article of faith among many. Dixon breathes new life into the case for market-provided education, particularly in very poor countries.

Government and schooling / Throughout the book, Dixon shows that private schools generally beat government-run schools at their own game: they provide better facilities and their students do better when all is said and done. She begins with a brief review of the literature on development aid that will likely be familiar to readers of Regulation. Put simply, it doesn’t work. She moves on to a brief history of British imperial adventures in India and what that meant for Indian schools. The results were not good, and they have so far left indigenous entrepreneurs and caring parents to pick up the pieces left by reformers with good (and in some cases, not-so-good) intentions.

In addition to surveying the empirical literature on low-cost private schools, Dixon brings the reader up to speed on the history of government involvement in schooling. She works at the E. G. West Centre at the University of Newcastle, so it is appropriate that she discusses West’s path-breaking work on the role of government in education. The conventional wisdom is that people were wallowing in ignorance and poverty before enlightened governments stepped in and provided them with schooling. This wasn’t the case. Summarizing West’s work, Dixon notes that near-universal literacy preceded government involvement in education, and she notes that West’s explanation for the expansion of state control of education was due to concerns about what the “lower orders” were reading: “What West believed the English government wanted to do was to prevent the spread of political literature among the poor.” She continues, “To stifle the reading of such potentially damaging publications, public reading rooms were closed down and licenses withdrawn from coffee houses, public houses, and inns where certain newspapers were received and read.”

I suspect that an enthusiast for government schooling will claim that this just illustrates how desperately underfunded schools are in India and other poor countries. This brings us to a running theme in Dixon’s book: enthusiasm for government-run schools in poor countries is likely the product of an ideological conviction as much as or more than it is the product of carefully done empirical assessment. Schooling is either something governments should do for moral reasons, or government schooling is a good idea based on incomplete understandings of what economists mean when they talk about public goods and externalities. Schooling may generate positive spillovers, but as James Buchanan and William Stubblebine argued many years ago, it isn’t clear that these spillovers matter at the margin. If there are spillovers to basic numeracy and literacy, which might be acquired by eighth grade, and everyone is schooled through at least 10th grade, then the spillovers are already reflected in the amount of education people receive.

This helps us understand why government schools can be so bad. In the tradition of “New Thinking in Politics, Philosophy, and Economics” that follows the work of James Buchanan, Dixon also explores how government provision leads to dysfunctional incentives in very poor countries. Centrally planned schooling will be limited in its efficacy by the dysfunctional incentives and by the knowledge problem. First, compensation for the teachers in these schools is not linked to performance and the schools are likely run for the benefit of politically powerful and influential labor unions. Second, Dixon discusses how Indian schooling can be evaluated on the basis of inputs. A “good school,” from this perspective, or one worthy of a government license, is one that has the right playground equipment and approved technology in the classroom. It is conceivable that these inputs will lead to better educational outcomes, but detailed regulation of educational inputs ties the hands of potential innovators and entrepreneurs.

At its heart, Dixon’s study is a study of pathological institutions and their role in preventing economic development. Unfortunately, development experts and practitioners have come to view institutions the way they used to view physical capital and human capital: as yet another treatment that can be applied to countries in the same way that doctors prescribe medicine. (Deirdre McCloskey made this point in a roundtable discussion of her work.) To use another metaphor, they are asking which switches to throw and which buttons to push in order to get development.

Clearing the way / For a long time, economists have indulged them by saying, at various points, that more capital or more human capital or better institutions would do the trick. The problem, though, as is evident from F. A. Hayek’s work, is that there may not be any buttons to push or switches to throw. It may be that we are groping and hulking about blindly in a cavern looking for a light switch that isn’t there and all the while getting in the way of poor people who are working to start their own fires and light their own ways. Dixon quotes C. K. Prahalad’s excellent The Fortune at the Bottom of the Pyramid: “If we stop thinking of the poor as victims or as broken and start recognizing them as resilient and creative entrepreneurs and value-conscious consumers, a whole new world of opportunity will open up.” This, perhaps, might be the best advice for those of us interested in alleviating the plight of the world’s poor.