Why do one in four Edinburgh students attend private school?

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A MAINSTREAM economic approach to understanding Edinburgh’s “mass market” for elite schooling reveals little we already know - in Edinburgh, one in four pupils are educated at independent schools.

A startling figure and a regional anomaly. Nationally around 4% of schoolchildren are in private education, and around 7% attend a private school across the UK. So why is this?

Surprisingly, there is not much research on private schools in Scotland

Attempting to understand the individual choices that lead to a quarter of Edinburgh’s children attending a fee-paying school would seem daunting. In this situation, policymakers would turn to economists for insight.

An orthodox economic analysis would consider the price of education as the main driver of consumption, suggesting that a lower price leads to an increase in demand. It would then discuss the utility, a kind of ephemeral feeling of internalised value, that consumption brings to those who consume.

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Across Scotland, despite increasing prices Scotland's independent schools' average annual fees for day attendance are around £15,000, more than half the median average earnings of £27,710, and the number of kids in the private sector has remained consistent for decades.

So the neoclassical idea that a higher price should lower demand doesn’t fit the evidence. Something is encouraging parents to consume private education at a higher than average rate in Edinburgh, and it is not price.

Perhaps then it is value.

In orthodox theory, we measure the value of something by considering its price. We, therefore, know that fee-paying schools provide value because their prices are high. This is a tautology common within orthodox microeconomics.

The idea of utility is similarly framed. Utility, which can’t be empirically measured, must be maximised by rational consumers because their decisions are rational. Therefore, according to the orthodox economist, what happens in Edinburgh is simply a rational display of consumer behaviour.

In the orthodox world, the price of private education is clearly inelastic (a large increase in price doesn’t affect demand), and Edinburgh parents receive six times as much utility from privately educating their children than the average parent across Scotland.

This explains a theory.

It does not provide a descriptive answer, leaving us no better off than when we started.

It is useless from a policy perspective.

Heterodox economics states that price is not the dominant factor in consumption behaviour. As Frederic Lee, one of the world’s most renowned economists, would often say to his students, “There is no law-like, functional relationship between price and quantity.”

A heterodox approach considers income and status, shaped by business, especially through advertising, the media, and government, as the chief drivers of consumption.

It also states that consumption decisions are taken within a social structure within the defined roles of those individuals within the organisations they are associated with.

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Note how this differs from the one-dimensional view offered by orthodox economists.

This more holistic approach further breaks those socially framed consumption decisions into two constituent parts, an instrumental element, for example, the need for your child to learn, and a ceremonial aspect, the decision to send them to a fee-paying school. Understanding the real-world causes behind our decisions is central to heterodox economics.

The decision by Edinburgh's parents is, therefore, a social one.

Within this wider understanding, beyond the tautology of price = value and rational consumers maximising utility, we can see private schooling for Edinburgh children as, the heterodox economist Zdravka Todorova argues, “a way of reaffirming households' place within a specific group”.

Professor of Sociology, David McCrone, wrote in 2020 that, “the question which school did you go to? is an attempt to place respondents in Edinburgh regarding social status,” and is evidence of consumer behaviour being made for what nineteen-century Economist Thorsten Veblen called “invidious distinction”.

Veblen wrote, “conspicuous consumption of valuable goods is a means of reputability”.

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In other words, one consumes certain goods, in this case, private education in Edinburgh, to be seen to consume.

This concept of invidious distinction helps us understand that we value and rank people within our own community not by their abilities but rather by their lifestyles, habits or identities. It also frames consumption decisions as social.

This is empirically supported by a sociological study of the fee-paying schools conducted by John Highet. The research found that 40% of parents in Edinburgh acknowledged an invidious hierarchy or "snobbishness" as a reason for choosing private education.

“Sending [a child] to a fee-paying school is the done thing in Edinburgh,” one parent said. "To keep up with those of similar standing”, said another.

This real-world reframing fits the evidence better and points to a deeper understanding of Edinburgh’s consumption patterns.

Clearly, different consumption patterns relate to class or, more appropriately defined, income.

In Edinburgh, the consumption of private education for children has become, as Veblen called it, a “settled habit of thought”. This has been achieved through Edinburgh's institutional development and cultural norms. Price has nothing to do with it.

All consumption decisions are social. This understanding leads to a paradigm shift for policymakers. Realising that the market's price mechanism is not our economy's dominant feature empowers policymakers to effect change.

For more background on a heterodox approach to microeconomics, check out episode 78 of SCOTONOMICS.