It's an anecdotal commonplace that rich parents in places like Manhattan are willing to shell out a colossal amount for their children's tutors. Most recently I heard about a math PhD student at an elite university who's getting $500 an hour to tutor high school kids.
Now this makes me wonder: why do tutors get paid so much, but not teachers? Why isn't there a private school somewhere, full of elite superstar teachers, getting paid colossal sums? Why isn't there someone trying to lure young people into being very well-paid schoolteachers instead of professors or hedge fund managers? If some parents have the extra resources to spend on their children's education, why is that money going to tutors rather than schools?
Some hypotheses that came to mind:
1. One-on-one tutoring really is the form of learning that gives you the most bang for your buck; the marginal dollar is best spent on getting a better tutor because tutoring is more effective than school.
2. The marginal dollar is best spent on getting a better tutor because tutors are independent contractors. Switching your kid's school is a big change for the kid, and a discrete jump in price, but getting a new tutor at slightly more cost is easy.
3. Something about the rules of teacher's unions prevents a few "superstar teachers" from being paid colossal sums.
4. The sort of person who becomes a $500-an-hour tutor usually has a background in something other than education, and isn't credentialed to be a schoolteacher, and perhaps doesn't want to teach full time. You could get him to tutor, if you paid well, but you couldn't get him to be a full-time teacher without an expenditure beyond the means of even the wealthiest parents.
5. Parents are using tutors to improve their children's grades, not their education. Putting that same money into the kid's school wouldn't improve the kid's grades relative to his classmates'.
Any other ideas?
To take a page from Robin Hanson: school isn't about learning, it's about teaching obedience, signaling (both for the parent vis-a-vis other adults and for the kids and colleges, employers, etc.) and babysitting. There are very few people who really care about their children's education and it's a serious collective action problem to put together a school to the sort of standard that would make a difference. It's much easier to hire a tutor in a specific subject than create that school. Also, if that school existed, why would people believe its claims? There are many private schools that try to pass themselves off as a huge leg up for their students.
Well, even supposing school is more about signaling than about education, parents still care about signaling. Why don't they spend their entire education budget on schools, and get even better signaling? Your point makes the existence of expensive tutors even more mysterious, because you can't use a tutor to signal your kid's aptitude (most tutors take any customer who will pay.)
Your point about a coordination problem seems to be separate, and that's what I was wondering as well. Could there be a market failure here? But I wanted to first see if there were hypotheses that make this state of affairs rational from an economic point of view.
You allude to a good point that hadn't occurred to me - it's probably substantially easier for a good tutor to signal usefulness than it is for a (possibly hypothetical) good school to signal usefulness.
I don't know about that. There's a significant dollar value, for a tutor, attached to having gone to an elite college or having high SAT scores. (I know this from experience.) Parents and tutoring services don't usually examine further whether, say, a tutor with high SAT scores is necessarily better at helping students on the SAT.
In fact, Kaplan requires minimum SAT scores in its employees, but on average I think I've seen the statistic that the average student's SAT score goes down slightly after taking a prep course like Kaplan. And yet, prep courses are still incredibly popular (and quite pricey) despite having been proven not to be useful! I don't know why parents/students still use them -- propitiatory magic?
But definitely, the tutoring market is not marked by great objectivity and performance-based pay.
Where have you seen that? My own search of journal articles seems to suggest a positive effect, significant but smaller than the prep services claim.
I agree with most of what you say here, but have no personal exposure to the upper-crust ($500/hr) tutoring market which is where one sees the very considerable divergence between tutor salaries and teacher salaries that your top level post references.
I could imagine willingness pay for tutoring/teaching being more performance-based in the upper-crust market than in the markets that I've been exposed to. I could also imagine the upper-crust tutoring/teaching markets being pretty much the same as what I've been exposed to.
One relevant factor would seem to be parents/students being misinformed. I would guess that another relevant factor is parents "showing that they care" in the Hansonian sense (making a sacrifice for their children without a view toward it being useful to their children).
Rich parents don't hire teachers; they pay private school tuition, and the school management ends up setting the salary. What incentive does a private school administrator have to pay teachers a lot of money? Parents don't usually choose a school based on direct evaluations of teacher quality, and schools with impressive reputations already charge parents a small fortune.
I suspect that, in large part, better schools are better because they have better students, not because they have better teachers. Take the teachers and other staff of the world's best high-tuition private school in the world, give them a building in the middle of Newark, NJ, and give them a random sample of the students that the "failing" school system of Newark has to teach, and what you'll get will be a bad school.
I actually recall a study (but not the citation) that did this experiment, and the school with good resources and underprivileged children is a bad school (measured by test scores.) On the other hand, if you move a kid from an underperforming school in a bad neighborhood to a high-performing school with mostly affluent kids, the poor kid usually performs in line with his new peers.
So I'd infer that what matters most for school performance is a critical mass of kids who have something in the cluster of stuff that correlates with high socioeconomic status.
Several hypotheses occur to me, all of which are probably true to some extent.
First, a teacher working in official capacity can't give useful cynical advice on how to game the system. A private tutor has no such constraints.
Second, top-rate minds rarely, if ever go for careers in full-time teaching. They might become university professors who like to do some teaching as part-time work alongside research (and perhaps entrepreneurship), but definitely not full-time teachers. Geniuses want far greater intellectual challenges, and they want to climb much higher peaks of accomplishment, status, power, and money. So if you want great minds to teach you, their time will be available only on a part-time basis and for a very steep price.
Third, in my experience, one-on-one conversations with someone knowledgeable are far more efficient than group classes for learning complex technical and math-heavy subjects. Lectures are great for learning about soft topics like e.g. history, but in subjects that deal with some complicated and non-intuitive formalism, the lecturer will inevitably be slow and boring for some students and too fast and unclear for others, so the average worth of the lecture per student has a pretty low upper bound, no matter how good the lecturer might be. In contrast, a highly skilled private tutor can figure out exactly what the student needs and make far better use of the same time, so I don't think it's irrational to value top-grade private tutoring far more than top-grade group classes.
Additional hypothesis: people receive private tuition for subjects they're either not very good at, or that they want a secret advantage in relative to other students. The $500-an-hour price tag is as much about discretion as it is about competence.
Let me suggest another reason that I don't think is in general the case for why people hire tutors but may be why when they do hire tutors some people are willing to pay so much: Having private tutors for children is a status symbol in some contexts. And that status is higher if one is paying more for the tutors.
That said, I suspect that in actual practice your first four reasons are likely the main causes.
Is it really a high-status signal? To me, it primarily signals that they have low-ability kids who are finding it hard to keep up with the educational expectations imposed by the social class they were born into.
Maybe my social radar isn't well-calibrated in this regard, but it has always seemed to me that successful kids are expected to breeze through school with their own smarts and abilities, while extra tutoring looks like an unpleasant remedial measure. (This in contrast to various extracurricular activities that are a often a matter of parents' intense, and sometimes obsessive, desire for status-signaling.)
I think it depends on the type of tutoring. Tutoring for standard classes at school is seen as a negative. But tutoring for other things isn't necessarily. Thus, for example, SAT tutoring if it occurs before the child has taken the SAT seems to be in some circles a positive status signal. Similarly, tutoring in areas that high schools don't normally teach (such as obscure languages or some areas of math) is also seen as a positive. Finally, in the lower middle class having tutors even for things that are standard in school is seen as a sign that one has children who are going to be moving up the social and income ladders. So for some lower middle class and upper low class individuals having tutors is a sign of status. But I'm not sure that that section is that relevant to the price issues being discussed because they don't have that much money (although in my own personal experience blue collar famillies are sometimes willing to pay more for tutoring than white collar families of close to the same income level. But there are also other explanations for that and my sample size isn't very large.)
Mass-market tutoring by professional tutors signals low ability, private mentoring by domain experts signals high ability and status.
Maybe risk aversion. Maybe it's that parents want to minimize risk. That way, they can get closure. I often feel that I would have done a lot more if I homeschooled myself instead of going to school, but my mom said that if I homeschooled myself and my social skills (as she perceives them anyways) ended up the way they are now, then she would feel A LOT of regret. But since she did all she could (by sending me to school) to get me to socialize, she can get this closure (and not feel regret).
There's a huge amount of value placed on a child's formative years, and parents have shown many other signs of trying to minimize every possible risk/gap they can find. If they paid for a "lower quality" tutor, they run the risk of permanently regretting the decision.
Personally, I think that a lot of kids would learn best if they simply learned the material themselves (using material like Sparknotes or Princeton Review). Sure, those materials are simplifications, but tutoring is also a simplification. If parents are concerned that their kids will play computer games instead, they could simply hire a baby-sitter to watch their kids.
I tutor mostly economics for ~$20/hour at my local state university. I think 5 fits well.
In my experience, the students get the most benefit when I sum up how the material fits together and discuss how they will be tested on it. In contrast, the teacher is more likely to treat the material as a series of unrelated, challenging problems. Professors at my school have to average each class's grades onto a certain GPA (I think it's around 2.5).
Teaching in the way they do maximizes the sorting effect. Those who already know how to manipulate models come out with a great grade. Those who don't struggle.
Hypothesis: the schools exist. We haven't heard about them.
Well, if anyone has heard of one, please comment!
The highest-status pre-college prep schools still, from the examples I've seen, don't pay their teachers dramatically more than a public-school teacher's salary.
Thanks for raising this interesting topic.
I think that each of the factors that you allude to in 1, 2 and 4 play a role, but despite these things, prima facie there still seems to be a market failure. The gap between between the maximum starting salary of a teacher as far as I know (maybe around $30/hr?) and the $500/hr salary for tutoring that you cite seems to be too big to justify via reference to 1, 2 and 4 alone.
I wonder if there's an arbitrage opportunity here? If so, the limiting factor is probably organization/coordination.
Agree with jsalvatier about 3.
About 5, I would guess that a major part of why the typical wealthy parents hire expensive tutors does have to do with relative status & signaling, but would guess that they're not primarily concerned with letter grades but rather, e.g. college admissions.
3 is definitely true for public schools, but that doesn't explain why such private schools don't exist.
6) Hiring a $500/hr tutor is straight-up dumb and doesn't need an objective explanation.
Of course, you could still look for a subjective explanation of what was going through the parents' heads, and that might fall in 1-5, but it's less interesting to me.