A democratic market economy theoretically achieves the highest possible level of freedom and wealth. Focussing on our country, this concept indeed worked out not too badly. However, we are still far away from the perfect world stated by the theory. Furthermore, for a few years we seem to be stuck in an economic as well as a democratic crisis. Though, when the theoretical conclusions are derived by the compelling logic of mathematics, how can they fail?
The answer is pretty simple: They don’t. The differences between theoretical and empirical outcomes are caused by the differences between the models’ underlying assumptions and real social and political conditions. In this regard, one important assumption for efficient democratic as well as economic behaviour is sovereignty. It can be understood as the power and possibility to make a rational choice and force its proportional consideration by others.
Among others, in the real world sovereignty therefore requests sufficiently informed and well educated people as consumers, voters and all kinds of democratic and economic agents. Therefore, it is not just about merit goods and external effects when a government establishes compulsory education. It rather is an essential foundation for the successful operation of a democratic market economy.
In the younger past the quality and effectiveness, or at least the average outcome of our educational system seems to be decreasing. Simultaneously, our youth possesses more and more self-determination. To this effect, teenagers have to make decisions about their path-dependent future, while they just do not know how strong the latter will depend on their capability to acquire and use knowledge. For knowledge itself is power. A certain proportional amount of power definitely is a necessary condition for sovereignty. Finally, sovereignty determines individual and aggregate outcomes in a democratic market economy.
Therefore, besides several other arguments from labour market and institutional economics, already the basic theory of democracy and the market economy justifies an extension of compulsory education. The empiricism finally recommends it for today. Of course, there will be costs in the short run, financially as well as politically. However, the alternative upcoming social costs arising in the long run would be many times higher. So be paternalistic today, in order to save democratic and economic freedom in the future!