The movement for school reform changed forever on April 30, when the Florida legislature voted to approve a bill creating the nation’s first statewide publicly funded education voucher program. No longer just a theory, vouchers are now a reality in one of the nation’s largest and fastest-growing states.
Teacher union opposition remains the strongest force opposing school reform. As political victories finally arrive, our biggest challenge will be to overcome popular misunderstandings about how markets operate and what a privatized education system should look like. Here, economics can teach school reformers many things.
Resolving Doubts about Choice
The average person, when introduced to the voucher idea, will raise many questions about whether or how a privatized education system would work. Economics is not needed to address some of those concerns. For example, sociologists such as the late Dr. James S. Coleman and political scientists such as John Chubb and Terry Moe demonstrated that private schools typically spend less than government schools, but deliver superior results.
Some people question whether parents can be trusted to make intelligent decisions for their children. Convincing evidence on this matter is now available from pilot choice projects in Milwaukee and Cleveland and private scholarship programs operating around the country. Parents rise to the challenge when given a greater role in their children’s education. When choosing a school, they place a high value on academics, safety, and disciplinary policies.
The urgency of reform also can be conveyed without discussing economics. The plight of inner-city children and the poor performance in international competitions by students from even our best suburban high schools are not well known. Once understood, most people accept the need for fundamental reform.
Finally, the political case for adopting choice and privatization can be made by pointing to polls showing widespread and rapidly rising public support for vouchers, particularly in minority communities. Democrats and populists can be persuaded that parents should be given the power to shape a vitally important social institution.
Too Many Assumptions?
The remaining doubts about school choice can be answered only by explaining how markets work. This is vividly demonstrated by the recent work of Dr. Paul T. Hill, a senior fellow at The Brookings Institution and a prominent figure in the national reform debate.
Hill believes reform is necessary and supports parental choice, but he thinks the privatization model makes too many “assumptions.” In Fixing Urban Schools, he writes:
“Voucher proposals assume that plenty of demand will attract high-quality independent school providers and drive innovation and that choice will allow families to select schools that they trust and can support.”
According to Hill, the “The Zone of Wishful Thinking” for vouchers includes “competent organizations willing to run schools, adequate supply of teachers willing to work in competitive environments, valid and readily available parent information, parental diligence in choosing schools, [and] mechanisms to guarantee supply of good schools in areas serving less-demanding parents.”
There are many things wrong with Hill’s reasoning. An economist doesn’t assume that supply will rise to meet demand. That is a universal characteristic of markets; in the absence of government-erected barriers to entry or enterprise, individuals will produce the products that consumers demand, in the quantity and quality they are willing to pay for. If this were not the case, economists could not draw supply-and-demand curves.
Do we lack low-priced tennis shoes because no entrepreneur is willing to cater to the low-income part of that market? Of course not. Do we worry whether Detroit will have enough assembly line workers and competent managers to oversee production of a new sedan? Certainly not.
Markets solve these problems, and millions of similar problems, every day and in every field … except education. It is simply wrong to say, as Hill does, that it is “wishful thinking” that this same process would take place in a privatized education arena.
Markets vs. Politics: Who Decides?
Hill opposes vouchers and privatization for a second reason: He believes government can do a better job than markets in assuring quality. For this reason, he prefers a variation on charter schools where public money flows to government agencies, which then contract with public and private schools. In Reinventing Public Education, Hill and two coauthors write,
“Authorities would also be obliged, by constant attention to their portfolio of contracts, to see to it that children leaving a failing school had a better place to go. They would also continuously evaluate contractors’ performance, both to prepare for negotiations around contract renewal and to identify contractors not delivering on their promises and failing to produce positive student results.”
In their plan, “. . . political authorities would still have a key function, awarding contracts, but they would have strong incentives to make decisions based on explicit performance criteria and price, rather than on political considerations, which is the current situation.”
Right. And the National Health Board in the Clinton health plan would have objectively and scientifically decided how many teeth would get fixed each year versus how many kidneys would be transplanted.
The proposal is implausible on at least two counts: that a political body would act in any way other than political, and that it could reflect the actual values and preferences of the families it purports to represent.
Markets, on the other hand, balance competing interests and values all the time. Prices make visible to potential providers the otherwise-hidden information concerning our preferences and desires. Competition ensures that the producer who is most efficient at fulfilling our needs is chosen to do the job. At every step, producers responding to demand for competing needs are free to bid against one another for control of scarce resources.
Choice and Equity
The third reason Hill opposes vouchers and privatization is because markets fail to redistribute wealth from those who have it in abundance to those who do not.
“[W]e propose a system of full-state funding for schools that would eliminate most of the expenditure variations within a state,” Hill and his colleagues write. ”A reformed finance system should ensure that state dollars follow students, so that each student has an equal opportunity of receiving a high-quality education.” And later, ”additional fund raising must be entirely voluntary and must not be treated as any sort of precondition for admission.”
Why does Hill call for equal funding, instead of allowing parents or communities to choose how much they spend on their children’s education? Why not a minimum guaranteed level of public support? Why not allow competition to determine the right price and the right quantity, while vouchers ensure that even the poorest of the poor can command the attention of providers?
Economics can help us predict the negative consequences of giving “equity” equal or greater weight than the right of parents (or communities) to decide for themselves how much to spend on schools. Harvard economist Caroline Hoxby has found a strong negative relationship between student achievement and the percent of school funding that comes from the community. Hill’s own colleagues at Brookings find spending is not generally related to student achievement. Hill’s identification of equal spending with equal opportunity is simply wrong.
A Return to Economics
The modern movement for vouchers and privatization started in 1962, when an economist named Milton Friedman proposed a voucher plan in a book titled Capitalism and Freedom. The idea took hold in the 1980s when sociologists and political scientists, frustrated by the glacial pace of reform in government school bureaucracies and alarmed by conditions in inner-city schools, saw school choice as a tool to transform failing school systems.
There is a certain rhythm, then, to the debate over vouchers and privatization returning to economics–the discipline whence it originated–for the final, winning arguments that will take it over the top and to victory.
