The Economics of School Vouchers

1
The Economics of School Vouchers

• Daniel Klein, George Mason University,
  dklein_at_gmu.edu

2
Fairfax County Public Schools

• School (238), pyramid (24), cluster (8), Division
  (1)
• Organizational Chart
• Statistics about FCPS
• In CA, funding is something like 36 local, 54
  state, 8 federal. Not sure what is typical.
• About the FCPS Board
• VA School Divisions

• School (238), pyramid (24), cluster (8), Division
  (1)
• Organizational Chart
• Statistics about FCPS
• In CA, funding is something like 36 local, 54
  state, 8 federal. Not sure what is typical.
• About the FCPS Board

3
My judgment of fundamental arrangements

• Three broad fundamental arrangements
• Laissez-faire
• Vouchers
• Status quo
• This lecture makes the case for vouchers over the
  status quo.

4
Supremes gave green-light

• 5-4 decision in 2002 upholding constitutionality
  of Cleveland voucher program.
• OKed participation by religious schools.
• Religious element is a big part of private
  schooling. The decision seems to have resolved
  the separation contention that voucher
  opponents had long kept alive.

5
Formulating a voucher policy

• Amount of voucher say 8,000, not means tested.
• More for kids with disabilities
• How fiscally administrated Who knows.
• The free public school option remains, but would
  naturally contract
• Parents to receive vouchers All possible phase
  in those with children in private schools now
• What string strings attached to money, on school
  redeeming the voucher?

6
Possible strings attached

• Curriculum
• Testing
• Diversity/discrimination
• Tuition-levels
• My plan No restriction on tuition, other
  restrictions as minimal as possible.

7
Vouchers vs. Tax Credits

• Joe Bast at Heartland Inst favors vouchers.
• Mackinac Center and Cato favors tax credits
• Parents paying private school tuition
• Individual donation
• Corporate donation

8
Strategy for BritainD. Carswell, Economic
Affairs March 2007

• Rather than seek a universal school voucher
  scheme, government should simply pass a law
  giving every parent a legal right to request and
  receive control over their childs share of local
  education funding. The precise mechanism by which
  that control was exercised within each local
  authority area, and what their childs share
  constituted need not been defined by Whitehall.
  Once a legal right had been enshrined, it could
  be left to parents, using the courts and judicial
  fiat to do the rest, to determine how a local
  authority met that legal obligation.

9
Vouchers funded by voluntary donations

• Private voucher programs enrolled approximately
  50,000 children in 79 programs in 2001.
  (Walberg, 36)
• Small, but such experiments help to demonstrate
  the positive effects of vouchers.

10
Arguing for vouchers

• Theory
• Empirics

11
Econ theory, the broadest planes

• The status quo is a system of govt
  production/producer-side subsidy without choice.
• The voucher plan is a system of user-side
  subsidies and market choice.
• Virtues of the free enterprise system
• Market imperfection theories
• Government imperfection theories

12
Virtues of the FES in full force

• Private ownership of schools residual claimancy,
  decisive authority
• We hope relative freedom of entry and operation
• Voluntary choice by the customer makes schools
  oriented toward overall consumer satisfaction
  community, edification, religion, identity
  (though not citizenship/nationalism).
• Product differentiation, innovation, competition
• Bottom-up selection of activities and
  institutions, spontaneous order
• The crude blackboard diagram price goes to
  long-run efficient cost

13
Market Imperfection arguments?

• Externalities/public goods Positive social
  spillovers from education. This is a financing
  issue and vouchers answer it.
• Common experience/collectivism/the peoples
  romance/national identity.
• This is really the main argument for govt
  schooling. Vouchers harm this goal, but I regard
  the goal as invalid. (Indeed, I count its defeat
  as a plus for vouchers.)

14
Market imperfection arguments?

• Other social character issues integration/diversi
  ty by race, income, ability.
• Replies
• Probable that the voucher plan would serve these
  goals better than the status quo
• If those goals are good, wouldnt parents tend to
  demand them?
• Ku Klux Schools
• How plausible? Adam Smith said religious liberty
  led to candour and moderation. Faith in free
  people.
• Strings attached would most likely rule out
  something like a KKK school

15
Market imperfection arguments?

• Declining MU of Vouchers answer this.
• Myth of Rationality Protecting the family from
  hurting itself (by not sending the child to
  school). This is an issue of compulsory
  schooling, not vouchers. This can also be
  interpreted in terms of parents having wrong
  values, treated above.
• Poor Information/consumer protection There is
  a demand for and supply of assurance.
• Natural monopoly Implausible.

16
Government imperfection

• All on display.
• If you focus on the median school, you get a
  picture of stagnant mediocrity. If you focus on
  the worst schools, you get a picture quite sad.

17
Number of school districts in the United
StatesSource Hoxby SEJ 2004
18
Local share, union shareSource Hoxby SEJ 2004
19
Aside The Social Democratic Cultural Reaction

• Liberalism
• 1880-1914 Progressivism, Collectivism, Democracy,
  New Liberalism
• WWI Collectivism
• 1930s Liberalism has utterly collapsed.
• Karl Polanyi The Great Transformation (1944)
• 1930s-1980 Social democracy utterly ascendant.

20
Average per pupil in Americas government
schoolsSource Hoxby SEJ 2004
21
Two quotations

• 1988 Carnegie Foundation The failure to
  educate adequately urban children is a
  shortcoming of such magnitude that many people
  have simply written off city schools as little
  more than human storehouses to keep young people
  off the streets.
• Former governor of Minnesota says We must come
  to grips with the fact that our present
  educational practices are contributing to the
  creation of a permanent underclass in our
  society.

22
Growing disenchantment with govt schools (see
handout)

• Declining academic results
• General breakdown of civility around school
• Loss of govt aura Simpsons, etc.

23
Theory summary

• Virtues of the free enterprise system
• Market imperfections
• Government imperfections
• Strong presumption against socialism

24
Thought Experiment

• Laurence Iannaccone has shown that the country
  with the freest market in religion is all the
  country with the most vibrant churchgoing
  practices among the population and most
  successful church marketplace. What country?
  (Possible exceptions Ireland, Poland.)
• ... the benefits of religious competition, the
  burdens of monopoly, and the hazards of
  government regulation are as real in in the
  religion sector as in any other sector of the
  economy . . . Competition will stimulate
  religious markets just as it does secular
  markets, leading suppliers to efficiently
  produce a wide range of alternative faiths well
  adapted to the specific needs of consumers. ...
  In contrast, state-sponsored religious monopoly
  will provide only the appearance of piety -- an
  ineffective clergy and an apathetic population
  ... (Iannaccone, from an article in a Routledge
  book 1996).
• Why not a separation of school and state?

25
Aside Why not do all subsidies as user-side?

• Roads, urban transit, health care, parks,
  beaches, security, fire fighting, higher ed, etc.
• User-side subsidies raise two key questions
• Which users receive them?
• Which service providers can redeem them?
• These two questions are exceptionally straight
• forward in the case of schooling.

26
Turning to empirics

• Private vs. government schools
• School choice experiences

27
James Colemans research

• Coleman and Thomas Hoffer, Public and Private
  High Schools The Impact of Communities (Basic
  Books, 1987)
• School as instrument of
• the family
• the community
• the larger society (esp. govt)

28
The historical shift

• From family and community to larger society/state
• For the ethnic, cultural, and religious
  minorities, however, this choice was choice
  against schooling as an extension of the family
  and for schooling as an instrument for bringing
  the child into the larger society. The larger
  society was not an extension of the family for
  them, either religiously or culturally. The
  public schools were for them an instrument that
  alienated the child from the family, an
  instrument that benefited the child by bringing
  it into the mainstream of American society, but
  at a cost to the continuity and strength of the
  family. ... The cost was great . . . for
  cultural minorities in residential communities
  that were heterogeneous. (P. 14)

29
The Common School

• Tendency of modern public schools imposing by
  central administration one system on all students
  and families.
• Dress codes, how much homework, discipline,
  curriculum, religious element, how traditional,
  sex education, busing, bilingual, etc. etc.

30
Coleman and Hoffer

• A principal of a school today in which
  attendance is based on residence has no set of
  dominant community values to uphold. Instead,
  there are a number of contending values, each
  claiming legitimacy, and at least some of them
  capable of being backed up by suits in court.

31
Coleman and Hoffer

• functional community -- a community that
  functions to achieve its goals and overcome
  obstacles
• value community -- a group of people with shared
  values (although they may not function as a
  community)

32
Coleman and Hoffer empirics

• How to assess the impact of community?
• Public low on value and functional community
• Catholic high on both
• Other privates value but often not functional
• They look at gains between 10th and 12th grade.
• Findingssee handout

33
Follow-up empirics

• Chubb and Moe 1990 book from Brookings (Markets,
  Politics, and Americas Schools), very hard
  hitting, bashed bureaucratic structure, using
  stats
• Econ papers like Sander and Krautmann Ec Inq
  1995, Evans and Schwab QJE 1995.
• Eric Hanushek has been showing in mainstream pubs
  that more money doesnt improve public schools.

34
Voucher program results Hoxby empirics

• Productivity in Education The Quintessential
  Upstream Industry Southern Economic Journal
  2004.
• School Choice The Three Essential Elements and
  Several Policy Options, Education Forum, Aug
  2006.
• She finds that better scholastic results come
  where school choice is more vibrant.

35
Herbert Walberg overview

• Point-in-time academic achievement
• Value-added over-time Achievement Gains
• Cost efficiency
• Parents/citizens satisfaction
• Social integration/citizenship
• Positives are conclusive or suggestive throughout

36
International Studies

• Sweden, Netherlands, Chile, Columbia, New Zealand
• Treated by Walberg.
• Also, James Tooley and Pauline Dixon done a lot
  of work about private schooling in less developed
  countries.

37
Real-life restrictions on private schools

• Restrictions on school accreditation and
  operations (Hammons 2008).
• Restrictions from state and local enviro, zoning,
  parking, and building codes (Seireg 2004)

38
(No Transcript)
39
State regs on schools examined

• Accreditation, licensing and approval
• Transparency and reporting
• Curriculum and academics
• Health and safety
• Miscellaneous

40
(No Transcript)
41
Enviro, zoning, parking, building codes

• Seireg paper on California shows four goliaths
  
• State Environmental Quality Act
• city zoning requirements
• city parking requirements
• state and local building codes.
• People involved in the debate tend to ignore this
  stuff . . .