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No. 616 April 16, 2008 �������

Dismal Science The Shortcomings of U.S. School Choice Research and How to Address Them by John Merrifield

Executive Summary

Pressing questions about the merits of market ments of market systems, including profit, price accountability in K-12 education have spawned a change, market entry, and product differentia- large scholarly literature. Unfortunately, much of tion—factors that are normally central to any dis- that literature is of limited relevance, and some of cussion of market effects. In essence, researchers it is misleading. The studies most widely cited in have drawn conclusions about apples by studying the United States used intense scrutiny of a few lemons. small-scale, restriction-laden U.S. programs—and To address the need for credible evidence on a handful of larger but still restriction-laden for- the effects of genuine education markets, econo- eign school choice expansions—to assert general mists should look to simulation models, indirect conclusions about the effects of “choice,” “com- evidence such as outcomes in similar industries, petition,” and “markets.” The most intensely and school systems abroad that enjoy varying studied programs lack most or all of the key ele- degrees of market accountability.

______John Merrifield is a professor of economics at the University of Texas–San Antonio, editor of the Journal of School Choice, and author of Parental Choices as an Education Reform Catalyst: Global Lessons (2005) and The School Choice Wars (2001).

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Prices determined The difficulty of charging tuition when by supply and Introduction the government offers “free” schooling is the main barrier to market entry faced by private demand are a key The free market is the primary form of schools in most of the world. That difficulty attribute of organization and accountability for most of not only impairs the effectiveness of private the economy, and increased reliance on mar- schools, it affects the kinds of private schools markets, but they 7 kets was the common denominator of suc- that can exist. The presence of “free” govern- are almost cessful 20th century economic reforms.1 ment schools artificially favors certain kinds unheard of in These facts, coupled with widespread dissatis- of private schools, such as those that faction over the quality of existing education- K-12 education. al services, have raised interest in market- • have large endowments; inspired education reforms that fall under the • have access to church subsidies; catch-all term “school choice.” • can offer inexpensive services that pub- But despite considerable effort to discover lic schools cannot, such as devotional the effects of “school choice,” much that could religious instruction; and qualify as evidence has not been directly stud- • can offer high-value subject or pedagog- ied, and much relevant information is not ic specializations that appeal to only a widely known. The limited educational choic- small share of the population. es available in the United States have been heavily researched, telling us how certain test Indeed, that artificially skewed and nar- scores respond when some families make use rowed menu of school types describes most of current alternatives to their assigned public of the existing U.S. private education sector. school.2 But such constrained choices provide But while U.S. school choice research has little evidence about how true education mar- focused on very limited existing reforms and kets might transform the status quo. Indeed, the small and highly skewed niche of American Harvard economist Caroline Hoxby (whose private schools, scholars have often used their work has focused on U.S. schooling) believes findings to make sweeping claims about com- that “[market-based] reforms would propel petition and market accountability in educa- American schools into wholly unknown terri- tion.8 Much of the alleged direct evidence of, tory.”3 A RAND study determined that “none for example, the effects of “large-scale voucher of the important empirical questions has been programs,” or market accountability through answered definitively. Even the strongest full-fledged competition, is thus wrong, mis- [U.S.] evidence is based on programs that have leading, or irrelevant.9 Misconceptions are been operating for only a short period of time more stubborn foes than ignorance, so undo- with a small number of participants.”4 ing the effects of this imagined evidence is a The novelty and minuteness of existing U.S. considerable challenge, and it is the key aim of school choice programs are not the only fac- this review.10 I also describe the sorts of studies tors that limit their value in assessing the mer- that can be undertaken (and in some cases, its of free-market education. Several key already have been undertaken) to truly deter- aspects of market accountability are virtually mine the merits of market education. absent from those programs: price change, easy market entry, and the profit motive, among others. Prices determined by supply and What Is “School Choice”? demand are a key attribute of markets, but they are almost unheard of in K-12 education—even Before diving into an analysis of the “school under most school choice programs.5 Further- choice” research, the term itself merits clarifica- more, existing private schools’ tuition rates are tion. Except when choice occurs through resi- greatly distorted by the taxpayer-funded com- dential relocation, “school choice” means a pol- petition from “free” public schools.6 icy that improves access to alternatives to the

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assigned public school. Improved access, which choice among “comprehensively uniform” typically results from a drop in the relative schooling options.14 Because school districts “price” of some alternative, may be universal or cannot assign children to specialized schools, limited to target groups, such as low-income choice by residential relocation cannot prompt families or children in public schools formally school systems to focus schools on specific designated as failing.11 Therefore, “school subject themes, or specific types of students, or choice evidence” is mostly what we know about specific teaching styles. the effects of changing the relative prices of Supplementing residence choice are eleven actual and potential schooling options. Note ways (#2–#12) to enhance choice, which means that subsidies like vouchers and tax credits can selectively or universally reducing the relative lower prices from families’ perspective while prices of the schooling options, sometimes by raising them from the school operators’ per- the creation of new schools. These school spective. By reducing disposable income, school choice options are as follows: taxes increase the relative price of private (#2) Chartered, nondistrict public schools, schooling. Interpretations of school choice which are authorized by law in 40 states.15 effects need to take account consistently of how Most charter laws let entities other than exist- much policy reforms change the relative prices ing school districts authorize publicly funded, to families and educators, and what fraction of less-regulated alternatives to assigned public Much of the educators and schoolchildren had access to the schools.16 As unzoned alternatives, charter alleged evidence price changes. If a price decrease significantly owners can pursue topical or pedagogical spe- of the effects increases interest in alternatives to the assigned cialization, but their inability to turn away public school, an entrepreneurial response may mission-incompatible children can under- of “large-scale yield a much-changed menu of schooling mine such efforts. Every charter law creates voucher 17 options. two price controls. Charter schools may not programs” Since the array of policy options for ex- charge tuition, which leaves it to the political panding school choice is poorly understood, process to set the amount paid to charter is wrong, the next section briefly describes the policy operators. A ban on parental copayments pre- misleading, or options that lower the cost, or enhance the vents charters from offering services that cost benefits, of leaving the assigned neighbor- more than the state’s per-child payment (cre- irrelevant. hood public school.12 The third section dis- ating a price “ceiling”), while the guaranteed cusses false evidence and false assumptions state funding gives operators no incentive to used to interpret evidence, while the fourth charge less for services that cost less than the outlines sources of valid evidence. per-child payment (creating a price “floor”). (#3) Choice among district public schools. All but five states (Alabama, Maryland, Nevada, Varieties of School Choice North Carolina, and Virginia) pay at least statu- tory lip service to “public school choice.”18 In Most U.S. children have an assigned public the states that don’t undermine it with restric- school based on their home address.13 Private tions or allow districts to opt out, open enroll- school tuition can severely strain family bud- ment among district public schools creates at gets, so residence choice is the most used least temporarily (until the best schools fill) school choice strategy (#1). The costs of this some alternatives to the assigned school, and in strategy may include relocation expenses and the 40 states with charter laws, it supplements trade-offs involving location issues such as the choice between assigned and chartered. worksite and amenities. For school districts to (#4) Targeted tuition vouchers selectively maintain the appearance of fairness, every improve access to private schools. The target- major district program must be available in ing criteria include financial need (Arizona, every attendance area. Therefore, choice Cleveland, Milwaukee), attendance at a pub- through residential relocation mostly yields lic school deemed “failing” (“FloridaA”), and

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the disability or special needs status of a stu- (#9) Option-demand universal tuition dent (Utah, “FloridaB”).19 vouchers. “Option-demand” plans offer vouch- (#5) Nonrefundable, personal use tuition ers to everyone who opts for a non-public tax credits. Targeting of a different sort affects school.22 With an option-demand program, a non-refundable credit’s utility to families. public school funding and voucher value are Nonrefundability restricts the maximum size separate policy issues. Consequently, per pupil of the credit to the specific personal tax liabil- funding for public schools can differ from the ities against which the credit can be applied value of a voucher. All of the formally proposed (income tax, sales tax, property tax, and so option-demand programs offered vouchers forth). The combined magnitude of the eligi- worth less than the public schools’ per pupil ble tax burden, and hence the credit’s value, funding. For example, California’s failed Prop- determines the extent to which the cost barri- ositions 174 and 38 (1993 and 2000, respective- er to private schooling is lowered and thus the ly) offered option-demand universal vouchers likely extent of migration from the public to worth half of the public schools’ per pupil the private sector. funding level.23 (#6) Nonrefundable, low-income scholar- (#10) Formal separation of school and ship donation tax credit. This approach state. This would mean eliminating special broadens the potential tax liability base of the rules for schools, selling off existing govern- credit to the vast majority of households that ment education assets, and dropping educa- do not have school age children, as well as to tion subsidies funded by taxes. businesses.20 It also has the significant politi- (#11) Informal, compromised school-state cal and social virtue of shifting the schooling separation. Informal separation occurs when benefits of the credit from higher to lower free government-run schools are available but, income households. But only when coupled to a great extent, available in name only, be- with personal-use tax credits as described cause the schools are thoroughly dysfunction- above can donation credits change the school al—or actually unavailable, as in remote rural choice calculus of middle- and upper-income areas. Compromised, informal separation is households, and thus capture much of the found in developing countries to a substantial potential to prompt entrepreneurially driven extent, and it is arguably emerging in developed change in the menu of schooling options.21 countries, for example, in some of major U.S. (#7) Refundable tuition tax credits. Fam- cities with a history of chronically ineffective ilies get a check when a refundable credit tops a and reform-resistant public schools.24 targeted tax liability, typically just income tax. (#12) Deregulation that allows greater dif- The credit’s cash value does not depend direct- ferences in schools. In countries such as Chile, ly on the family’s tax liability, or indirectly on Sweden, and the Netherlands, where many the taxpayer’s income. As in the case of the families can readily choose non-state, “inde- option-demand, universal voucher described pendent” schools, extensive regulations great- below, it is strictly a matter of legislative choice ly reduce the potential for differences among whether private- and public-school users receive the school choices, which constitutes another equal subsidies, or whether the tax credit is a major school choice barrier. large fraction of the tuition charged by the typ- Many researchers ical alternatives to the assigned public school. have overlooked (#8) “Pure” universal tuition vouchers. “Pure” Imagined Evidence means that parental choice of school allocates all the absence of key of the public funds earmarked for approved Owing to a widespread misunderstanding market elements schooling. Public and private schools get the of competitive markets, many researchers same per-child subsidy. Although a child’s sub- have overlooked the absence of several key in existing school sidy would not depend on the school’s owner, it elements of market accountability in existing choice programs. could depend on age or academic status. school choice programs. Economist Charles

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Manski notes that “consideration of [unre- for example, asserting that experience with pub- Many of stricted] choice, to date, has been anything but lic school choice provides insights into market the wrong, serious. The policy debate has been long on accountability: “Advocates and opponents fre- advocacy and short on [relevant empirical] quently overstate what is known about the con- misleading, analysis.”25 Jeffrey Henig observes that sequences of school choice.”29 Much overstate- and irrelevant ment is implicit. For example, Table 1 in Teske statements about The source of major conflicts and confu- and Schneider is an overview of “studies of sions today [in interpreting school choice choice types and outcomes.”30 The Teske and the effects of research] derives from the absence of Schneider overview table does not differentiate “competition” clear guidance about how to move from between narrowly targeted vouchers and unre- findings specific to one manifestation of stricted universal programs, and it does not stem from failure choice to more general conclusions. include “supply-side response” in the table’s list to define the Most of what we have learned about of potentially key school choice outcomes. The term. school choice is based on evidence drawn student performance column merely lists stud- from two sectors—religious institutions ies that examine whether choosers gained by and public education—in which the key moving to another part of the present system, actors and decision criteria are distinctly something we would expect just from confi- not market driven.26 dence in rational behavior. The dense list of studies in the “Vouchers” column could leave Every current school choice program, and the impression that all of the important aspects school system, lacks some of the key elements of vouchers have received considerable academ- listed below. They are especially scarce in the ic scrutiny. In fact, the opposite is true. Instead, widely cited U.S. programs. These typically miss- only a few narrowly relevant issues have received ing market elements include the following: much attention. Many of the wrong, misleading, or irrelevant • Low formal (regulatory) barriers to the statements about the effects of “competition” entry of new schools and to product stem from failure to define the term or acknowl- [schooling] differentiation (e.g., school edge the key elements listed above, and from control of admissions and curriculum, insufficient use of necessary qualifiers such as and consumer sovereignty; family will- “muted” and “fringe.” As Terry Moe noted, “it ingness to pay as the key determinant of usually makes little sense to ask whether vouch- school financial viability)27 ers or charter schools, in some generic sense, • Stability (a high degree of confidence in have particular effects,” but it happens a lot.31 constant or growing total demand) Clifford Cobb noted that the mismatch between • Market-determined, flexible prices (e.g., restrictions on parental choice and rhetoric permitting parental copayments under about competition creates considerable confu- voucher programs) sion.32 For example, two analysts have asserted • Nondiscrimination in funding (e.g., that “the nature of some of these [tiny, privately public funding per child, if any, does not funded voucher] programs allow for studies of vary significantly on the basis of school essentially Friedman-like [universal, same sub- sector or for-profit versus nonprofit sta- sidy level for all, plus ability to co-pay] voucher tus) to ensure the level playing field arrangements.”33 As George Orwell said, “the essential to an entrepreneurial response slovenliness of our language makes it easier for • Some direct payment by the consumer, us to have foolish thoughts.”34 in the form of tuition fees, as opposed to third-party payments only28 Experience with 1950s/1960s Fear-Based Choice Much misleading generalization rests on Some of the concern about stratification facts stretched beyond their narrow relevance, and increased segregation stems from the

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1950s/1960s “fear-based choice” that was pro- tion, or both. The opportunity for genuine vided mostly to the privileged as a “backlash” rivalry between schools has thus been mini- against the 1954 Brown Supreme Court deseg- mal, but virtually all studies of these systems regation order.35 Often unsaid is that the desire assert that competition is on trial. For exam- to stratify was of utmost importance to the ple, Fiske and Ladd claim that mere public policy designers. Many of the tuition grant school choice created a “market” in New programs enacted to resist the Brown decision Zealand.38 Other stunning examples of mis- formally excluded blacks, and the vast majority takenly assumed competition and market of the eligible schools did not admit black chil- forces include programs that cap market entry dren. Only Louisiana allowed a pursuit of prof- and set prices (charter laws, and most current it that might have prompted entrepreneurial voucher programs); policies that strongly pressure to see the entire population as poten- favor some school providers; and regulations tial customers. The courts struck down all of that give private schools very little leeway to the 1950s/1960s school choice programs with- differentiate themselves from the public out ruling on the voucher mechanism that, schools or from each other. The much-publi- when applied in a nondiscriminatory manner, cized dispute between Hoxby and Rothstein was found constitutional by the Supreme was about a type of “competition” that had The mostly Court’s 2002 Zelman decision. nothing to do with markets, but with sup- positive, but Claims that uncontrolled opportunities to posed rivalry among political jurisdictions for 39 unspectacular, opt out of assigned schools without relocating tax base and economic development. would undermine integration efforts persist in Half-hearted, partial market liberalization effects of “school the face of both empirical and modeling evi- can yield misleading results. For example, the choice” may dence to the contrary, and those who make the ineffectiveness and perverse side effects of pre- claims seldom address the growing de facto seg- sumed market reforms slandered capitalism slander genuine 36 regation of the assigned public school system. in South America, with dire consequences market-based Hill pointed out that, “fears of [increased] re- only now becoming evident in places like reforms. segregation and restratification depend on cer- Venezuela and Bolivia.40 Likewise, the mostly tain assumptions: very few good schools, that positive, but unspectacular, effects of “school school quality varies on one dimension from choice” discussed earlier may slander the gen- high to low, and the real choosers will be the uine market-based reforms that qualify as the good schools, which will have their pick of stu- “tentative procedures” capable of yielding the dents.”37 Implicit in the arguments that resegre- transformation needed by a K-12 system in cri- gation will accelerate are entry barriers that pre- sis. Though the evidence that receives virtually vent an expansion of the supply of the better all of the U.S. attention has little bearing on schools. Those assumptions are often valid for the likely effects of competitive K-12 educa- the current system, or the current system tion markets, the argument that “competi- amended with narrowly targeted, restriction- tion” cannot produce sufficient school-system laden school choice. The historical evidence dis- improvement is already appearing in putative- cussed above, and the indirect evidence dis- ly authoritative journals and is being made by cussed later, indicates that those assumptions prominent spokespersons in the newsletters will not apply to a mature, market accountabil- of influential think tanks.41 Eight years of ity–based system. experience with the limited public school choice created by the United Kingdom’s 1988 Competition Tried in Absentia Education Reform Act was the basis of In developed countries, competition and Stephen Gorard’s non sequitur that “the prog- parental choice have only been implemented nosis for the improvement effect of markets piecemeal, or on a small scale. The school sys- on schools is not good.”42 tems of these nations are restriction-laden or Martin Carnoy and Helen Ladd have said extend choice to a narrowly targeted popula- that the Chilean universal option-demand

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voucher program was an example of a “large, signed to fail”—that included price control, set unrestricted voucher program,” even though a small voucher size, initially limited participa- Ladd noted the government’s tight control of tion to 1 percent of Milwaukee public school virtually all aspects of schooling.43 Gauri had enrollment, and allowed only the then-rare sec- already documented Chile’s central microman- ular private schools to enroll voucher users.48 agement, including price control.44 Earlier, Likewise, the Paul Peterson introduction to the Carnoy overlooked the intensity of central con- compilation of Education Next articles, entitled trol. He concluded that Chile had “fully subsi- Choice and Competition in American Education, dized, deregulated private schools competing does not mention that the journal’s authors head-on for pupils with de-regulated munici- describe only programs lacking the key condi- pality-run public schools.”45 Carnoy and Ladd tions of genuine market competition.49 Pre- concluded that since the assumed (but in fact sumably, this means that Education Next, the largely absent) market forces had failed to pro- top nontechnical outlet of education reform duce the promised results, increased central research, hasn’t seen an acceptable manuscript control was in order. discussing the differences between the levels of Jeffrey Perloff’s Microeconomics text notes rivalry present in American education and what that “When most people talk about competi- generally constitutes market competition. tive firms they mean firms that are rivals for Economists have also asserted the presence the same customers.46 By this interpretation, of market forces that are in fact largely absent. any market that has more than one firm is For example, the introduction to Market competitive. However, to an economist, only Approaches to Education, written by the book’s some of these multi-firm markets are compet- editor, Elchanan Cohn, says that its collected itive.” The actual competitiveness of the set- essays will consider only public school choice tings studied to gauge “market competition” and narrowly targeted subsidies—approaches effects is a largely neglected, crucial issue. With that lack every key ingredient of a truly com- public school choice, the school choices are petitive market.50 Despite the existing system’s not even separate firms. Even in the least major entry barriers, and the fact that private restrictive of the widely cited school choice and public schools are not close substitutes, programs, the state-run sector easily satisfies Thomas Dee’s “Competition and the Quality the monopoly definition used for antitrust of Public Schools” attributes positive effects lawsuits. Certainly, the state-run system is the on public school graduation rates to “compe- dominant producer, with significant entry tition” from increased private sector market barriers assuring that it is likely to remain so. share.51 Since there is little incentive to active- And in the dominant-producer/competitive- ly compete, and little evidence of actual rival- fringe market of K-12 education, the domi- rous behavior, Dee’s findings could be the nant producer is not even a firm, that is, not result of other predictable effects of a larger directly customer-dependent. private-school market share.52 For example, Virtually all noneconomists attribute mar- with more private schools, parents are better Even under ket forces and “competition” to every setting able to match their child’s unique characteris- U.S. “choice” where an assigned school has a comparably tics to the available schooling options. priced alternative, regardless of the often exten- Removal of children that would do better else- programs, public sive market-stifling restrictions that exist. The where leaves behind more homogenous, easier schools easily most recent examples are Mitchell Pearlstein’s to teach public school classrooms. review of voucher studies and Sol Stern’s Many economists have ignored or rein- satisfy the lament that market forces have shown them- forced distorted views of the various school definition of selves inadequate to the assumed imperative of choice policies. Discussions of product differ- monopoly used public school improvement.47 John Witte’s The entiation, price change, and entry-exit aspects Market Approach to Education is about the initial of market accountability are rare. The Belfield in antitrust Milwaukee voucher program—a program “de- and Levin literature review and their lengthy lawsuits.

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Fiske and Ladd discussion of the effects of competition be- three reasons why it is “wrong-headed” to trumpet “market tween schools does not mention price change, insist that choosers achieve higher test scores profits, entry barriers, or regulation—all critical to see choice as a worthwhile reform: “(1) competition” in components of the “market competition”53 Productivity with equal resources is the key New Zealand, and they claimed to assess. Woodfield and Gunby question and the choice schools typically have then document and Fiske and Ladd trumpet the presence of fewer resources; (2) Schools left behind may “marketization” and “market competition” in improve, invalidating comparisons; (3) Com- the absence of New Zealand, and then document the absence parison criteria may be incomplete—data may nearly all market of nearly all of the key features of a truly com- not reflect factors of importance to parents.”60 petitive market.54 Some rivalry may exist among Hoxby disapproves of the test score com- features. New Zealand’s public schools, but the system parisons because they are likely to be difficult does not remotely resemble a competitive mar- and unfair. But a more important objection to ket. The tightly regulated New Zealand system the comparisons is the near-total irrelevance lacks profits, entry/exit, and market-based price of differences between the public and private change. Yet influential commentators, includ- sectors of a school system widely seen as disas- ing former U.S. Labor Secretary Robert Reich, trously ineffective. In a nation officially “at have cited the New Zealand experience as evi- risk” because of poor academic achievement, dence of what could be expected from a market- the key issue is which kinds of choice-based driven system.55 reforms, if any, can maximize continuous Present U.S. school choice programs create improvement as measured by more than sim- some potential for producer rivalry, but school ply test scores. Test score evidence that leaders have little authority or incentive to choosers usually find a better choice from the engage even in that, much less to exhibit existing menu of schools does not tell us if aggressive competitive behavior. There are choice can prompt desirable changes in the high entry barriers, and the combination of menu. Strong charter laws and narrowly tar- copayment limits, participation caps, and geted vouchers prompt public school im- means testing arguably rules out price change, provement, but a larger market accountabili- and all but rules out significant profit. Still, ty–based transformation of the private sector Dolton asserts that “America has important might instead prompt a gradual elimination lessons for any country considering market- of public schools.61 And such a transforma- led choice reforms.”56 The actual key lesson is tion may produce the better school system. that market forces are largely absent but that Experience says that a gradual but ultimately even small doses of increased freedom to significant loss of market-share of govern- choose from a largely static menu of schooling ment-controlled schooling is the most likely options can still produce measurable, though outcome of market accountability. Clayton modest and perhaps short-lived, improve- Christensen and Michael Overdorf’s study of ments. organizational response to disruptive change found that dominant firms typically fail to Misleading Test Score Wars improve enough to avoid eventual replace- Despite some dissent, higher test scores for ment by newcomers.62 choosers are widely seen as the needed evidence that choice “works.”57 Various scholars thus Intellectual Prisoners of the Status Quo argue over what the test results show, and the Differences between the current system’s resulting “storm over vouchers” often appears private and public schools are still widely on the front pages of the Wall Street Journal and seen as telling evidence of what expanded the New York Times.58 The market metaphor is choice and the assumed resulting greater use on trial despite the virtual absence of market of private schools would mean.63 According accountability. Test scores are inappropriately to Dan Goldhaber, “the superiority of private seen as “political dynamite.”59 Hoxby gave schools’ ability to educate students is the cen-

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tral claim of those advocating choice, and a ly, that could be the immediate effect of a gen- central tenet in the claim that expansion of uine market system. But it would be tempo- public-private choice would improve the rary. In a genuine market system, shortages of overall quality of schools in the US.”64 The space at the most popular schools would elim- typical current U.S. private school is not an inate themselves by initially pushing up prices appropriate standard of excellence, either in and hence encouraging their expansion and its current condition or based on past rates of imitation, which would at least partially improvement. “Nation at Risk” test scores at reverse the initial price increase. a lower cost are not proper objectives of A key claim made by proponents of large- reform.65 scale voucher programs is the potential for sig- The typical implicit assumption is that nificant change in the private share of the sys- greater use of private schools would improve tem, both as an end in itself and as a potential the K-12 results to the same extent that private catalyst for public sector improvement. But schools now yield better scores, which by offi- much discussion of that claim rests on the cial measures is slight.66 But differences implicitly assumed permanence of public sec- between existing schools are not necessarily tor comprehensive uniformity and the current good indicators of the benefits of increased composition of the private sector (virtually choice. Elimination of entry barriers would 100 percent non-profit; mostly church-run).70 The issue is not significantly change the private share of K-12, For example, Patrick McEwan makes much whether current and the critical issue is not whether private ado about a detailed comparison of the cur- private schools schools are now more effective than govern- rent U.S. public and private schooling sectors, ment-run schools, or even whether they can be including church dominance of private are more effective under more market-friendly circumstances.67 schooling.71 But then he concludes that the than public It may turn out that public versus private own- need to change both sectors causes the data to schools, because ership is just another specialization issue that have little value for evaluations of large-scale helps determine which school is best for which programs. In another bizarre application of market reforms child. The critical issue is which kind of static thinking, differences in the student bod- would transform accountability yields and sustains the best sys- ies and “service mix” of current private and tem, which could turn out to be a much dif- public schools are the basis of a claim that pri- the private sector. ferent mix of private and public schools than vate schools are not more efficient than public the United States now has. schools. For example, according to Levin, cur- Certainly, for applications of school choice rent private schools would spend as much as in bits and pieces to wring better results from public schools if they had the same students the present system, the differences in facilities, and service mix, that is, if private schools had funding, and governance procedures between a broad mix of students and a comprehensive current private and public schools are impor- array of services on every campus.72 But it is tant. But it makes no sense to apply a static inefficient to provide every noteworthy acade- world view when only programs that aim to mic program in virtually every assigned school transform K-12 schooling truly qualify as and to randomly match students and educa- “tentative procedures,” that is, as procedures tors, that is, to connect them in a classroom capable of effecting systemwide transforma- without regard to the unique attributes of tion and testing the merits of real market both. It makes no sense to argue that private reform.68 The static view—being an intellectu- schools would be no more efficient than pub- al prisoner of the status quo—implicitly lic schools if they behaved as inefficiently as assumes away the critical transformation neighborhood public schools. Even in a sys- objective. For example, it takes a static view of tem with little market pressure to be efficient the private sector and assumes that private (current public and private schools are mostly schools overwhelmed with applications will not close substitutes), private schools are typi- exercise school choice, not parents.69 Certain- cally more efficient (comparable effectiveness

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at a lower per pupil cost) precisely because they cuss potential effects of price decontrol.80 configure themselves differently and benefit They note that while private copayment “is from non-random connections between stu- not common practice under current voucher dents and educators. programs, voucher schools could, in theory, charge tuition and require parents to top off Ignoring Price Control [copay] the voucher amount.”81They assert Especially shocking are economists’ (price equity benefits for the copayment bans with- theorists’) failures to highlight and sharply criti- out explaining how restrictions on school cize price control by the present U.S. K-12 sys- spending by higher-income families ostensibly tem, virtually all of the world’s other K-12 sys- helps lower-income families. Betts et al. also tems, and the vast majority of proposed and fail to note or discuss the arguments that co- existing school choice programs. They could cite payment bans harm virtually everyone, for massive tomes, or a flagship journal article by a example, by reducing contemporary competi- Nobel laureate—as well as 4,000 years worth of tive pressures and the incentive to develop bad experience with price control, including the innovations that often start off too expensive near failure of the American Revolution—on the for anyone but the wealthy to afford.82 By pre- indispensability of market-determined prices as cluding an initial high price for innovative sources of vital information and powerful incen- schooling practices copayment bans can keep tives.73 But they have not done so. Clive Belfield innovations from getting off the drawing and Henry Levin do not mention the price con- board. trol present in most school choice programs.74 Price control is part of every charter law, Fiske and Ladd ignore the price control in New but economist Scott Milliman said that Zealand’s alleged experiment in “full parental Arizona’s charter school law had “initiated a choice and competition.”75 Masato Aoki and free market in public education.”83 Likewise, Susan Feiner’s “general guide to the economics Helen Ladd has said that charter schools are “a of the market approach” cited the well-known market-based reform strategy,” and Joseph Chubb and Moe plan as a prototypical market Viteriti has said that “real competition” results approach.76 They did not challenge the Chubb from strong charter laws even though, in addi- and Moe assertion that a market system can tion to instituting price control, strong char- (and should) include price control.77 ter laws mean that popularity with families, Like Aoki and Feiner, Donald Frey men- financial viability, and lawful behavior is not tions price control, but does not critique it or enough for schools to remain open.84 The gov- explain how market-determined price change ernment bureaus empowered to grant char- could prompt product diversification and ters can close popular schools for failure to innovation, regulate entry and exit into K-12 meet bureau standards. education and its subfields, force cost-cutting, The Texas and Arkansas reform recom- or other dynamic effects that economists fre- mendations of the Koret Task Force (which Especially quently acknowledge as inherent, critical ele- included education economists) ignores shocking are ments of competitive markets.78 The same price control as a limitation of charter law thing is true of Derek Neal’s discussion, “How approaches to reform.85 Koret supported a economists’ Vouchers Could Change the Market for Edu- Texas legislative proposal for means-tested failures to high- cation,” and Ladd’s “critical view” of vouch- vouchers that allows copayment and thus 79 light and sharply ers. Julian Betts et al. have a general discus- avoids price control, but the task force did sion of the price system, but they do not not explain the importance of that provision criticize price connect it to the K-12 situation, either to cri- or how means-testing would reduce market control by most tique existing price control, to explain that entry and distort market determination of prohibiting voucher copayment with private tuition (price) levels. The “Constraints on school choice funds (which is included in most school Supply” section of a significant RAND study programs. choice plans) creates price control, or to dis- makes no mention of price control.86

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Wrong Success Criteria for reform proposals that assure public schools Among current The alleged acid test of assumed, but usu- a large market share. U.S. programs, ally absent, market forces is the public school response.87 Dee opens by noting that “the fun- none has the damental premise for educational policies Promising Routes to potential to that advocate school choice is that increased Critical Evidence generate serious competition can improve the quality of public schools.”88 Likewise, according to Hess, “the Among the current U.S. programs, none market account- most commonly advanced argument for has the potential to generate serious market ability without school choice is that the market will force pub- accountability insights without major reforms. lic school systems to improve.”89 McEwan For example, the Milwaukee program would major reforms. cites the public school response as a key effec- have to allow universal access to vouchers and tiveness measure for “large-scale voucher pro- allow virtually unrestricted copayment. Since grams.”90 And for many prominent reform none of the U.S. school systems with long- advocates, the Hoxby finding of modest acad- standing choice programs contains the essen- emic gains from alleged competitive pressures tial elements of market accountability, we are and nonsubstantive public school responses is decades away from a comprehensive empirical evidence that we cannot rely on market forces analysis of a market accountability–based equi- to significantly improve schooling.91 librium in this country. If the reasoning behind the focus on public That is not to say that reformers should school response were sound, major gains in abandon efforts to create genuine experi- retailing, computers, and telecommunications ments in market accountability–driven K-12 would not have been possible without better education. Better to have direct domestic evi- performance by Sears, IBM, and the original dence in decades than never to have it at all. In AT&T. Luckily that kind of reasoning was false the interim, however, it seems sensible to use for those industries, as well as false generally. other, more indirect, sources of evidence that Those industries made great progress even are available today, and that, when taken while their once-dominant firms lagged. In- together, could prove compelling. Here I refer deed, Christensen and Overdorf note that most to such forms of evidence as simulation mod- industries make great leaps forward, despite els, analogies to other industries, and compar- lackluster performance from former industry isons to school systems in other countries and leaders.92 This and other strong indirect evi- school systems that no longer exist. I discuss dence suggests that school system improve- these forms of evidence below. ment will require that public schools go the way of Ma Bell, IBM, and Sears, claiming a much Simulation Models smaller market share than is the case under the Improvements in simulation models, current school system.93 Established market including sensitivity analysis with parame- leaders are only rarely up to the challenge of dis- ters that can’t be estimated from present ruptive change. New competition typically data, are of the utmost importance.95 That is replaces them. And public school operators face probably the only way to explore the impor- longer odds than industry leaders. The author- tance of key program features and assump- ities that run public school systems can’t tions about the nature of student, educator, respond as decisively as business CEOs, and a and entrepreneurial behavior, and the impli- shift from political control of K-12 to market cations of the apparent significant diversity accountability is arguably much more disrup- in how children learn. tive than the technological innovation pres- As Dolton correctly noted: “This [simula- sures examined by Christensen and Overdorf.94 tion modeling] is an extremely valuable—but The public school response to choice-based difficult exercise.”96 It is a valuable substitute reform is of great long-term significance only for unavailable empirical evidence, but quite

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difficult because data from the current system that the current system’s problems are largely are a dubious source of parameter estimates, inherent in non-market systems, we can study and because the inevitable, initial simplifying industries and economic systems that lack the assumptions can produce misleading results. profit motive and a price system (USSR, Cuba, For example, the current leading efforts assume North Korea). The well-established superiority one-dimensional student ability and school of market over government provision of goods quality and assume that quality depends only and services may turn out to be the most pow- on average student ability and school spend- erful evidence. The biggest challenge is to get ing.97 In other words, they assume that school- policymakers to take that evidence seriously. ing practices are uniform and that children—far Discovery and analysis of specific industries from being good at some things and average or with production functions like schooling is a bad at others—are smart, average, or slow across potential source of more specific insights into the range of different kinds of abilities. Hill the likely workings of market accountability– points out that school stratification by income based K-12 education. Other industries involv- and ability should result from those conditions, ing schooling, especially for children, promise mobility, and school choice.98 Assuming more the best and most credible indirect evidence. plausible subject- or pedagogy-specialized For example, market forces supply tutoring ser- Market-driven schools and multidimensional ability could vices to children. I’m not aware of attempts to tutoring is produce different results.99 Charles Manski rec- develop lessons for K-12 reform from U.S. popular with ognized the potential for specialization, but tutoring markets, but Coulson’s study of the omitted it from his simulation model because Japanese market demonstrates that schooling Japanese families “the greater realism of a differentiated product is not a special case in which capitalism disap- and widely model carries with it greater complexity in char- points, while delivering the goods efficiently 100 regarded as acterizing and finding equilibria.” But multi- elsewhere. Market-driven tutoring is quite pop- ple equilibria would be a key insight into the ular with Japanese families and is widely regard- effective. It likely nature of a market accountability–based ed as highly effective. That evidence deserves deserves further K-12 system. further study and a wider audience. Again, Modeling efforts typically do not quickly efforts to establish its relevance to school sys- study. incorporate every desirable nuance. Probably tem reform debates are at least as important as they cannot. Early, crude models often identify the effort to extract additional information. key modifications. For school choice issues, the Vocational education serves mostly adults, gradual, collaborative model-building process but programs that provide significant subsi- is barely underway. The production functions dies for job training expenses may create of inefficient, comprehensively uniform opportunities to tease out some insights on schools, and the effects of residential mobility the nature of private schooling subsidized by are a dubious source of reliable estimates of vouchers or tax credits. Higher education also model parameters for studying market-based involves adults and is fraught with hazards as policies.101 Therefore, analysts should conduct a source of lessons for market accountability. sensitivity analyses of their findings by also Many private universities enjoy a buffer from generating simulation results with hypotheti- competitive pressures in the form of a large cal parameters created to reflect factors like low endowment, and the much larger subsidies of entry barriers and market-driven price change. state universities create many of the same Establishing the policy relevance of such find- problems found in the current U.S. K-12 sys- ings will be at least as challenging. tem. However, higher education studies may be a good source of insights about critical Indirect Evidence political dynamics, especially the evolution of Indirect evidence is plentiful; for example, state-run universities into semiprivate there are competitive industries that have schools that is apparently underway in some much in common with schooling. Or, to argue states.102

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Myron Lieberman’s The Educational Morass market situations existing as recently as the compares school system practices to heavily sub- 1800s—universally show that greater direct sidized, restriction-laden, but still much more financial responsibility for parents, less regula- market-oriented health care in order to argue tion of schooling practices, effective competi- that more widespread use of market forces tion, and increased opportunity to profit from would drastically change teacher training, popular schooling practices improve school research practices, and the use of research.103 system effectiveness and efficiency. A compar- Again, the effort to establish the findings’ rele- ison of state systems in the United States sup- vance to potential choice-based reform is at least ports the same conclusion. Differences in the as important as making the comparisons. The education market activity levels of U.S. states, general findings of Christensen and Overdorf low as they all are under just slightly different about industry change are good examples of evi- versions of the current system, still register dence that Christensen worked to credibly con- directly as determinants of increased academ- nect to the K-12 reform debate.104 ic effectiveness and efficiency.107 It’s certainly Too much is made of the new, restriction- not a matter of finding a system to copy. It’s a laden, foreign school choice programs (Chile, matter of identifying the likely critical ele- New Zealand, and Sweden), while too little is ments of highly effective school systems by made of the differences between longstanding taking advantage of the natural experiments school systems with widely different levels of described above. The elements thus adduced market accountability. Though no current can then be fine-tuned to place-specific con- system possesses a high level of market temporary political and economic circum- accountability, contemporary foreign school- stances, as necessary. ing policies, as a group, provide a good, natur- To establish the policy-relevance of the al, long-term experiment in the determinants historical examples of schooling driven by of differences in equilibrium outcomes.105 A producer and consumer choice that pre-date “natural experiment” involves studying the the 20th century, scholars must address dif- outcomes of particular systems across varying ferences in culture and differences between cultural and economic settings, looking for current economic and political conditions consistent patterns. When a given system is and those prevailing then.108 And since data consistently associated with positive out- suitable for scientific empirical analysis are comes regardless of socioeconomic context, likely unavailable from historic archives (at researchers can have some degree of confi- least prior to the 19th century), scholars will dence that the given effects are in fact due to have to rely on carefully constructed compar- the system itself and not to extrinsic factors, isons akin to the natural experiment created since those factors will have varied from one by international differences in contemporary setting to another. Among the world’s nations school systems. there are varying levels of subsidies for “inde- There seems to be virtually unlimited pendent” schools and varying levels of regula- potential to develop evidence from compro- tory control. Thus, reviewing this body of mised separation of school and state. Though Education experiences as a whole constitutes a relevant potentially insightful on key questions such as and potentially highly informative natural the importance of price change, degree of systems with experiment. product differentiation, stratification, and greater market The initial assessments of that evidence rate of change, the findings will understate the accountability are make a strong case for school choice and mar- private sector response to uncompromised, ket accountability generally.106 Programs with low formal entry-barrier opportunities to cre- consistently more higher levels of market accountability are con- ate private schools. Understatement will result efficient than sistently more efficient than more restrictive because a compromised separation of school programs. Specifically, international examples and state forces schooling entrepreneurs to more restrictive spanning thousands of years—including true compete with government-run schools for systems.

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A capital- resources such as school sites, teachers, and U.S. families away from their assigned, “free” intensive other school personnel. Potential classroom- neighborhood public school. clearing improvement in the free government- approach to run alternatives to the fee-charging private private schooling schools casts a pall of uncertainty over private Summary and Concluding may eventually school investment decisions. And payment of Remarks school taxes reduces the ability to pay fees. become Therefore, a key issue to address in some of We lack direct answers to pressing ques- inexpensive and the initial studies is the degree to which the tions about market accountability as a trans- continued government presence compromis- formation catalyst, and imaginary evidence effective enough es the outcomes. From the work of Tooley confuses the K-12 reform debate. The impor- to draw a large and Dixon, we know that entrepreneurs can tance of the K-12 reform issue and the demand number of compete effectively with the free government- for empirical evidence has led to intense scruti- provided schooling in developing countries, ny of the small, restriction-laden U.S. choice low-income but we don’t know the extent to which the programs and, increasingly, of more informa- families. government’s use of schooling resources and tive but still quite limited foreign programs.111 its mere presence impacts the character of pri- Failure to recognize major differences between vate schooling enterprises and their market the key elements of market accountability and share.109 For example, it may be that the low the conditions of existing school choice pro- labor costs of developing countries allow for grams, and the inability to address key issues cheap, labor-intensive production of school- with direct empirical evidence, led to creative ing that is competitive with the terrible attempts to “tease out findings from existing schooling available at no charge. With high arrangements.”112 And many of the findings labor intensity production, little is invested, were important. Limited programs, which are so little is at risk in case government-provided the most likely to yield some of the negative free schooling were suddenly to respond to effects claimed by choice opponents, did not one of the many high-profile initiatives osten- produce the extensive creaming, increased sibly aimed at that result.110 That risk to pri- stratification, and budgetary consequences vate school providers may cause more capital- that have been the fodder of anti–school choice intensive approaches to appear even more campaign commercials.113 But presentations costly than they already are in capital-poor of some findings have been misleading, espe- developing countries. cially regarding the potential for competition Despite reports of horrifically dangerous to be the much sought-after transformation and academically dysfunctional schooling in catalyst. Certainly choice opponents were eager major U.S. cities, the entrepreneurial response to trumpet the modest effects of the school to low income family despair with public choice “experiments.” But the modest effects schooling has yet to match the response found prompted some scholars and authoritative in developing countries. Why? The answers proponents to declare their misgivings about could prove to be quite valuable. Certainly, rel- the utility of “competition” as a transforma- ative price differences will be a significant part tion catalyst.114 Alleged “proxies for competi- of the answer. Labor is not cheap in the United tion” have severe limitations, yet economists States, and urban public schools may not be as are among the analysts that have generalized bad as their counterparts in developing coun- effects of weak rivalry into alleged evidence of tries. Developed countries enjoy relative capi- market accountability.115 At the same time, tal abundance, so with increased development economists have done little to correct or pre- of software and the internet, a capital-inten- vent poorly grounded pronouncements about sive approach to private schooling may even- the likely nature of a competitive education tually become inexpensive and effective industry. The resulting persistence of the imag- enough to draw a large number of low-income ined evidence undermines a fair comparison of

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market accountability and the multiple exist- Taxpayers?” American Economic Review 90, no. 5 ing versions of political accountability. (December 2000): 1209 The challenges are especially severe for the 4. Brian P. Gill, P. Michael Timpane, Karen E. Ross, well-established, virtual indispensability of and Dominic J. Brewer, Rhetoric Versus Reality (Santa market-determined prices, something well- Monica, CA: Rand Corporation, 2001), p. 22. known within the economic profession but 116 5. Friedrich Hayek, “The Use of Knowledge in not beyond. Based on that general evidence, Society,” American Economic Review 35, no. 4 (Septem- integration into the economywide price sys- ber 1945): 519–30; George Reisman, Capitalism tem is a likely imperative almost entirely unac- (Ottawa, IL: Jameson Books, 1998). knowledged in calls for K-12 reform. Price 6. Walberg. change clears markets, prompts product diver- sification and innovation, regulates entry and 7. Ibid. exit into industries and their subfields, forces cost cutting, and has other dynamic effects 8. For the most recent, widely read example, see Sol Stern, “School Choice Isn’t Enough,” City Journal 18, that economists frequently acknowledge. But no. 1 (Winter 2008), http://www.city-journal.org/ economists have not forced those issues into 2008/18_1_instructional_reform.html. K-12 reform debates by criticizing the current system’s lack of a price system, documenting 9. Patrick J. McEwan, “The Potential Impact of Large-Scale Voucher Programs,” Review of Edu- the effects of price control in K-12, or protest- cational Research 70, no. 2 (Summer 2000): 103–50. ing its absence from most proposed school On “large, unrestricted voucher programs,” see also choice programs. Ladd, “School Vouchers: A Critical View,” Journal of Direct U.S. evidence is not imminent, and Economic Perspectives 16, no. 4 (Fall 2002): 14. there are repeated reminders of the urgency of 10. Consider the following observations about a K-12 reform, from the declarations of biparti- backlash against ostensible free market reform: (1) san commissions to the existence of armies of “In many countries around the world, the idea of functionally illiterate high school gradu- capitalism stands discredited not because it has 117 been tried and failed, but because a false model of ates. The failure of frenzied, decades-long capitalism was imposed.” Llewellyn H. Rockwell Jr., public school reform efforts, as well as evi- “Society Needs No Managers,” Mises Daily Article, dence from other fields that dominant pro- December 16, 2005, http://www.mises.org/story ducers rarely transform themselves, compels /1987. (2) “The ‘market’ got a black eye, but facts show that experiments in reform often fell far us to broaden the body of evidence under con- short of economic liberalism. They endorsed half- sideration. New international and indirect evi- measures and ignored the importance of competi- dence must be developed, and its credibility tion.” Mary O’Grady, “All About Evo,” Wall Street established, to permit a fair, near-term assess- Journal, December 23, 2005. ment of market accountability as a K-12 trans- 11. For example, interdistrict public-school formation agent. choice allows switching to a nearby school with- out the cost of moving to the attendance area of the preferred school. Vouchers lower the relative Notes price of eligible private schools. 1. Daniel Yergin and Joseph Stanislaw, The Com- 12. A more detailed discussion of school choice manding Heights: The Battle for the World Economy options exists in John Merrifield, “The Twelve (New York: Simon and Schuster, 1998). Ways to Exercise or Facilitate School Choice,” Jour- nal of School Choice 2, no. 1 (Spring 2007). 2. Jay Greene, Greg Forster, and Marcus Winters, Education Myths (Lanham, MD: Rowman and 13. Seventy-four percent of U.S. schoolchildren Littlefield Publishers, 2005); Herbert J. Walberg, attend an assigned neighborhood public school. School Choice, the Findings (Washington: Cato The U.S. private sector accounts for 10.8 percent Institute, 2007). of total K-12 enrollment, and of that private sec- tor, 77.8 percent is run and subsidized by religious 3. Caroline M. Hoxby, “Does Competition organizations. For 2003 data, see: http://nces.ed. among Public Schools Benefit Students and gov/fastfacts/display.asp?id=6.

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14. Byron Brown, “Why Governments Run Schools,” Geeta G. Kingdon, “The Quality and Efficiency of Economics of Education Review 11, no. 4 (December Private and Public Education: A Case Study in 1992): 287. Urban India,” Oxford Bulletin of Economics and Statistics 58, no. 1 (February 1996): 57–81. For the situation in 15. Richard D. Komer and Clark Neily, School U.S. urban areas, see Joel Turtel, Public Schools, Public Choice and State Constitutions (Arlington, VA: Menace (New York: Liberty Books, 2005). Institute for Justice and American Legislative Ex- change Council, 2007). 25. Charles Manski, “Educational Choice (Vouch- ers) and Social Mobility,” Economics of Education 16. John Merrifield, “Charter School Legislation: Review 11, no. 4 (December 1992): 351. Disaster, Detour, Irrelevant, or Reform Tool,” Journal of School Choice 1, no. 1 (Spring 2006): 3–22. 26. Jeffrey R. Henig, “School Choice Outcomes,” in School Choice and Social Controversy, ed. Stephen 17. Ibid., p. 8. D. Sugarman and Frank R. Kemerer (Washing- ton: Brookings Institution Press, 1999): p 68. 18. Komer and Neily. 27. Note that economists have shown that low 19. Utah is the Utah Special Needs Voucher. entry barriers are the key, producing reasonably FloridaA is the voucher for students attending competitive behavior even where the actual num- failed schools, recently ruled unconstitutional by ber of producers is small. William J. Baumol, John the Florida Supreme Court. FloridaB is the McKay C. Panzar, and Robert D. Willig, Contestable Markets Special Needs voucher. and the Theory of Industry Structure (New York: Harcourt Brace Jovanovich, 1982); Severin Boren- 20. According to the 2000 Census, File 4, 31.5 per- stein, “The Evolution of U.S. Airline Competition,” cent of households are not families (See http: Journal of Economic Perspectives 6, no. 1 (Winter //factfinder.census.gov/), and less than half of all 1992): 45–74; Steven A. Morrison and Clifford families have school-age children. In 2001, there Winston, “Empirical Implications and Tests of the were 71.98 million family households in 2001, Contestability Hypothesis,” Journal of Law and and 34.4 million of them had children less than Economics 30, no. 1 (April 1987): 53–66. 18 years old; 19.6 million had children 6-17 years old, and none younger (http://www.bls.gov/news. 28. See Andrew J. Coulson, “How Markets Affect release/History/famee_03292002.txt). Some of Quality,” in Educational Freedom in Urban America, ed. the 14.8 million with children under 6 years old David Salisbury and Casey Lartigue (Washington: certainly also had some children in school, but Cato Institute, 2004): pp. 265–324; and Andrew J. the data didn’t allow for a precise count of the Coulson, Market Education: The Unknown History number of families with children 5–17, the tradi- (New Brunswick, NJ: Transaction Publishers, 1999). tional measure of ‘school-age.’ The figure is cer- tainly well below 47.8 percent (34.4/71.98), but 29. Stephen D. Sugarman and Frank R. Kemerer, exactly how much below is unknown. Introduction to School Choice and Social Controversy (see note 26), p. 1. 21. Adam B. Schaeffer, “The Public Education Tax Credit,” Cato Institute Policy Analysis no. 605, 30. Teske and Schneider, p. 612. December 5, 2007. 31. Terry Moe, “The Structure of School Choice,” 22. Paul Teske and Mark Schneider, “What Research in Choice with Equity, ed. Paul Hill (Stanford, CA: Can Tell Policymakers About School Choice,” Jour- Hoover Institution Press, 2002), p. 179. nal of Policy Analysis and Management 20, no. 4 (Fall 2001): 609–31. 32. Clifford Cobb, Responsive Schools, Renewed Com- munities (San Francisco, CA: The ICS Press, 1992). 23. See http://vote2000.sos.ca.gov/VoterGuide/ For an example of such confusion, see Stern. text/text_analysis_38.htm. 33. Douglas J. Lamdin and Michael Mintrom, 24. For the situation abroad, see James Tooley and “School Choice in Theory and Practice: Taking Pauline Dixon, “Private Education is Good for the Stock and Looking Ahead,” Education Economics 5, Poor: A Study of Private Schools Serving the Poor in no. 3 (December 1997): 235. Low-Income Countries,” Cato Institute White Paper, December 7, 2005; James Tooley and Pauline 34. George Orwell, “Politics and the English Lang- Dixon, “De Facto Privatization of Education and the uage,” http://www.george-orwell.org/Politics_and_ Poor: Implications of a Study from Sub-Saharan the_English_Language/0.html. Africa and India,” Compare: A Journal of Comparative Education 36, no. 4 (December 2006): 443–462; and 35. Gerard Robinson, “Freedom of Choice: Brown,

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Vouchers, and the Philosophy of Language,” in Reform Movement,” in Selling Out Our Schools, ed. Educational Freedom in Urban America, ed. David Robert Lowe and Barbara Miner (Milwaukee, WI: Salisbury and Casey Lartigue (Washington: Cato Rethinking Schools, 1996), pp. 26–27; Ladd, p. 14. Institute, 2004), pp. 13–52. 44. Varun Gauri, School Choice in Chile (Pitts- 36. For the claim that an ability to opt out would burgh: University of Pittsburgh Press, 1998). undermine integration, see Richard D. Kahlenberg, All Together Now (Washington: Brookings Institution, 45. Carnoy. 2001), pp. 125–28. For empirical evidence to the con- trary, see Greg Forster, Freedom from Racial Barriers: 46. Jeffrey M. Perloff, Microeconomics, 3rd ed. The Empirical Evidence on Vouchers and Segregation (Boston, Pearson Education, 2004), p. 228. (Indianapolis, IN: Friedman Foundation, 2006). For modeling evidence, see Thomas J. Nechyba, “Intro- 47. Mitchell B. Pearlstein, Achievement Gaps and ducing School Choice into Multi-District Public Vouchers (Minneapolis, MN: Center of the Ameri- School Systems,” in The Economics of School Choice, ed. can Experiment, 2007), http://www.americanex Caroline Hoxby (Chicago: University of Chicago periment.org/uploaded/files/achievement_gaps Press, 2003): 145–94. On growing de facto segrega- __vouchers_012507.pdf; Stern. tion, see Kahlenberg, p. 2; and Joe Klein, “The Legacy of Summerton,” Newsweek, May 16, 1994, p. 26: 48. John F. Witte, The Market Approach to Education: “More black children are in all or virtually all black An Analysis of America’s First Voucher Program schools today than in 1954.” (Princeton, N.J.: Princeton University Press, 2000). For the “designed to fail” evaluation, see Paul E. 37. Paul T. Hill, “The Supply-Side of School Peterson and Chad Noyes, “School Choice in Mil- Choice,” in School Choice and Social Controversy (see waukee,” in New Schools for a New Century, ed. Diane note 26), p. 140. Ravitch and Joseph Viteritti (London: Yale Univer- sity Press, 1997), p 128. 38. Alan Woodfield and Philip Gunby, “The Mar- ketization of New Zealand Schools: Assessing 49. Paul E. Peterson, “The Use of Market Incen- Fiske and Ladd,” Journal of Economic Literature 41, tives in Education,” in Choice and Competition in no. 3 (September 2003): 863–84. American Education, ed. Paul E. Peterson (Lanham, MD: Rowman and Littlefield, 2006), p. 3–12. 39. For the Hoxby/Rothstein disputes, see “Novel Way to Assess School Competition Stirs Academic 50. Elchanan Cohn, ed., introduction to Market Row,” Wall Street Journal, October 24, 2005, A1; Jesse Approaches to Education (NY: Elsevier, 1997). Rothstein, “Does Competition among Public Schools Benefit Students and Taxpayers? A Com- 51. Thomas S. Dee, “Competition and the Quality ment on Hoxby” (NBER Working Paper 11215, of Public Schools,” Economics of Education Review March, 2005, nber15.nber.org/papers/w11215), 17, no. 4 (October 1998): 419–27. American Economic Review, forthcoming; and Caroline M. Hoxby, “Competition among Public 52. Ibid. Schools: A Reply to Rothstein” (NBER Working Paper 11216, March, 2005, nber15.nber.org/pap 53. Clive R. Belfield and Henry M. Levin, “The ers/w11216), American Economic Review, forthcom- Effects of Competition between Schools on Edu- ing. For an analysis of the dispute, see John Merri- cational Outcomes: A Review for the United States,” field, “Free Market in Public Schools? Not Yet,” Review of Educational Research 72, no. 2 (Summer Wall Street Journal, November 3, 2005. 2002), 279–342.

40. O’Grady. 54. Woodfield and Gunby; Edward B. Fiske and Helen F Ladd, When Schools Compete: A Cautionary 41. For published arguments against competition, Tale (Washington: Brookings Institution Press, see Stephen Gorard, School Choice in an Established 2000). For the claim that “marketization” exists in Market (Brookfield, VT: Ashgate, 1997). For argu- New Zealand, see Woodfield and Gunby, p. 863; ments from influential think tank newsletters, see for the claim of “market competition,” see Fiske Michael J. Petrilli, “What If Competition Doesn’t and Ladd, p. 272. Work?” The Education Gadfly, December 15, 2005, pp. 1–3. Petrilli is a pro-school choice former U.S. 55. See also, Thomas Lasley and William Bainbridge, assistant secretary of education. “Unintended Consequences,” Education Week, May 2, 2001, pp. 38, 42; Jennifer Hochschild, review of When 42. Gorard. Schools Compete: A Cautionary Tale, by Edward Fiske and Helen Ladd, Education Matters, Summer, 2001, 43. Martin Carnoy, “Lessons of Chile’s Voucher http://www.hoover.org/publications/ednext/33901

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56.html; Robert B. Reich, “The Case for Progressive Economics, ed. William Becker and William Baumol Vouchers,” Wall Street Journal, September 6, 2000. (NY: Russell Sage Foundation, 1996), pp. 75–98; Two papers presented at a session of the 2005 con- Cohn; Ladd; Dan Goldhaber, “Public and Private ference of the Southern Economics Association High Schools: Is School Choice an Answer to the asserted that New Zealand has a quasi-voucher pro- Productivity Problem?” Economics of Education gram. I mention these papers only to demonstrate Review 15, no. 2 (April 1996): 93–109; Henry Levin, that such misperceptions are probably widespread; I “Educational Vouchers: Effectiveness, Choice, and do not cite them because they were unpublished Costs,” Journal of Policy Analysis and Management 17, drafts. no. 3 (Summer 1998): 373–92.

56. Peter Dolton, review of The Economics of School 64. Goldhaber, p. 94. Choice, ed. Caroline Hoxby, The Economic Journal 113, issue 485 (February 2003): F170. 65. The typical conclusion is that private schools are more efficient. See, e.g., Howell and Peterson, 57. For the dissent on test scores, see John pp. 91–93. Merrifield, The School Choice Wars (Lanham, MD: Scarecrow Press, 2001); Caroline M. Hoxby, “School 66. McEwan; Albert Shanker and Bella Rosenberg, Choice and School Competition: Evidence from the “Private School Choice: An Ineffective Path to Edu- United States,” Swedish Economic Policy Review, 10, cation Reform,” in Privatizing Education and Edu- no. 2 (2003): 11–67. For the reliance on test scores, cational Choice, ed. Simon Hakim, Paul Seidenstat, see William Howell and Paul Peterson, The Education and Gary Bowman (Westport, CN: Praeger, 1994), Gap (Washington: Brookings Institution Press, p. 60. 2002); Paul Peterson, William Howell, Patrick Wolf, and David E. Campbell, “School Vouchers: Results 67. Christensen and Overdorf. from Randomized Experiments,” in The Economics of School Choice (see note 37), pp. 107–44; Jay P. Greene, 68. Aoki and Feiner; Ladd; Levin; McEwan; Derek Greg Forster, and Marcus Winters, Education Myths Neal, “How Vouchers Could Change the Market (Lanham, MD: Rowman and Littlefield Publishers, for Education,” Journal of Economic Perspectives 16, Inc., 2005); and Walberg. no. 4 (Fall 2002): 25–44; Lonnie K. Stevans and David N. Sessions, “Private/Public School Choice 58. Debra Viadero, “Research at Center of Storm and Student Performance Revisited,” Education over Vouchers,” Education Week, August 5, 1998, pp. Economics 8, no. 2 (August 2000): 169–84. 1, 16–17; Bob Davis, “Dueling Professors Have Milwaukee Dazed over School Vouchers,” Wall 69. Kahlenberg, p. 4. Authors cited in the previous Street Journal, October 11, 1996; Diana J. Schemo, note make the same point, albeit in less explicit “Public School Pupils Do as Well in Math as Those terms. in Private School, Study Says,” New York Times, January 28, 2006. 70. William C. Symonds, “For-Profit Schools,” Busi- ness Week, February 7, 2000, pp. 64–76. 59. For Stephen Hegarty, “He Proffers the Proof in Voucher Fights,” St. Petersburg Times, September 71. McEwan. 2, 2003, http://www.sptimes.com/2003/09/02/ Worldandnation/He_proffers_the_proof.shtml. 72. Levin.

60. Hoxby, “School Choice and School Competi- 73. Adam Smith, An Inquiry into the Nature and tion,” p 34. Causes of the Wealth of Nations (London: Methuen, 1904), http://www.econlib.org/library/Smith/sm 61. Ibid.; Walberg. WN0.html; Reisman; Hayek; Robert L. Shuettinger and Eamonn F. Butler, Forty Centuries of Wage and 62. Clayton Christensen and Michael Overdorf, Price Controls (Thornwood, NY: Caroline House “Meeting the Challenge of Disruptive Change.” Publishers, 1979). Harvard Business Review (March-April, 2000), pp. 66–76. 74. Belfield and Levin.

63. George A. Akerlof and Rachel E. Kranton, 75. Fiske and Ladd, p. 250 “Identity and Schooling: Some Lessons for the Economics of Education,” Journal of Economic 76. Aoki and Feiner, p. 75 Literature 40, no. 4 (December 2002): 1167–201; Masato Aoki and Susan F. Feiner, “The Economics 77. Chubb and Moe, Chap. 6, pp. 215–25. of Market Choice and At-Risk Students,” in Assessing Educational Practices: The Contribution of 78. Donald E. Frey, “Can Privatizing Education

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Really Improve Achievement? An Essay Review,” 94. Ibid. Economics of Education Review 11, no. 4 (December 1992): 427–38. 95. Dennis Epple and Richard E. Romano, “Comp- etition between Private and Public Schools, Vouch- 79. Neal; Ladd. ers, and Peer Group Effects,” American Economic Review 88, no. 1 (March 1998): 33–62; Maria M. 80. Julian Betts, Dan Goldhaber, and Larry Rosen- Ferreyra, “Estimating the Effects of Private School stock, “Understanding How Families Choose Vouchers in Multi-District Economies,” American Schools,” in Getting Choice Right, ed. Julian Betts and Economic Review 97, no. 3 (June 2007): 789–817; Tom Loveless (Washington: Brookings Institution, Nechyba. 2005), pp. 61–84. 96. Dolton, p. F173. 81. Ibid, p. 70. 97. Ibid. 82. Merrifield, The School Choice Wars. 98. Hill. 83. Robert Maranto and Scott Milliman, “In Arizona, Charter Schools Work,” Washington Post, 99. John Merrifield, “Specialization in a Competitive October 11, 1999, A25. Education Industry: Areas and Impacts,” Cato Jour- nal 25, no. 2 (Spring/Summer 2005): 317–36. 84. Statement made by Helen Ladd, February 24, 2000, at a Brookings Institution panel discussion 100. Manski, p. 360. based on Fiske and Ladd; Joseph Viteritti, Choosing Equality (Washington: Brookings Institution, 2000), 101. On the inefficiency of schools, see Caroline M. p. 221. Hoxby, “School Choice and School Productivity: Could School Choice be a Tide that Lifts All 85. Koret Task Force on K-12 Education, Reform- Boats?” in The Economics of School Choice (see note ing Education in Arkansas (Stanford, CA: Hoover 37), pp. 287–341. On the comprehensive nature of Institution Press, 2005); Koret Task Force on K-12 public schools, see Brown. Education, Reforming Education in Texas (Stan- ford, CA: Hoover Institution Press, 2004). 102. June Kronholz, “As Amount of Funding Declines, Public Universities Trim Ties,” Wall Street 86. Gill, Timpane, Ross, and Brewer, p. 124. Journal, April 18, 2003, http://online.wsj.com/arti cle/0,,SB105062306588478700,00.html. 87. Jim F. Couch, William F. Shugart, and Al L. Williams, “Private School Enrollment and Public 103. Myron Lieberman, The Educational Morass School Performance,” Public Choice 76, no. 4 (August (Lanham, MD: Rowman and Littlefield, forthcom- 1993): 301–12; Peter Dolton, review of The Economics ing), chapters 5, 6. of School Choice; Lamdin and Mintrom; James E. Ryan and Michael Heise, “The Political Economy of 104. On industry change, see Christensen and School Choice,” The Yale Law Journal 111, no. 8 (June Overdorf. For an application to schools, see Clay- 2002): 2043–2136; Stern. ton M. Christensen, “Can Schools Improve?” Phi Delta Kappan 86, no. 7 (March 2005): 545–50. 88. Dee, p. 419. 105. Charles Glenn and Jan de Groof, Finding the 89. Frederick Hess, Revolution at the Margins (Wash- Right Balance (Utrecht: Lemma, 2002). ington: Brookings Institution Press, 2002), p. 5. 106. Coulson, “How Markets Affect Quality.” 90. McEwan. 107. Andrew Coulson, “Cato Education Market 91. For skepticism about market forces: see Index Full Technical Report,” Cato Institute Michael Petrilli, a pro-choice former assistant sec- Policy Analysis no. 585, December 13, 2006. retary of education who clearly expressed that concern in Petrilli. See also Stern. For the Hoxby 108. Samuel Blumenfeld, Is Public Education Neces- findings, see Hoxby, “School Choice and School sary? (Boise, ID: The Paradigm Company, 1981); Competition.” On the alleged competitive pres- Coulson, Market Education; E.G. West, Education and sures, see Howell and Peterson; and Hess. the State, 3rd ed. (Indianapolis, IN: Liberty Fund, 1994). 92. Christensen and Overdorf. 109. Tooley and Dixon, “De Facto Privatization of 93. Ibid. Education and the Poor.”

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110. Aaron Benavot, Julia Resnik, and Javier Corrales, nent’s, Petrilli. Global Educational Expansion: Historical Legacies and Po- litical Obstacles (American Academy of Arts and Sci- 115. Hess, p. 22. ences, 2006); Ayre L. Hillman and Eva Jenkner, Educat- ing Children in Poor Countries, International Monetary 116. Hayek; Reisman. Fund, Economic Issues, no. 33, April 29, 2004. 117. For the declarations of bipartisan commis- 111. Greene, Forster, and Winters; Howell and Peter- sions, see National Commission on Excellence in son; Paul E. Peterson, “The Use of Market Incentives Education, A Nation at Risk: The Imperative for in Education,” Choice and Competition in American Educational Reform (Washington: Department of Education, ed. Paul E. Peterson (Lanham, MD: Row- Education, 1983); David Kirkpatrick, School Choice: man and Littlefield, 2006), pp. 3–12. The Idea That Will Not Die (Mesa, AZ: Bluebird, 1997); United States Commission on National Security/ 112. Hess, p. 22. 21st Century, Road Map for National Security: Impera- tive for Change–Phase III report (Washington: Com- 113. Hill. mission on National Security/21st Century, 2001). For American illiteracy, see http://www.nifl.gov/ 114. For a scholar’s view, see Gorard; for a propo- nifl/facts/IALS.html.

STUDIES IN THE POLICY ANALYSIS SERIES

615. Does Rail Transit Save Energy or Reduce Greenhouse Gas Emissions? by Randal O’Toole (April 14, 2008)

614. Organ Sales and Moral Travails: Lessons from the Living Kidney Vendor Program in Iran by Benjamin E. Hippen (March 20, 2008)

613. The Grass Is Not Always Greener: A Look at National Health Care Systems Around the World by Michael Tanner (March 18, 2008)

612. Electronic Employment Eligibility Verification: Franz Kafka’s Solution to Illegal Immigration by Jim Harper (March 5, 2008)

611. Parting with Illusions: Developing a Realistic Approach to Relations with Russia by Nikolas Gvosdev (February 29, 2008)

610. Learning the Right Lessons from Iraq by Benjamin H. Friedman, Harvey M. Sapolsky, and Christopher Preble (February 13, 2008)

609. What to Do about Climate Change by Indur M. Goklany (February 5, 2008)

608. Cracks in the Foundation: NATO’s New Troubles by Stanley Kober (January 15, 2008)

607. The Connection between Wage Growth and Social Security’s Financial Condition by Jagadeesh Gokhale (December 10, 2007)

Untitled-2 2 2/7/06 4:35:00 PM