What is the best way to organize education and achieve the greatest social benefits? Specific matters as to how schools are run--such as class size, teacher certification, teacher salaries, student testing, homework levels, and the curriculum--are important, but the primary issue is whether these matters are resolved through the choices of parents in a market setting or through government decisions in the political process.
I argue that a market approach whereby schools compete and are directly accountable to parents works better than accountability through the political process. In fact, markets would fix many of the problems that afflict public education because most of these problems are inherent in government provision.
When decisions are made through a political rather than an economic process, issues are resolved on the basis of political clout and producer interests dominate. Competition from private schools is curbed because government schools receive much larger subsidies and the public sector can impose regulatory burdens on its competitors. Public education becomes overcentralized, there are few market incentives, and it is not responsive to parental demands. The results are inefficient and inequitable. Delivered through the political process, public education makes it difficult to encourage good teaching, harms the poor, and stunts innovation.
A market system in which suppliers are directly accountable to consumers would be the best means of encouraging good teaching, fostering innovation, and meeting the needs of disadvantaged students. Some benefits can be derived by instituting partial reforms that increase competition facing public schools, but the largest benefits would come from a full market system, with choice for consumers and open entry for suppliers.
The Problems with Public Provision
The poor performance of government schools is directly related to the poor incentives and lack of information inherent in government ownership. As a consequence, public provision leads to a lack of innovation, does not encourage good teaching, and disproportionately harms the poor.
Political Rather Than Market Incentives
The fundamental problem with public provision is that those who control government-owned schools (politicians and bureaucrats) do not have strong incentives or the information necessary to make efficient decisions. Instead, they pursue political, ideological, and personal objectives. As a result, the government may provide services to consumers that are valued at less than their cost of production and fail to produce more highly valued services. The needs of some groups, such as the disadvantaged, are easily neglected.
Under public provision there are no price signals to elicit and confirm consumer preferences and provide the incentive to meet them. Further, there are no direct feedback mechanisms to show whether decisions are correct or to improve performance. Often the government never finds out whether it provided the right types and amount of education.
Only a market test provides credible information on how parents value different aspects of educational quality and the relative importance they place on different educational objectives. A market test allows consumers to choose from a range of alternatives. Without a market test it is difficult to judge whether changes in public provision policies do more good than harm, and whether the changes go far enough.
Although test score statistics may give information on school academic performance, some parents may highly value factors not measured by test scores: Is my child safe? Is there a suitable music program? What if my child has a personality clash with a particular teacher? Only parents can weigh the value of these different factors. Experts may all agree, for example, that single-sex schools are better for academic achievement than coeducational schools, but some parents may prefer coeducational schools because they believe they provide better socialization. …