The Economics of
School Vouchers
Daniel Klein, George Mason University,
dklein@gmu.edu
Fairfax County Public Schools
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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
My judgment of fundamental
arrangements
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Three broad fundamental arrangements
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Laissez-faire
Vouchers
Status quo
This lecture makes the case for vouchers over
the status quo.
Supremes gave green-light
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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.
Formulating a voucher policy
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Amount of voucher: say $8,000, not means tested.
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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?
Possible strings attached
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Curriculum
Testing
Diversity/discrimination
Tuition-levels
My plan: No restriction on tuition, other
restrictions as minimal as possible.
Vouchers vs. Tax Credits
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Joe Bast at Heartland Inst favors vouchers.
Mackinac Center and Cato favors tax credits:
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Parents paying private school tuition
Individual donation
Corporate donation
Strategy for Britain
D. 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 child’s share of local education funding. The precise
mechanism by which that control was exercised within each local
authority area, and what ‘their child’s 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.”
Vouchers funded by voluntary
donations
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“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.
Arguing for vouchers
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Theory
Empirics
Econ theory, the broadest planes
The status quo is a system of govt production/producerside subsidy without choice.
The voucher plan is a system of user-side subsidies and
market choice.
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Virtues of the free enterprise system
Market imperfection theories
Government imperfection theories
Virtues of the FES in full force
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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
Market Imperfection arguments?
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Externalities/public goods: Positive social
spillovers from education. This is a financing
issue and vouchers answer it.
Common experience/collectivism/“the
people’s romance”/national identity.
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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.)
Market imperfection arguments?
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Other social character issues: integration/diversity by
race, income, ability.
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Replies:
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Probable that the voucher plan would serve these goals better
than the status quo
If those goals are good, wouldn’t parents tend to demand them?
Ku Klux Schools:
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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
Market imperfection arguments?
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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.
Government imperfection
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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.
Number of school districts in the United States
Source: Hoxby SEJ 2004
Local share, union share
Source: Hoxby SEJ 2004
Aside: The Social Democratic Cultural
Reaction
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Liberalism
1880-1914 Progressivism, Collectivism,
Democracy, “New Liberalism”
WWI Collectivism
1930s: Liberalism has utterly collapsed.
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Karl Polanyi: The Great Transformation (1944)
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1930s-1980: Social democracy utterly
ascendant.
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Average per pupil in America’s government schools
Source: Hoxby SEJ 2004
Two quotations
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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.”
Growing disenchantment with govt
schools (see handout)
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Declining academic results
General breakdown of civility around school
Loss of govt aura: Simpsons, etc.
Theory summary
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Virtues of the free enterprise system
Market imperfections
Government imperfections
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Strong presumption against socialism
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Thought Experiment
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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.)
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“ ... 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 . . . [C]ompetition 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).
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Why not a separation of school and state?
Aside:
Why not do all subsidies as user-side?
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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.
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Turning to empirics
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Private vs. government schools
School choice experiences
James Coleman’s research
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Coleman and Thomas Hoffer, Public and
Private High Schools: The Impact of
Communities (Basic Books, 1987)
School as instrument of:
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the family
the community
the larger society (esp. govt)
The historical shift
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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)
“The Common School”
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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.
Coleman and Hoffer
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“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.”
Coleman and Hoffer
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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)
Coleman and Hoffer empirics
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How to assess “the impact of community”?
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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.
Findings—see handout
Follow-up empirics
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Chubb and Moe 1990 book from Brookings
(Markets, Politics, and America’s 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 doesn’t
improve public schools.
Voucher program results: Hoxby
empirics
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“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.
Herbert Walberg overview
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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
International Studies
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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.
Real-life restrictions on private schools
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Restrictions on school accreditation and
operations (Hammons 2008).
Restrictions from state and local enviro,
zoning, parking, and building codes (Seireg
2004)
State regs on schools examined:
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Accreditation, licensing and approval
Transparency and reporting
Curriculum and academics
Health and safety
Miscellaneous
Enviro, zoning, parking, building codes
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Seireg paper on California shows “four
goliaths”:
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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 . . .