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July 12, 2005

limits of market mechanisms in education

I suspect that increased choice and competition may improve educational outcomes to a degree. I am fairly agnostic about the advantages and disadvantages of market mechanisms. However, the potential drawbacks are at least worth listing:

1. Motivation: Usually, if a company makes money on each client, then it wants to attract more. It is motivated to please its customers and develop a good reputation. However, many educators prefer to work in smaller schools and within smaller organizations. They are not automatically motivated to attract more "clients" (in this case, students and parents). If we decide to reward them for increasing the size of their schools or for founding new branches, then those benefits will to some degree counteract their desire to remain small. It would be a good idea to reward educators for expanding their organizations if we thought that big schools (or chains of similar schools) tended to work better than small ones. But the contrary is more likely to be true.

2. Sorting problems: Parents want their kids to get good educations. But they also want their own kids to be among other children who are relatively well-off and academically successful. I know this for a fact, since I hear parents in my neighborhood talking about the percentage of students in each local school who are "out-of-bounds." The in-bounds kids around here tend to be affluent and White; the out-of-bound students tend to be poorer and very diverse. Many parents quite blatantly choose their home addresses so that their own children can attend schools without many pupils from poor neighborhoods. Meanwhile, the private schools are highly exclusive, and that exclusivity is one value that parents are buying (for $20k/year). It doesn't matter if a private school adds much value through the quality of its teaching; as long as the student body is highly selected, kids' talents and advantages will rub off on one another.

All of this means that in a true market, kids' socio-economic status and test scores will be valuable commodities. Those who are better off will be desirable, both to schools and to other parents. The result will be increased sorting--which we already see in markets like DC where there is a lot of private education.

3. Public goods: Our surveys and focus groups have often found that parents want other people's children to be educated for citizenship; they are not so concerned about civic education for their own family. This may be because civic skills and attitudes are examples of public goods. If a child becomes a capable and responsible citizen, then everyone benefits. In contrast, economic skills benefit the individual first, and society only indirectly. In a market, parents are likely to demand information about the effects of schools on their own kids' economic skills. Such data will be provided, and parents will choose schools accordingly. They are much less likely to demand evidence that schools are enhancing public goods such as citizenship, social cohesion, and equity. Thus a market mechanism is likely to enhance certain kinds of education over other kinds.

4. Bad parents. It's politically incorrect to suggest that some parents are not up to the task of selecting schools. And indeed, I am often the first to complain that big school systems undervalue their parents and take too little advantage of citizens' talents and energies. However, some parents are the problem. Yesterday, Kate Zernike wrote in the New York Times:

Nationwide, the Drug Enforcement Administration says that over the last five years 15,000 children were found at laboratories where methamphetamine was made. But that number vastly understates the problem, federal officials say, because it does not include children whose parents use methamphetamine but do not make it and because it relies on state reporting, which can be spotty.

In a true market, there is no "paternalism," because customers make their own free choices. But in education, kids are not the decision-makers; parents are. So there is no escaping paternalism. The only question is what balance of power we want to accord to literal parents versus the community or the state. While this balance should favor parents, it can't tip all the way over, as long as some adults are abusive and neglectful.

Finally, I am convinced that much of the enthusiasm for markets arises because people believe that teachers and administrators, on the whole, are lazy and/or incompetent. Thus "market discipline" would squeeze out the waste and enhance efficiency. But my many visits to urban public schools tell me that teachers and administrators, with some exceptions, are hard-working and idealistic. Increasing their motivation through market mechanisms wouldn't help, since they are motivated already.

Posted by peterlevine at July 12, 2005 09:47 AM

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