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Can Market Incentives Improve Schools?

Mon., January 18, 1999

Over the past 30 years, public education in America has experienced a barrage of criticism, prompting various and sundry reforms designed to make government-funded schools more effective. Despite the best efforts of the reformers, however, public confidence in public schools is lower today than it was three decades ago. All of the time, effort, and money spent on the current system have not led to significant and widespread improvement. After a generation of futile tinkering it is time to stop, take a step back, and ask ourselves a few basic questions about how education is delivered in this country.

What Does the Public Want?

Parents want a great many things from their schools, but their aspirations can be distilled down to four general goals. First and foremost among these goals is that schools provide their students with the academic basics: Public consensus on the importance of basic academic and job training is high both nationally and internationally.

Beyond the basics, however, parental priorities begin to diverge. Questions such as the role of religion in education elicit many different-and conflicting-views. So the second goal is for schools to cater to each family's particular needs in these areas withoutcausing social tensions or conflicts within the community. To be effective, schools must be flexible and responsive to a diverse population.

The third goal is that children at all income levels have access to quality educational services. In fact, education is widely seen as the most promising way to lift families out of poverty. Fourth and finally, people want their schools to foster responsible citizenship, democratic ideals, and a healthy economy.

What Kind of Schools Can Meet These Goals?

There are five interrelated traits that have consistently characterized the world's most effective and successful school systems: choice and financial responsibility for parents and freedom, competition, and the profit motive for schools--in essence, a free market in education.

Market education where it has been tried has best met the four goals most desired by parents. Despite this fact, however, virtually every country today has a government-run school system in place. This is because many people are simply not comfortable with the idea of profit-making schools or the elimination of government oversight from education. And there's the rub: The way to reach the educational goals most desired by the public is to cultivate a free market in education, which is at odds with America's current approach to schooling and most people's dearly held beliefs about how schools should work.

How Would Free-Market Education Work?

People must first recognize that ideas should not be rejected just because they are perceived as "radical." The American Revolution was radical- treasonous in the eyes of the British monarchy- but it was based on sound principles that led to the establishment of a great nation. Einstein's relativistic model of the universe was equally revolutionary, causing scientists to discard the well-established rules of Newtonian mechanics. In both cases, change came about because people recognized that the change was necessary for the achievement of a desired end: liberty in the former case and scientific accuracy in the latter.

The reintroduction of educational freedom in America is crucial to the achievement of academic excellence on a long-term, widespread basis. The following paragraphs explain how and why this is so.

Parental Choice

Parental choice in education is not distributed to any and all who ask for it. Like all other human freedoms, choice must be fought for and defended. Parents, when free from the "choices" imposed on them by government-appointed experts, have over the centuries done remarkably well for their children in the educational marketplace. Parents in general avoid pedagogical fads and focus instead on ensuring that their children learn useful skills. The societies and economies that have grown up around parental and educational choice have been among the most productive and cohesive in history. When families can get what they want for their children, without forcing their views on their neighbors, community tensions are kept to a minimum.

Parental Financial Responsibility

Public schools-which usually do not charge tuition-often do not take the needs of families as their guiding principle. Many even ignore those needs completely, preferring to deliver the sort of education favored by whomever is footing the bill. All too often, parents who attempt to take an active role in schools for which they are not paying tuition are rebuffed as nuisances since they have no direct power over the institution and frequently have few alternatives.

Worse yet, "free" government schools tend eventually to be taken for granted by parents who have many other important concerns to which they must attend. Government schooling encourages parents to drop little Johnny off in the morning and forget about him while they tend to other matters until it's time to pick him up in the late afternoon. Burdened by so many other responsibilities, these parents often wake up one day to find themselves disenfranchised spectators in their own children's education. Government school teachers cite the lack of participation by parents as one of their most pressing problems, but government schooling itself is one of the key causes of that problem.

By contrast, private school teachers report parental apathy to be far less common. The responsibility of directly paying all or part of their children's tuition forces parents to take a more active role, and gives them considerably more power over the content and direction of the instruction their children receive. Poor families will of course face financial difficulties, which I will address in a moment.

Competition and Freedom for Schools

Just as parents must be free to choose their children's schools, schools must be free to innovate. They must be able to cater to specific audiences, leverage the particular talents of their staffs, and follow the goals and philosophies of their principals. The absence of these freedoms has led to frustration and low morale among teachers, institutional inefficiencies, and pedagogical stagnation. To be effective institutions of learning, schools must be unburdened from the paralyzing and mindless bureaucracy so prevalent in classrooms today.

The freedom of schools, however, should be balanced with accountability to prevent abuses. Schools that are not directly answerable to families can and do go off on their own educational tangents that diverge wildly from the goals of students and parents. The way to ensure that schools are free to do whatever they want so long as they are effectively serving their customers is to force them to compete with one another to attract and keep those customers.

The Profit Motive for Schools

By themselves, the four factors thus far described choice and responsibility for parents, and freedom and competition for schools are enough to prevent the worst educational abuses, but they are not enough to promote educational excellence. For that, it is necessary to introduce the incentive of profit making. Many of us have powerful computers on our desks, a situation that would have been unthinkable only 20 years ago. But computer manufacturers have not been regularly improving performance and cutting costs out of the goodness of their hearts: They have done it because they profit from doing it.

The absence of the profit motive in any business leads to stagnation, and the nonprofit private school industry is a case in point. The virtual absence of significant progress in pedagogy and educational technology over the past one hundred years is absolutely unprecedented in other fields. Every other area of human endeavor from agriculture to the service sector to athletics has registered significant gains during the 20th century, gains that have been conspicuously absent from both public and nonprofit private schools. The only proven way of spurring that same tremendous progress in education is by encouraging innovation through the lure of potential profits.

This does not mean that there is no role for nonprofit schools. On the contrary, schools associated with religious organizations will undoubtedly continue to operate effectively as nonprofits. These schools are not likely to be the originators of dramatic educational innovations, but they will continue to offer a much-sought-after moral and religious educational environment.

Scholarships for Low-Income Families

But what kind of service would low-income families receive in a free educational marketplace? The short answer is much better service than they currently receive. In early 19th-century England, families from the lowest economic classes felt that their own private educational arrangements were superior to government-subsidized schools, and the evidence backs them up. Markets, moreover, are normally complemented by some mechanism for subsidizing the education of poor families. Private scholarship programs, which are cropping up around America today, promise to be the most effective such mechanism ever conceived.

Educational tax credit programs such as the Mackinac Center for Public Policy's Universal Tuition Tax Credit would allow for rapid growth in the number of private scholarships available, giving low-income families unprecedented power in the educational marketplace. An overwhelming body of evidence points to the fact that poor parents base their educational decisions on the same criteria as wealthier ones, and giving them the financial clout to choose their schools will transform the educational landscape. Decaying buildings, low standards, and defective curricula will soon be replaced by the sorts of things that all parents expect: a clean and safe classroom environment, high academics tandards, and pedagogical methods and materials based on sound research rather than the latest fads.

A Choice of Futures

In 1841, state-funded school promoters such as Horace Mann promised a millennial transformation of society if only their proposals were passed into law. Mann argued that "nine tenths of the crimes in the penal code" and a "long catalogue of human ills" would be eradicated by public schools. Fast forward to February 1998, when the Los Angeles County school board voted to arm its public school police with shotguns. Mann's promised Utopia has clearly failed to materialize.

Today, as we approach a new millennium, the debate over the future of American schools continues. This time, policy makers and parents should carefully evaluate the evidence that shows a free and competitive educational market best meets students' needs before they consign American children to another century of metal detectors and mediocrity.

Related Topics: Economics, Basic; Education
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"Two former Detroit Public Schools employees accused of defrauding the district of $400,000 in a payroll scam pled guilty in federal court." >>
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User Comments
Is it true that young ones today are losing interest on these subjects? Obviously, the White House is promoting programs that will help students on coping up with math and science subjects. But, The federal government thinks that the quality of math and science education can repair credit with the scientific community and improve US education with a few <a rev="vote for" title="U.S. Government Spends $250 Million on Science and Math" href="http://personalmoneystore.com/Payday-Loans/ ">payday loans</a> of sorts. In reality, it will take far longer to accomplish than they might think – US educators can't even get students to accept that "irregardless" isn't a word, and the difference between their, they're, and there – our students can't even learn their own language! It's a noble aim, to be sure, but throwing money at it may not work in the long run. >>
I am a teacher in the same county who is presently trying to quit the union. Like Caldwell, I strongly disagree with the MEA.

This article was timely.

Rob Olson
Pittsford Area Schools

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I agree this is a change worth making. I describe some of the uneven effects of the idea on my blog at http://rickolson.blogspot.com/2009/08/statewide-health-insurance-plan-for.html which you may also wish to read.

The devil will be in the details, so this is one we will need to monitor closely.

Rick Olson from Saline, former school Business Manager >>

Nowadays, saving money is very crucial and properly investing the money can keep you and your family away from the effect of the financial crisis. The sad news is that a lot of the options for short term funding have been drying up. Short term funding is a necessary thing to have around, and going through traditional channels such as banks isn't an option for a lot of people anymore – basically it's only open to Ken Lewis. Installment loans are an option, but some people, including senior citizens, have been thinking about raiding their retirement fund. Getting into your pension retirement plan or 401(k) funds is the last thing you want to do if you don't qualify for any withdrawals yet. The penalties are substantial, and you'll end up needing installments loans to pay them if you use retirement funds for <a rev="vote for" title="Installment Loans Reliable Option As 401(k)s are Dwindling" href="http://personalmoneystore.com/moneyblog/2009/05/17/installment-loans-reliable-option-401ks-dwindling/">short term funding</a>.


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I AGREE >>
Godfrey-Lee on the west side of the state has been running all-day, every-day kindergarten for several years. >>
We have a problem in Detroit Public School, their system had cash flow problem for years now. And honestly it getting worst in terms in progression with more children leaving to charter their schools almost every year. The state decided to give the Detroit school districts cash advance of $70 million so they would meet the schools expenses, as well as payment for teachers. Robert Bobb, the newly appointed emergency financial manager, requested the funds early in order for him to get the house in order before he had to start panicking. President Obama has been giving out large sums of money for troubled school districts, perhaps that’s where a generous portion of the aid came from. Getting Detroit Public Schools in working order is a worthy cause.

LINK TO READ FOR MORE INFO:
http://personalmoneystore.com/moneyblog/2009/03/10/state-advance-detroit-public-schools-70m/


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I am all for school choice and think its great that charters are finally moving forward. However, I'm wondering if the research accounts for a playing field that is not level. I can't take my school buildings and move them anywhere I want, nor can I simply slap up a pole building and make it a school. If anything, public schools need less state regulation and oversight so we can play by the same minimal rules charters do. If you want public schools to compete to improve, remove the barriers to doing so. I will gladly except less funding per pupil if the playing field is level.
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The purpose is to encourage non excercising children to excercise but my daughter's highschool gave her an improper body fat percentage and made my healthy daughter who trains 20 hours a week in tap jazz and ballet believe she was overweaghit instead of a person with muscles.
I believe the public schools do not have the right to make the diagnoses with these kids because they are using one measurement and recording it from their arms that they have a certain percetnage of body fat with one arm caliper test.
Does any one have feed back?
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Specifically, 81 percent of students in religiously affiliated schools and 82 percent of students in other private schools have parents who report being "very satisfied" with their schools, compared to 55 percent of students in assigned public schools and 63 percent of students in chosen public schools.

High levels of satisfaction among private school parents also extend to opinions about their children's teachers, academic standards of the school, order and discipline at the school, the amount of homework assigned, and interactions with school personnel.

http://fitt.in >>