Thursday, March 06, 2008

ECON 365: School Vouchers

A few years ago Caroline Hoxby wrote a paper that argues that the voucher debate in Milwaukee was good for Milwaukee public schools (that is, performance per dollar spent rose). Here's a nice discussion of the paper from Crooked Timber:

She attributes the gains to the voucher program, though she doesn’t distinguish between the effects of the internal market between schools that the voucher program introduced and the effects of the political fall out on making the school district administration more accountable. She’s entitled to attribute the gain to vouchers because she compares Milwaukee Public Schools with comparable Wisconsin school districts which were similarly effected by the changes in funding wrought by the State equalization formula. There are interesting methodological questions here. For example, if you remove the 1997-8 school year data from the analysis it would look quite different, and less well disposed to choice. And the aforementioned distinction between political and market competition is significant: if the gains were entirely the result of administrators getting their acts together then there might be other, less disruptive, ways of getting the gains. So the paper is not perfect.

But I point it out for two reasons. First, it’s a wonderful paper for non-economists to read – a model of someone who can write simply and clearly, but is sensitive to numerous complexities. Second, because vouchers and choice are increasingly hard for the left in the US to dismiss. The second best objection to well-designed and targeted voucher programs is that they leave the children remaining in the public schools worse off. If that objection can be met, progressives are left only with the best objection – that they will set in train a dynamic that will undermine the principle of public schooling. But in America, where public schooling is savagely unjust in its internal workings, that objection rings a bit hollow unless coupled with a substantial and politically feasible plan for improving the public schools which the least advantaged Americans attend.

Tyler Cowen, though, still has a different objection:

I worry about how vouchers themselves will affect prices and costs. Private schools for poor urban students are cheap, in part, because the school knows the parents cannot afford much more. If the first $5000 is free, the price could go up considerably. In addition, if the schools can somehow coordinate on yet higher prices, there will be political pressures to raise the voucher amount.

Mixed public-private systems are not always cheaper than more public systems, in part because private firms are often skilled in extracting resources from the public sector. The American health care system, for instance, has considerably higher administrative costs than does the "single-payer" Canadian system, read here for a recent comparison. I don't favor national health insurance by any means, but these figures should give pause to voucher advocates.

The research of Harvard professor Caroline Hoxby suggests that increased school competition brings increased school quality. But her work does not clear up the most difficult questions about vouchers. If you imagine the system in place, on a large scale, for lengthy periods of time, and subject to pressures for rent-seeking and regulation, what would it look like? Would it truly serve parent demands for good education, or would it look more like the American system of health care, a crazy-quilt mix of bad incentives, high costs, and increasing levels of intervention?

Links to a more extensive debate on the issue between him and his co-blogger Alex Tabbarok is available here.

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