Pressing questions about the merits of marketaccountability in K-12 education have spawned alarge scholarly literature. Unfortunately, much ofthat literature is of limited relevance, and some ofit is misleading. The studies most widely cited inthe United States used intense scrutiny of a fewsmall-scale, restriction-laden U.S. programs—anda handful of larger but still restriction-laden for-eign school choice expansions—to assert generalconclusions about the effects of “choice,” “com-petition,” and “markets.” The most intenselystudied programs lack most or all of the key ele-

ments of market systems, including profit, pricechange, market entry, and product differentia-tion—factors that are normally central to any dis-cussion of market effects. In essence, researchershave drawn conclusions about apples by studyinglemons.

To address the need for credible evidence onthe effects of genuine education markets, econo-mists should look to simulation models, indirectevidence such as outcomes in similar industries,and school systems abroad that enjoy varyingdegrees of market accountability.

Dismal ScienceThe Shortcomings of U.S. School Choice Research and

How to Address Themby John Merrifield

_____________________________________________________________________________________________________

John Merrifield is a professor of economics at the University of Texas–San Antonio, editor of the Journal of SchoolChoice, and author of Parental Choices as an Education Reform Catalyst: Global Lessons (2005) andThe School Choice Wars (2001).

Executive Summary

No. 616 April 16, 2008

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Introduction

The free market is the primary form oforganization and accountability for most ofthe economy, and increased reliance on mar-kets was the common denominator of suc-cessful 20th century economic reforms.1

These facts, coupled with widespread dissatis-faction over the quality of existing education-al services, have raised interest in market-inspired education reforms that fall under thecatch-all term “school choice.”

But despite considerable effort to discoverthe effects of “school choice,” much that couldqualify as evidence has not been directly stud-ied, and much relevant information is notwidely known. The limited educational choic-es available in the United States have beenheavily researched, telling us how certain testscores respond when some families make useof current alternatives to their assigned publicschool.2 But such constrained choices providelittle evidence about how true education mar-kets might transform the status quo. Indeed,Harvard economist Caroline Hoxby (whosework has focused on U.S. schooling) believesthat “[market-based] reforms would propelAmerican schools into wholly unknown terri-tory.”3 A RAND study determined that “noneof the important empirical questions has beenanswered definitively. Even the strongest[U.S.] evidence is based on programs that havebeen operating for only a short period of timewith a small number of participants.”4

The novelty and minuteness of existing U.S.school choice programs are not the only fac-tors that limit their value in assessing the mer-its of free-market education. Several keyaspects of market accountability are virtuallyabsent from those programs: price change, easymarket entry, and the profit motive, amongothers. Prices determined by supply anddemand are a key attribute of markets, but theyare almost unheard of in K-12 education—evenunder most school choice programs.5 Further-more, existing private schools’ tuition rates aregreatly distorted by the taxpayer-funded com-petition from “free” public schools.6

The difficulty of charging tuition whenthe government offers “free” schooling is themain barrier to market entry faced by privateschools in most of the world. That difficultynot only impairs the effectiveness of privateschools, it affects the kinds of private schoolsthat can exist.7 The presence of “free” govern-ment schools artificially favors certain kindsof private schools, such as those that

• have large endowments;• have access to church subsidies;• can offer inexpensive services that pub-

lic schools cannot, such as devotionalreligious instruction; and

• can offer high-value subject or pedagog-ic specializations that appeal to only asmall share of the population.

Indeed, that artificially skewed and nar-rowed menu of school types describes mostof the existing U.S. private education sector.

But while U.S. school choice research hasfocused on very limited existing reforms andthe small and highly skewed niche of Americanprivate schools, scholars have often used theirfindings to make sweeping claims about com-petition and market accountability in educa-tion.8 Much of the alleged direct evidence of,for example, the effects of “large-scale voucherprograms,” or market accountability throughfull-fledged competition, is thus wrong, mis-leading, or irrelevant.9 Misconceptions aremore stubborn foes than ignorance, so undo-ing the effects of this imagined evidence is aconsiderable challenge, and it is the key aim ofthis review.10 I also describe the sorts of studiesthat can be undertaken (and in some cases,already have been undertaken) to truly deter-mine the merits of market education.

What Is “School Choice”?

Before diving into an analysis of the “schoolchoice” research, the term itself merits clarifica-tion. Except when choice occurs through resi-dential relocation, “school choice” means a pol-icy that improves access to alternatives to the

2

Prices determinedby supply and

demand are a keyattribute of

markets, but theyare almost

unheard of in K-12 education.

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assigned public school. Improved access, whichtypically results from a drop in the relative“price” of some alternative, may be universal orlimited to target groups, such as low-incomefamilies or children in public schools formallydesignated as failing.11 Therefore, “schoolchoice evidence” is mostly what we know aboutthe effects of changing the relative prices ofactual and potential schooling options. Notethat subsidies like vouchers and tax credits canlower prices from families’ perspective whileraising them from the school operators’ per-spective. By reducing disposable income, schooltaxes increase the relative price of privateschooling. Interpretations of school choiceeffects need to take account consistently of howmuch policy reforms change the relative pricesto families and educators, and what fraction ofeducators and schoolchildren had access to theprice changes. If a price decrease significantlyincreases interest in alternatives to the assignedpublic school, an entrepreneurial response mayyield a much-changed menu of schoolingoptions.

Since the array of policy options for ex-panding school choice is poorly understood,the next section briefly describes the policyoptions that lower the cost, or enhance thebenefits, of leaving the assigned neighbor-hood public school.12 The third section dis-cusses false evidence and false assumptionsused to interpret evidence, while the fourthoutlines sources of valid evidence.

Varieties of School Choice

Most U.S. children have an assigned publicschool based on their home address.13 Privateschool tuition can severely strain family bud-gets, so residence choice is the most usedschool choice strategy (#1). The costs of thisstrategy may include relocation expenses andtrade-offs involving location issues such asworksite and amenities. For school districts tomaintain the appearance of fairness, everymajor district program must be available inevery attendance area. Therefore, choicethrough residential relocation mostly yields

choice among “comprehensively uniform”schooling options.14 Because school districtscannot assign children to specialized schools,choice by residential relocation cannot promptschool systems to focus schools on specificsubject themes, or specific types of students, orspecific teaching styles.

Supplementing residence choice are elevenways (#2–#12) to enhance choice, which meansselectively or universally reducing the relativeprices of the schooling options, sometimes bythe creation of new schools. These schoolchoice options are as follows:

(#2) Chartered, nondistrict public schools,which are authorized by law in 40 states.15

Most charter laws let entities other than exist-ing school districts authorize publicly funded,less-regulated alternatives to assigned publicschools.16 As unzoned alternatives, charterowners can pursue topical or pedagogical spe-cialization, but their inability to turn awaymission-incompatible children can under-mine such efforts. Every charter law createstwo price controls.17 Charter schools may notcharge tuition, which leaves it to the politicalprocess to set the amount paid to charteroperators. A ban on parental copayments pre-vents charters from offering services that costmore than the state’s per-child payment (cre-ating a price “ceiling”), while the guaranteedstate funding gives operators no incentive tocharge less for services that cost less than theper-child payment (creating a price “floor”).

(#3) Choice among district public schools.All but five states (Alabama, Maryland, Nevada,North Carolina, and Virginia) pay at least statu-tory lip service to “public school choice.”18 Inthe states that don’t undermine it with restric-tions or allow districts to opt out, open enroll-ment among district public schools creates atleast temporarily (until the best schools fill)some alternatives to the assigned school, and inthe 40 states with charter laws, it supplementsthe choice between assigned and chartered.

(#4) Targeted tuition vouchers selectivelyimprove access to private schools. The target-ing criteria include financial need (Arizona,Cleveland, Milwaukee), attendance at a pub-lic school deemed “failing” (“FloridaA”), and

3

Much of thealleged evidenceof the effects of “large-scalevoucher programs” is wrong, misleading, orirrelevant.

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the disability or special needs status of a stu-dent (Utah, “FloridaB”).19

(#5) Nonrefundable, personal use tuitiontax credits. Targeting of a different sort affectsa non-refundable credit’s utility to families.Nonrefundability restricts the maximum sizeof the credit to the specific personal tax liabil-ities against which the credit can be applied(income tax, sales tax, property tax, and soforth). The combined magnitude of the eligi-ble tax burden, and hence the credit’s value,determines the extent to which the cost barri-er to private schooling is lowered and thus thelikely extent of migration from the public tothe private sector.

(#6) Nonrefundable, low-income scholar-ship donation tax credit. This approachbroadens the potential tax liability base of thecredit to the vast majority of households thatdo not have school age children, as well as tobusinesses.20 It also has the significant politi-cal and social virtue of shifting the schoolingbenefits of the credit from higher to lowerincome households. But only when coupledwith personal-use tax credits as describedabove can donation credits change the schoolchoice calculus of middle- and upper-incomehouseholds, and thus capture much of thepotential to prompt entrepreneurially drivenchange in the menu of schooling options.21

(#7) Refundable tuition tax credits. Fam-ilies get a check when a refundable credit tops atargeted tax liability, typically just income tax.The credit’s cash value does not depend direct-ly on the family’s tax liability, or indirectly onthe taxpayer’s income. As in the case of theoption-demand, universal voucher describedbelow, it is strictly a matter of legislative choicewhether private- and public-school users receiveequal subsidies, or whether the tax credit is alarge fraction of the tuition charged by the typ-ical alternatives to the assigned public school.

(#8) “Pure” universal tuition vouchers. “Pure”means that parental choice of school allocates allof the public funds earmarked for approvedschooling. Public and private schools get thesame per-child subsidy. Although a child’s sub-sidy would not depend on the school’s owner, itcould depend on age or academic status.

(#9) Option-demand universal tuitionvouchers. “Option-demand” plans offer vouch-ers to everyone who opts for a non-publicschool.22 With an option-demand program,public school funding and voucher value areseparate policy issues. Consequently, per pupilfunding for public schools can differ from thevalue of a voucher. All of the formally proposedoption-demand programs offered vouchersworth less than the public schools’ per pupilfunding. For example, California’s failed Prop-ositions 174 and 38 (1993 and 2000, respective-ly) offered option-demand universal vouchersworth half of the public schools’ per pupilfunding level.23

(#10) Formal separation of school andstate. This would mean eliminating specialrules for schools, selling off existing govern-ment education assets, and dropping educa-tion subsidies funded by taxes.

(#11) Informal, compromised school-stateseparation. Informal separation occurs whenfree government-run schools are available but,to a great extent, available in name only, be-cause the schools are thoroughly dysfunction-al—or actually unavailable, as in remote ruralareas. Compromised, informal separation isfound in developing countries to a substantialextent, and it is arguably emerging in developedcountries, for example, in some of major U.S.cities with a history of chronically ineffectiveand reform-resistant public schools.24

(#12) Deregulation that allows greater dif-ferences in schools. In countries such as Chile,Sweden, and the Netherlands, where manyfamilies can readily choose non-state, “inde-pendent” schools, extensive regulations great-ly reduce the potential for differences amongthe school choices, which constitutes anothermajor school choice barrier.

Imagined Evidence

Owing to a widespread misunderstandingof competitive markets, many researchershave overlooked the absence of several keyelements of market accountability in existingschool choice programs. Economist Charles

4

Many researchershave overlooked

the absence of keymarket elements

in existing schoolchoice programs.

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Manski notes that “consideration of [unre-stricted] choice, to date, has been anything butserious. The policy debate has been long onadvocacy and short on [relevant empirical]analysis.”25 Jeffrey Henig observes that

The source of major conflicts and confu-sions today [in interpreting school choiceresearch] derives from the absence ofclear guidance about how to move fromfindings specific to one manifestation ofchoice to more general conclusions.Most of what we have learned aboutschool choice is based on evidence drawnfrom two sectors—religious institutionsand public education—in which the keyactors and decision criteria are distinctlynot market driven.26

Every current school choice program, andschool system, lacks some of the key elementslisted below. They are especially scarce in thewidely cited U.S. programs. These typically miss-ing market elements include the following:

• Low formal (regulatory) barriers to theentry of new schools and to product[schooling] differentiation (e.g., schoolcontrol of admissions and curriculum,and consumer sovereignty; family will-ingness to pay as the key determinant ofschool financial viability)27

• Stability (a high degree of confidence inconstant or growing total demand)

• Market-determined, flexible prices (e.g.,permitting parental copayments undervoucher programs)

• Nondiscrimination in funding (e.g.,public funding per child, if any, does notvary significantly on the basis of schoolsector or for-profit versus nonprofit sta-tus) to ensure the level playing fieldessential to an entrepreneurial response

• Some direct payment by the consumer,in the form of tuition fees, as opposedto third-party payments only28

Much misleading generalization rests onfacts stretched beyond their narrow relevance,

for example, asserting that experience with pub-lic school choice provides insights into marketaccountability: “Advocates and opponents fre-quently overstate what is known about the con-sequences of school choice.”29 Much overstate-ment is implicit. For example, Table 1 in Teskeand Schneider is an overview of “studies ofchoice types and outcomes.”30 The Teske andSchneider overview table does not differentiatebetween narrowly targeted vouchers and unre-stricted universal programs, and it does notinclude “supply-side response” in the table’s listof potentially key school choice outcomes. Thestudent performance column merely lists stud-ies that examine whether choosers gained bymoving to another part of the present system,something we would expect just from confi-dence in rational behavior. The dense list ofstudies in the “Vouchers” column could leavethe impression that all of the important aspectsof vouchers have received considerable academ-ic scrutiny. In fact, the opposite is true. Instead,only a few narrowly relevant issues have receivedmuch attention.

Many of the wrong, misleading, or irrelevantstatements about the effects of “competition”stem from failure to define the term or acknowl-edge the key elements listed above, and frominsufficient use of necessary qualifiers such as“muted” and “fringe.” As Terry Moe noted, “itusually makes little sense to ask whether vouch-ers or charter schools, in some generic sense,have particular effects,” but it happens a lot.31

Clifford Cobb noted that the mismatch betweenrestrictions on parental choice and rhetoricabout competition creates considerable confu-sion.32 For example, two analysts have assertedthat “the nature of some of these [tiny, privatelyfunded voucher] programs allow for studies ofessentially Friedman-like [universal, same sub-sidy level for all, plus ability to co-pay] voucherarrangements.”33 As George Orwell said, “theslovenliness of our language makes it easier forus to have foolish thoughts.”34

Experience with 1950s/1960s Fear-BasedChoice

Some of the concern about stratificationand increased segregation stems from the

5

Many of the wrong, misleading, and irrelevantstatements aboutthe effects of“competition”stem from failureto define theterm.

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1950s/1960s “fear-based choice” that was pro-vided mostly to the privileged as a “backlash”against the 1954 Brown Supreme Court deseg-regation order.35 Often unsaid is that the desireto stratify was of utmost importance to thepolicy designers. Many of the tuition grantprograms enacted to resist the Brown decisionformally excluded blacks, and the vast majorityof the eligible schools did not admit black chil-dren. Only Louisiana allowed a pursuit of prof-it that might have prompted entrepreneurialpressure to see the entire population as poten-tial customers. The courts struck down all ofthe 1950s/1960s school choice programs with-out ruling on the voucher mechanism that,when applied in a nondiscriminatory manner,was found constitutional by the SupremeCourt’s 2002 Zelman decision.

Claims that uncontrolled opportunities toopt out of assigned schools without relocatingwould undermine integration efforts persist inthe face of both empirical and modeling evi-dence to the contrary, and those who make theclaims seldom address the growing de facto seg-regation of the assigned public school system.36

Hill pointed out that, “fears of [increased] re-segregation and restratification depend on cer-tain assumptions: very few good schools, thatschool quality varies on one dimension fromhigh to low, and the real choosers will be thegood schools, which will have their pick of stu-dents.”37 Implicit in the arguments that resegre-gation will accelerate are entry barriers that pre-vent an expansion of the supply of the betterschools. Those assumptions are often valid forthe current system, or the current systemamended with narrowly targeted, restriction-laden school choice. The historical evidence dis-cussed above, and the indirect evidence dis-cussed later, indicates that those assumptionswill not apply to a mature, market accountabil-ity–based system.

Competition Tried in AbsentiaIn developed countries, competition and

parental choice have only been implementedpiecemeal, or on a small scale. The school sys-tems of these nations are restriction-laden orextend choice to a narrowly targeted popula-

tion, or both. The opportunity for genuinerivalry between schools has thus been mini-mal, but virtually all studies of these systemsassert that competition is on trial. For exam-ple, Fiske and Ladd claim that mere publicschool choice created a “market” in NewZealand.38 Other stunning examples of mis-takenly assumed competition and marketforces include programs that cap market entryand set prices (charter laws, and most currentvoucher programs); policies that stronglyfavor some school providers; and regulationsthat give private schools very little leeway todifferentiate themselves from the publicschools or from each other. The much-publi-cized dispute between Hoxby and Rothsteinwas about a type of “competition” that hadnothing to do with markets, but with sup-posed rivalry among political jurisdictions fortax base and economic development.39

Half-hearted, partial market liberalizationcan yield misleading results. For example, theineffectiveness and perverse side effects of pre-sumed market reforms slandered capitalismin South America, with dire consequencesonly now becoming evident in places likeVenezuela and Bolivia.40 Likewise, the mostlypositive, but unspectacular, effects of “schoolchoice” discussed earlier may slander the gen-uine market-based reforms that qualify as the“tentative procedures” capable of yielding thetransformation needed by a K-12 system in cri-sis. Though the evidence that receives virtuallyall of the U.S. attention has little bearing onthe likely effects of competitive K-12 educa-tion markets, the argument that “competi-tion” cannot produce sufficient school-systemimprovement is already appearing in putative-ly authoritative journals and is being made byprominent spokespersons in the newslettersof influential think tanks.41 Eight years ofexperience with the limited public schoolchoice created by the United Kingdom’s 1988Education Reform Act was the basis ofStephen Gorard’s non sequitur that “the prog-nosis for the improvement effect of marketson schools is not good.”42

Martin Carnoy and Helen Ladd have saidthat the Chilean universal option-demand

6

The mostly positive, but

unspectacular,effects of “school

choice” may slander genuine

market-basedreforms.

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voucher program was an example of a “large,unrestricted voucher program,” even thoughLadd noted the government’s tight control ofvirtually all aspects of schooling.43 Gauri hadalready documented Chile’s central microman-agement, including price control.44 Earlier,Carnoy overlooked the intensity of central con-trol. He concluded that Chile had “fully subsi-dized, deregulated private schools competinghead-on for pupils with de-regulated munici-pality-run public schools.”45 Carnoy and Laddconcluded that since the assumed (but in factlargely absent) market forces had failed to pro-duce the promised results, increased centralcontrol was in order.

Jeffrey Perloff’s Microeconomics text notesthat “When most people talk about competi-tive firms they mean firms that are rivals forthe same customers.46 By this interpretation,any market that has more than one firm iscompetitive. However, to an economist, onlysome of these multi-firm markets are compet-itive.” The actual competitiveness of the set-tings studied to gauge “market competition”effects is a largely neglected, crucial issue. Withpublic school choice, the school choices arenot even separate firms. Even in the leastrestrictive of the widely cited school choiceprograms, the state-run sector easily satisfiesthe monopoly definition used for antitrustlawsuits. Certainly, the state-run system is thedominant producer, with significant entrybarriers assuring that it is likely to remain so.And in the dominant-producer/competitive-fringe market of K-12 education, the domi-nant producer is not even a firm, that is, notdirectly customer-dependent.

Virtually all noneconomists attribute mar-ket forces and “competition” to every settingwhere an assigned school has a comparablypriced alternative, regardless of the often exten-sive market-stifling restrictions that exist. Themost recent examples are Mitchell Pearlstein’sreview of voucher studies and Sol Stern’slament that market forces have shown them-selves inadequate to the assumed imperative ofpublic school improvement.47 John Witte’s TheMarket Approach to Education is about the initialMilwaukee voucher program—a program “de-

signed to fail”—that included price control, seta small voucher size, initially limited participa-tion to 1 percent of Milwaukee public schoolenrollment, and allowed only the then-rare sec-ular private schools to enroll voucher users.48

Likewise, the Paul Peterson introduction to thecompilation of Education Next articles, entitledChoice and Competition in American Education,does not mention that the journal’s authorsdescribe only programs lacking the key condi-tions of genuine market competition.49 Pre-sumably, this means that Education Next, thetop nontechnical outlet of education reformresearch, hasn’t seen an acceptable manuscriptdiscussing the differences between the levels ofrivalry present in American education and whatgenerally constitutes market competition.

Economists have also asserted the presenceof market forces that are in fact largely absent.For example, the introduction to MarketApproaches to Education, written by the book’seditor, Elchanan Cohn, says that its collectedessays will consider only public school choiceand narrowly targeted subsidies—approachesthat lack every key ingredient of a truly com-petitive market.50 Despite the existing system’smajor entry barriers, and the fact that privateand public schools are not close substitutes,Thomas Dee’s “Competition and the Qualityof Public Schools” attributes positive effectson public school graduation rates to “compe-tition” from increased private sector marketshare.51 Since there is little incentive to active-ly compete, and little evidence of actual rival-rous behavior, Dee’s findings could be theresult of other predictable effects of a largerprivate-school market share.52 For example,with more private schools, parents are betterable to match their child’s unique characteris-tics to the available schooling options.Removal of children that would do better else-where leaves behind more homogenous, easierto teach public school classrooms.

Many economists have ignored or rein-forced distorted views of the various schoolchoice policies. Discussions of product differ-entiation, price change, and entry-exit aspectsof market accountability are rare. The Belfieldand Levin literature review and their lengthy

7

Even under U.S. “choice” programs, publicschools easily satisfy the definition ofmonopoly usedin antitrust lawsuits.

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discussion of the effects of competition be-tween schools does not mention price change,profits, entry barriers, or regulation—all criticalcomponents of the “market competition”53

they claimed to assess. Woodfield and Gunbyand Fiske and Ladd trumpet the presence of“marketization” and “market competition” inNew Zealand, and then document the absenceof nearly all of the key features of a truly com-petitive market.54 Some rivalry may exist amongNew Zealand’s public schools, but the systemdoes not remotely resemble a competitive mar-ket. The tightly regulated New Zealand systemlacks profits, entry/exit, and market-based pricechange. Yet influential commentators, includ-ing former U.S. Labor Secretary Robert Reich,have cited the New Zealand experience as evi-dence of what could be expected from a market-driven system.55

Present U.S. school choice programs createsome potential for producer rivalry, but schoolleaders have little authority or incentive toengage even in that, much less to exhibitaggressive competitive behavior. There arehigh entry barriers, and the combination ofcopayment limits, participation caps, andmeans testing arguably rules out price change,and all but rules out significant profit. Still,Dolton asserts that “America has importantlessons for any country considering market-led choice reforms.”56 The actual key lesson isthat market forces are largely absent but thateven small doses of increased freedom tochoose from a largely static menu of schoolingoptions can still produce measurable, thoughmodest and perhaps short-lived, improve-ments.

Misleading Test Score WarsDespite some dissent, higher test scores for

choosers are widely seen as the needed evidencethat choice “works.”57 Various scholars thusargue over what the test results show, and theresulting “storm over vouchers” often appearson the front pages of the Wall Street Journal andthe New York Times.58 The market metaphor ison trial despite the virtual absence of marketaccountability. Test scores are inappropriatelyseen as “political dynamite.”59 Hoxby gave

three reasons why it is “wrong-headed” toinsist that choosers achieve higher test scoresto see choice as a worthwhile reform: “(1)Productivity with equal resources is the keyquestion and the choice schools typically havefewer resources; (2) Schools left behind mayimprove, invalidating comparisons; (3) Com-parison criteria may be incomplete—data maynot reflect factors of importance to parents.”60

Hoxby disapproves of the test score com-parisons because they are likely to be difficultand unfair. But a more important objection tothe comparisons is the near-total irrelevanceof differences between the public and privatesectors of a school system widely seen as disas-trously ineffective. In a nation officially “atrisk” because of poor academic achievement,the key issue is which kinds of choice-basedreforms, if any, can maximize continuousimprovement as measured by more than sim-ply test scores. Test score evidence thatchoosers usually find a better choice from theexisting menu of schools does not tell us ifchoice can prompt desirable changes in themenu. Strong charter laws and narrowly tar-geted vouchers prompt public school im-provement, but a larger market accountabili-ty–based transformation of the private sectormight instead prompt a gradual eliminationof public schools.61 And such a transforma-tion may produce the better school system.Experience says that a gradual but ultimatelysignificant loss of market-share of govern-ment-controlled schooling is the most likelyoutcome of market accountability. ClaytonChristensen and Michael Overdorf’s study oforganizational response to disruptive changefound that dominant firms typically fail toimprove enough to avoid eventual replace-ment by newcomers.62

Intellectual Prisoners of the Status QuoDifferences between the current system’s

private and public schools are still widelyseen as telling evidence of what expandedchoice and the assumed resulting greater useof private schools would mean.63 Accordingto Dan Goldhaber, “the superiority of privateschools’ ability to educate students is the cen-

8

Fiske and Laddtrumpet “market

competition” inNew Zealand, and

then documentthe absence of

nearly all marketfeatures.

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tral claim of those advocating choice, and acentral tenet in the claim that expansion ofpublic-private choice would improve theoverall quality of schools in the US.”64 Thetypical current U.S. private school is not anappropriate standard of excellence, either inits current condition or based on past rates ofimprovement. “Nation at Risk” test scores ata lower cost are not proper objectives ofreform.65

The typical implicit assumption is thatgreater use of private schools would improvethe K-12 results to the same extent that privateschools now yield better scores, which by offi-cial measures is slight.66 But differencesbetween existing schools are not necessarilygood indicators of the benefits of increasedchoice. Elimination of entry barriers wouldsignificantly change the private share of K-12,and the critical issue is not whether privateschools are now more effective than govern-ment-run schools, or even whether they can beunder more market-friendly circumstances.67

It may turn out that public versus private own-ership is just another specialization issue thathelps determine which school is best for whichchild. The critical issue is which kind ofaccountability yields and sustains the best sys-tem, which could turn out to be a much dif-ferent mix of private and public schools thanthe United States now has.

Certainly, for applications of school choicein bits and pieces to wring better results fromthe present system, the differences in facilities,funding, and governance procedures betweencurrent private and public schools are impor-tant. But it makes no sense to apply a staticworld view when only programs that aim totransform K-12 schooling truly qualify as“tentative procedures,” that is, as procedurescapable of effecting systemwide transforma-tion and testing the merits of real marketreform.68 The static view—being an intellectu-al prisoner of the status quo—implicitlyassumes away the critical transformationobjective. For example, it takes a static view ofthe private sector and assumes that privateschools overwhelmed with applications willexercise school choice, not parents.69 Certain-

ly, that could be the immediate effect of a gen-uine market system. But it would be tempo-rary. In a genuine market system, shortages ofspace at the most popular schools would elim-inate themselves by initially pushing up pricesand hence encouraging their expansion andimitation, which would at least partiallyreverse the initial price increase.

A key claim made by proponents of large-scale voucher programs is the potential for sig-nificant change in the private share of the sys-tem, both as an end in itself and as a potentialcatalyst for public sector improvement. Butmuch discussion of that claim rests on theimplicitly assumed permanence of public sec-tor comprehensive uniformity and the currentcomposition of the private sector (virtually100 percent non-profit; mostly church-run).70

For example, Patrick McEwan makes muchado about a detailed comparison of the cur-rent U.S. public and private schooling sectors,including church dominance of privateschooling.71 But then he concludes that theneed to change both sectors causes the data tohave little value for evaluations of large-scaleprograms. In another bizarre application ofstatic thinking, differences in the student bod-ies and “service mix” of current private andpublic schools are the basis of a claim that pri-vate schools are not more efficient than publicschools. For example, according to Levin, cur-rent private schools would spend as much aspublic schools if they had the same studentsand service mix, that is, if private schools hada broad mix of students and a comprehensivearray of services on every campus.72 But it isinefficient to provide every noteworthy acade-mic program in virtually every assigned schooland to randomly match students and educa-tors, that is, to connect them in a classroomwithout regard to the unique attributes ofboth. It makes no sense to argue that privateschools would be no more efficient than pub-lic schools if they behaved as inefficiently asneighborhood public schools. Even in a sys-tem with little market pressure to be efficient(current public and private schools are mostlynot close substitutes), private schools are typi-cally more efficient (comparable effectiveness

9

The issue is notwhether currentprivate schoolsare more effectivethan publicschools, becausemarket reformswould transformthe private sector.

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at a lower per pupil cost) precisely because theyconfigure themselves differently and benefitfrom non-random connections between stu-dents and educators.

Ignoring Price ControlEspecially shocking are economists’ (price

theorists’) failures to highlight and sharply criti-cize price control by the present U.S. K-12 sys-tem, virtually all of the world’s other K-12 sys-tems, and the vast majority of proposed andexisting school choice programs. They could citemassive tomes, or a flagship journal article by aNobel laureate—as well as 4,000 years worth ofbad experience with price control, including thenear failure of the American Revolution—on theindispensability of market-determined prices assources of vital information and powerful incen-tives.73 But they have not done so. Clive Belfieldand Henry Levin do not mention the price con-trol present in most school choice programs.74

Fiske and Ladd ignore the price control in NewZealand’s alleged experiment in “full parentalchoice and competition.”75 Masato Aoki andSusan Feiner’s “general guide to the economicsof the market approach” cited the well-knownChubb and Moe plan as a prototypical marketapproach.76 They did not challenge the Chubband Moe assertion that a market system can(and should) include price control.77

Like Aoki and Feiner, Donald Frey men-tions price control, but does not critique it orexplain how market-determined price changecould prompt product diversification andinnovation, regulate entry and exit into K-12education and its subfields, force cost-cutting,or other dynamic effects that economists fre-quently acknowledge as inherent, critical ele-ments of competitive markets.78 The samething is true of Derek Neal’s discussion, “HowVouchers Could Change the Market for Edu-cation,” and Ladd’s “critical view” of vouch-ers.79 Julian Betts et al. have a general discus-sion of the price system, but they do notconnect it to the K-12 situation, either to cri-tique existing price control, to explain thatprohibiting voucher copayment with privatefunds (which is included in most schoolchoice plans) creates price control, or to dis-

cuss potential effects of price decontrol.80

They note that while private copayment “isnot common practice under current voucherprograms, voucher schools could, in theory,charge tuition and require parents to top off[copay] the voucher amount.”81They assertequity benefits for the copayment bans with-out explaining how restrictions on schoolspending by higher-income families ostensiblyhelps lower-income families. Betts et al. alsofail to note or discuss the arguments that co-payment bans harm virtually everyone, forexample, by reducing contemporary competi-tive pressures and the incentive to developinnovations that often start off too expensivefor anyone but the wealthy to afford.82 By pre-cluding an initial high price for innovativeschooling practices copayment bans can keepinnovations from getting off the drawingboard.

Price control is part of every charter law,but economist Scott Milliman said thatArizona’s charter school law had “initiated afree market in public education.”83 Likewise,Helen Ladd has said that charter schools are “amarket-based reform strategy,” and JosephViteriti has said that “real competition” resultsfrom strong charter laws even though, in addi-tion to instituting price control, strong char-ter laws mean that popularity with families,financial viability, and lawful behavior is notenough for schools to remain open.84 The gov-ernment bureaus empowered to grant char-ters can close popular schools for failure tomeet bureau standards.

The Texas and Arkansas reform recom-mendations of the Koret Task Force (whichincluded education economists) ignoresprice control as a limitation of charter lawapproaches to reform.85 Koret supported aTexas legislative proposal for means-testedvouchers that allows copayment and thusavoids price control, but the task force didnot explain the importance of that provisionor how means-testing would reduce marketentry and distort market determination oftuition (price) levels. The “Constraints onSupply” section of a significant RAND studymakes no mention of price control.86

10

Especially shocking areeconomists’

failures to high-light and sharply

criticize price control by most

school choice programs.

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Wrong Success CriteriaThe alleged acid test of assumed, but usu-

ally absent, market forces is the public schoolresponse.87 Dee opens by noting that “the fun-damental premise for educational policiesthat advocate school choice is that increasedcompetition can improve the quality of publicschools.”88 Likewise, according to Hess, “themost commonly advanced argument forschool choice is that the market will force pub-lic school systems to improve.”89 McEwancites the public school response as a key effec-tiveness measure for “large-scale voucher pro-grams.”90 And for many prominent reformadvocates, the Hoxby finding of modest acad-emic gains from alleged competitive pressuresand nonsubstantive public school responses isevidence that we cannot rely on market forcesto significantly improve schooling.91

If the reasoning behind the focus on publicschool response were sound, major gains inretailing, computers, and telecommunicationswould not have been possible without betterperformance by Sears, IBM, and the originalAT&T. Luckily that kind of reasoning was falsefor those industries, as well as false generally.Those industries made great progress evenwhile their once-dominant firms lagged. In-deed, Christensen and Overdorf note that mostindustries make great leaps forward, despitelackluster performance from former industryleaders.92 This and other strong indirect evi-dence suggests that school system improve-ment will require that public schools go the wayof Ma Bell, IBM, and Sears, claiming a muchsmaller market share than is the case under thecurrent school system.93 Established marketleaders are only rarely up to the challenge of dis-ruptive change. New competition typicallyreplaces them. And public school operators facelonger odds than industry leaders. The author-ities that run public school systems can’trespond as decisively as business CEOs, and ashift from political control of K-12 to marketaccountability is arguably much more disrup-tive than the technological innovation pres-sures examined by Christensen and Overdorf.94

The public school response to choice-basedreform is of great long-term significance only

for reform proposals that assure public schoolsa large market share.

Promising Routes to Critical Evidence

Among the current U.S. programs, nonehas the potential to generate serious marketaccountability insights without major reforms.For example, the Milwaukee program wouldhave to allow universal access to vouchers andallow virtually unrestricted copayment. Sincenone of the U.S. school systems with long-standing choice programs contains the essen-tial elements of market accountability, we aredecades away from a comprehensive empiricalanalysis of a market accountability–based equi-librium in this country.

That is not to say that reformers shouldabandon efforts to create genuine experi-ments in market accountability–driven K-12education. Better to have direct domestic evi-dence in decades than never to have it at all. Inthe interim, however, it seems sensible to useother, more indirect, sources of evidence thatare available today, and that, when takentogether, could prove compelling. Here I referto such forms of evidence as simulation mod-els, analogies to other industries, and compar-isons to school systems in other countries andschool systems that no longer exist. I discussthese forms of evidence below.

Simulation ModelsImprovements in simulation models,

including sensitivity analysis with parame-ters that can’t be estimated from presentdata, are of the utmost importance.95 That isprobably the only way to explore the impor-tance of key program features and assump-tions about the nature of student, educator,and entrepreneurial behavior, and the impli-cations of the apparent significant diversityin how children learn.

As Dolton correctly noted: “This [simula-tion modeling] is an extremely valuable—butdifficult exercise.”96 It is a valuable substitutefor unavailable empirical evidence, but quite

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Among currentU.S. programs,none has thepotential to generate seriousmarket account-ability withoutmajor reforms.

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difficult because data from the current systemare a dubious source of parameter estimates,and because the inevitable, initial simplifyingassumptions can produce misleading results.For example, the current leading efforts assumeone-dimensional student ability and schoolquality and assume that quality depends onlyon average student ability and school spend-ing.97 In other words, they assume that school-ing practices are uniform and that children—farfrom being good at some things and average orbad at others—are smart, average, or slow acrossthe range of different kinds of abilities. Hillpoints out that school stratification by incomeand ability should result from those conditions,mobility, and school choice.98 Assuming moreplausible subject- or pedagogy-specializedschools and multidimensional ability couldproduce different results.99 Charles Manski rec-ognized the potential for specialization, butomitted it from his simulation model because“the greater realism of a differentiated productmodel carries with it greater complexity in char-acterizing and finding equilibria.”100 But multi-ple equilibria would be a key insight into thelikely nature of a market accountability–basedK-12 system.

Modeling efforts typically do not quicklyincorporate every desirable nuance. Probablythey cannot. Early, crude models often identifykey modifications. For school choice issues, thegradual, collaborative model-building processis barely underway. The production functionsof inefficient, comprehensively uniformschools, and the effects of residential mobilityare a dubious source of reliable estimates ofmodel parameters for studying market-basedpolicies.101 Therefore, analysts should conductsensitivity analyses of their findings by alsogenerating simulation results with hypotheti-cal parameters created to reflect factors like lowentry barriers and market-driven price change.Establishing the policy relevance of such find-ings will be at least as challenging.

Indirect EvidenceIndirect evidence is plentiful; for example,

there are competitive industries that havemuch in common with schooling. Or, to argue

that the current system’s problems are largelyinherent in non-market systems, we can studyindustries and economic systems that lack theprofit motive and a price system (USSR, Cuba,North Korea). The well-established superiorityof market over government provision of goodsand services may turn out to be the most pow-erful evidence. The biggest challenge is to getpolicymakers to take that evidence seriously.

Discovery and analysis of specific industrieswith production functions like schooling is apotential source of more specific insights intothe likely workings of market accountability–based K-12 education. Other industries involv-ing schooling, especially for children, promisethe best and most credible indirect evidence.For example, market forces supply tutoring ser-vices to children. I’m not aware of attempts todevelop lessons for K-12 reform from U.S.tutoring markets, but Coulson’s study of theJapanese market demonstrates that schoolingis not a special case in which capitalism disap-points, while delivering the goods efficientlyelsewhere. Market-driven tutoring is quite pop-ular with Japanese families and is widely regard-ed as highly effective. That evidence deservesfurther study and a wider audience. Again,efforts to establish its relevance to school sys-tem reform debates are at least as important asthe effort to extract additional information.

Vocational education serves mostly adults,but programs that provide significant subsi-dies for job training expenses may createopportunities to tease out some insights onthe nature of private schooling subsidized byvouchers or tax credits. Higher education alsoinvolves adults and is fraught with hazards asa source of lessons for market accountability.Many private universities enjoy a buffer fromcompetitive pressures in the form of a largeendowment, and the much larger subsidies ofstate universities create many of the sameproblems found in the current U.S. K-12 sys-tem. However, higher education studies maybe a good source of insights about criticalpolitical dynamics, especially the evolution ofstate-run universities into semiprivateschools that is apparently underway in somestates.102

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Market-driventutoring is

popular withJapanese families

and widelyregarded as effective. It

deserves furtherstudy.

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Myron Lieberman’s The Educational Morasscompares school system practices to heavily sub-sidized, restriction-laden, but still much moremarket-oriented health care in order to arguethat more widespread use of market forceswould drastically change teacher training,research practices, and the use of research.103

Again, the effort to establish the findings’ rele-vance to potential choice-based reform is at leastas important as making the comparisons. Thegeneral findings of Christensen and Overdorfabout industry change are good examples of evi-dence that Christensen worked to credibly con-nect to the K-12 reform debate.104

Too much is made of the new, restriction-laden, foreign school choice programs (Chile,New Zealand, and Sweden), while too little ismade of the differences between longstandingschool systems with widely different levels ofmarket accountability. Though no currentsystem possesses a high level of marketaccountability, contemporary foreign school-ing policies, as a group, provide a good, natur-al, long-term experiment in the determinantsof differences in equilibrium outcomes.105 A“natural experiment” involves studying theoutcomes of particular systems across varyingcultural and economic settings, looking forconsistent patterns. When a given system isconsistently associated with positive out-comes regardless of socioeconomic context,researchers can have some degree of confi-dence that the given effects are in fact due tothe system itself and not to extrinsic factors,since those factors will have varied from onesetting to another. Among the world’s nationsthere are varying levels of subsidies for “inde-pendent” schools and varying levels of regula-tory control. Thus, reviewing this body ofexperiences as a whole constitutes a relevantand potentially highly informative naturalexperiment.

The initial assessments of that evidencemake a strong case for school choice and mar-ket accountability generally.106 Programs withhigher levels of market accountability are con-sistently more efficient than more restrictiveprograms. Specifically, international examplesspanning thousands of years—including true

market situations existing as recently as the1800s—universally show that greater directfinancial responsibility for parents, less regula-tion of schooling practices, effective competi-tion, and increased opportunity to profit frompopular schooling practices improve schoolsystem effectiveness and efficiency. A compar-ison of state systems in the United States sup-ports the same conclusion. Differences in theeducation market activity levels of U.S. states,low as they all are under just slightly differentversions of the current system, still registerdirectly as determinants of increased academ-ic effectiveness and efficiency.107 It’s certainlynot a matter of finding a system to copy. It’s amatter of identifying the likely critical ele-ments of highly effective school systems bytaking advantage of the natural experimentsdescribed above. The elements thus adducedcan then be fine-tuned to place-specific con-temporary political and economic circum-stances, as necessary.

To establish the policy-relevance of thehistorical examples of schooling driven byproducer and consumer choice that pre-datethe 20th century, scholars must address dif-ferences in culture and differences betweencurrent economic and political conditionsand those prevailing then.108 And since datasuitable for scientific empirical analysis arelikely unavailable from historic archives (atleast prior to the 19th century), scholars willhave to rely on carefully constructed compar-isons akin to the natural experiment createdby international differences in contemporaryschool systems.

There seems to be virtually unlimitedpotential to develop evidence from compro-mised separation of school and state. Thoughpotentially insightful on key questions such asthe importance of price change, degree ofproduct differentiation, stratification, andrate of change, the findings will understate theprivate sector response to uncompromised,low formal entry-barrier opportunities to cre-ate private schools. Understatement will resultbecause a compromised separation of schooland state forces schooling entrepreneurs tocompete with government-run schools for

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Education systems withgreater marketaccountability areconsistently moreefficient thanmore restrictivesystems.

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resources such as school sites, teachers, andother school personnel. Potential classroom-clearing improvement in the free government-run alternatives to the fee-charging privateschools casts a pall of uncertainty over privateschool investment decisions. And payment ofschool taxes reduces the ability to pay fees.

Therefore, a key issue to address in some ofthe initial studies is the degree to which thecontinued government presence compromis-es the outcomes. From the work of Tooleyand Dixon, we know that entrepreneurs cancompete effectively with the free government-provided schooling in developing countries,but we don’t know the extent to which thegovernment’s use of schooling resources andits mere presence impacts the character of pri-vate schooling enterprises and their marketshare.109 For example, it may be that the lowlabor costs of developing countries allow forcheap, labor-intensive production of school-ing that is competitive with the terribleschooling available at no charge. With highlabor intensity production, little is invested,so little is at risk in case government-providedfree schooling were suddenly to respond toone of the many high-profile initiatives osten-sibly aimed at that result.110 That risk to pri-vate school providers may cause more capital-intensive approaches to appear even morecostly than they already are in capital-poordeveloping countries.

Despite reports of horrifically dangerousand academically dysfunctional schooling inmajor U.S. cities, the entrepreneurial responseto low income family despair with publicschooling has yet to match the response foundin developing countries. Why? The answerscould prove to be quite valuable. Certainly, rel-ative price differences will be a significant partof the answer. Labor is not cheap in the UnitedStates, and urban public schools may not be asbad as their counterparts in developing coun-tries. Developed countries enjoy relative capi-tal abundance, so with increased developmentof software and the internet, a capital-inten-sive approach to private schooling may even-tually become inexpensive and effectiveenough to draw a large number of low-income

U.S. families away from their assigned, “free”neighborhood public school.

Summary and ConcludingRemarks

We lack direct answers to pressing ques-tions about market accountability as a trans-formation catalyst, and imaginary evidenceconfuses the K-12 reform debate. The impor-tance of the K-12 reform issue and the demandfor empirical evidence has led to intense scruti-ny of the small, restriction-laden U.S. choiceprograms and, increasingly, of more informa-tive but still quite limited foreign programs.111

Failure to recognize major differences betweenthe key elements of market accountability andthe conditions of existing school choice pro-grams, and the inability to address key issueswith direct empirical evidence, led to creativeattempts to “tease out findings from existingarrangements.”112 And many of the findingswere important. Limited programs, which arethe most likely to yield some of the negativeeffects claimed by choice opponents, did notproduce the extensive creaming, increasedstratification, and budgetary consequencesthat have been the fodder of anti–school choicecampaign commercials.113 But presentationsof some findings have been misleading, espe-cially regarding the potential for competitionto be the much sought-after transformationcatalyst. Certainly choice opponents were eagerto trumpet the modest effects of the schoolchoice “experiments.” But the modest effectsprompted some scholars and authoritativeproponents to declare their misgivings aboutthe utility of “competition” as a transforma-tion catalyst.114 Alleged “proxies for competi-tion” have severe limitations, yet economistsare among the analysts that have generalizedeffects of weak rivalry into alleged evidence ofmarket accountability.115 At the same time,economists have done little to correct or pre-vent poorly grounded pronouncements aboutthe likely nature of a competitive educationindustry. The resulting persistence of the imag-ined evidence undermines a fair comparison of

14

A capital-intensive

approach to private schooling

may eventuallybecome

inexpensive andeffective enough

to draw a largenumber of

low-income families.

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market accountability and the multiple exist-ing versions of political accountability.

The challenges are especially severe for thewell-established, virtual indispensability ofmarket-determined prices, something well-known within the economic profession butnot beyond.116 Based on that general evidence,integration into the economywide price sys-tem is a likely imperative almost entirely unac-knowledged in calls for K-12 reform. Pricechange clears markets, prompts product diver-sification and innovation, regulates entry andexit into industries and their subfields, forcescost cutting, and has other dynamic effectsthat economists frequently acknowledge. Buteconomists have not forced those issues intoK-12 reform debates by criticizing the currentsystem’s lack of a price system, documentingthe effects of price control in K-12, or protest-ing its absence from most proposed schoolchoice programs.

Direct U.S. evidence is not imminent, andthere are repeated reminders of the urgency ofK-12 reform, from the declarations of biparti-san commissions to the existence of armies offunctionally illiterate high school gradu-ates.117 The failure of frenzied, decades-longpublic school reform efforts, as well as evi-dence from other fields that dominant pro-ducers rarely transform themselves, compelsus to broaden the body of evidence under con-sideration. New international and indirect evi-dence must be developed, and its credibilityestablished, to permit a fair, near-term assess-ment of market accountability as a K-12 trans-formation agent.

Notes1. Daniel Yergin and Joseph Stanislaw, The Com-manding Heights: The Battle for the World Economy(New York: Simon and Schuster, 1998).

2. Jay Greene, Greg Forster, and Marcus Winters,Education Myths (Lanham, MD: Rowman andLittlefield Publishers, 2005); Herbert J. Walberg,School Choice, the Findings (Washington: CatoInstitute, 2007).

3. Caroline M. Hoxby, “Does Competitionamong Public Schools Benefit Students and

Taxpayers?” American Economic Review 90, no. 5(December 2000): 1209

4. Brian P. Gill, P. Michael Timpane, Karen E. Ross,and Dominic J. Brewer, Rhetoric Versus Reality (SantaMonica, CA: Rand Corporation, 2001), p. 22.

5. Friedrich Hayek, “The Use of Knowledge inSociety,” American Economic Review 35, no. 4 (Septem-ber 1945): 519–30; George Reisman, Capitalism(Ottawa, IL: Jameson Books, 1998).

6. Walberg.

7. Ibid.

8. For the most recent, widely read example, see SolStern, “School Choice Isn’t Enough,” City Journal 18,no. 1 (Winter 2008), http://www.city-journal.org/2008/18_1_instructional_reform.html.

9. Patrick J. McEwan, “The Potential Impact ofLarge-Scale Voucher Programs,” Review of Edu-cational Research 70, no. 2 (Summer 2000): 103–50.On “large, unrestricted voucher programs,” see alsoLadd, “School Vouchers: A Critical View,” Journal ofEconomic Perspectives 16, no. 4 (Fall 2002): 14.

10. Consider the following observations about abacklash against ostensible free market reform: (1)“In many countries around the world, the idea ofcapitalism stands discredited not because it hasbeen tried and failed, but because a false model ofcapitalism was imposed.” Llewellyn H. Rockwell Jr.,“Society Needs No Managers,” Mises Daily Article,December 16, 2005, http://www.mises.org/story/1987. (2) “The ‘market’ got a black eye, but factsshow that experiments in reform often fell farshort of economic liberalism. They endorsed half-measures and ignored the importance of competi-tion.” Mary O’Grady, “All About Evo,” Wall StreetJournal, December 23, 2005.

11. For example, interdistrict public-schoolchoice allows switching to a nearby school with-out the cost of moving to the attendance area ofthe preferred school. Vouchers lower the relativeprice of eligible private schools.

12. A more detailed discussion of school choiceoptions exists in John Merrifield, “The TwelveWays to Exercise or Facilitate School Choice,” Jour-nal of School Choice 2, no. 1 (Spring 2007).

13. Seventy-four percent of U.S. schoolchildrenattend an assigned neighborhood public school.The U.S. private sector accounts for 10.8 percentof total K-12 enrollment, and of that private sec-tor, 77.8 percent is run and subsidized by religiousorganizations. For 2003 data, see: http://nces.ed.gov/fastfacts/display.asp?id=6.

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14. Byron Brown, “Why Governments Run Schools,”Economics of Education Review 11, no. 4 (December1992): 287.

15. Richard D. Komer and Clark Neily, SchoolChoice and State Constitutions (Arlington, VA:Institute for Justice and American Legislative Ex-change Council, 2007).

16. John Merrifield, “Charter School Legislation:Disaster, Detour, Irrelevant, or Reform Tool,”Journal of School Choice 1, no. 1 (Spring 2006): 3–22.

17. Ibid., p. 8.

18. Komer and Neily.

19. Utah is the Utah Special Needs Voucher.FloridaA is the voucher for students attendingfailed schools, recently ruled unconstitutional bythe Florida Supreme Court. FloridaB is the McKaySpecial Needs voucher.

20. According to the 2000 Census, File 4, 31.5 per-cent of households are not families (See http://factfinder.census.gov/), and less than half of allfamilies have school-age children. In 2001, therewere 71.98 million family households in 2001,and 34.4 million of them had children less than18 years old; 19.6 million had children 6-17 yearsold, and none younger (http://www.bls.gov/news.release/History/famee_03292002.txt). Some ofthe 14.8 million with children under 6 years oldcertainly also had some children in school, butthe data didn’t allow for a precise count of thenumber of families with children 5–17, the tradi-tional measure of ‘school-age.’ The figure is cer-tainly well below 47.8 percent (34.4/71.98), butexactly how much below is unknown.

21. Adam B. Schaeffer, “The Public Education TaxCredit,” Cato Institute Policy Analysis no. 605,December 5, 2007.

22. Paul Teske and Mark Schneider, “What ResearchCan Tell Policymakers About School Choice,” Jour-nal of Policy Analysis and Management 20, no. 4 (Fall2001): 609–31.

23. See http://vote2000.sos.ca.gov/VoterGuide/text/text_analysis_38.htm.

24. For the situation abroad, see James Tooley andPauline Dixon, “Private Education is Good for thePoor: A Study of Private Schools Serving the Poor inLow-Income Countries,” Cato Institute WhitePaper, December 7, 2005; James Tooley and PaulineDixon, “De Facto Privatization of Education and thePoor: Implications of a Study from Sub-SaharanAfrica and India,” Compare: A Journal of ComparativeEducation 36, no. 4 (December 2006): 443–462; and

Geeta G. Kingdon, “The Quality and Efficiency ofPrivate and Public Education: A Case Study inUrban India,” Oxford Bulletin of Economics and Statistics58, no. 1 (February 1996): 57–81. For the situation inU.S. urban areas, see Joel Turtel, Public Schools, PublicMenace (New York: Liberty Books, 2005).

25. Charles Manski, “Educational Choice (Vouch-ers) and Social Mobility,” Economics of EducationReview 11, no. 4 (December 1992): 351.

26. Jeffrey R. Henig, “School Choice Outcomes,”in School Choice and Social Controversy, ed. StephenD. Sugarman and Frank R. Kemerer (Washing-ton: Brookings Institution Press, 1999): p 68.

27. Note that economists have shown that lowentry barriers are the key, producing reasonablycompetitive behavior even where the actual num-ber of producers is small. William J. Baumol, JohnC. Panzar, and Robert D. Willig, Contestable Marketsand the Theory of Industry Structure (New York:Harcourt Brace Jovanovich, 1982); Severin Boren-stein, “The Evolution of U.S. Airline Competition,”Journal of Economic Perspectives 6, no. 1 (Winter1992): 45–74; Steven A. Morrison and CliffordWinston, “Empirical Implications and Tests of theContestability Hypothesis,” Journal of Law andEconomics 30, no. 1 (April 1987): 53–66.

28. See Andrew J. Coulson, “How Markets AffectQuality,” in Educational Freedom in Urban America, ed.David Salisbury and Casey Lartigue (Washington:Cato Institute, 2004): pp. 265–324; and Andrew J.Coulson, Market Education: The Unknown History(New Brunswick, NJ: Transaction Publishers, 1999).

29. Stephen D. Sugarman and Frank R. Kemerer,Introduction to School Choice and Social Controversy(see note 26), p. 1.

30. Teske and Schneider, p. 612.

31. Terry Moe, “The Structure of School Choice,”in Choice with Equity, ed. Paul Hill (Stanford, CA:Hoover Institution Press, 2002), p. 179.

32. Clifford Cobb, Responsive Schools, Renewed Com-munities (San Francisco, CA: The ICS Press, 1992).For an example of such confusion, see Stern.

33. Douglas J. Lamdin and Michael Mintrom,“School Choice in Theory and Practice: TakingStock and Looking Ahead,” Education Economics 5,no. 3 (December 1997): 235.

34. George Orwell, “Politics and the English Lang-uage,” http://www.george-orwell.org/Politics_and_the_English_Language/0.html.

35. Gerard Robinson, “Freedom of Choice: Brown,

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Vouchers, and the Philosophy of Language,” inEducational Freedom in Urban America, ed. DavidSalisbury and Casey Lartigue (Washington: CatoInstitute, 2004), pp. 13–52.

36. For the claim that an ability to opt out wouldundermine integration, see Richard D. Kahlenberg,All Together Now (Washington: Brookings Institution,2001), pp. 125–28. For empirical evidence to the con-trary, see Greg Forster, Freedom from Racial Barriers:The Empirical Evidence on Vouchers and Segregation(Indianapolis, IN: Friedman Foundation, 2006). Formodeling evidence, see Thomas J. Nechyba, “Intro-ducing School Choice into Multi-District PublicSchool Systems,” in The Economics of School Choice, ed.Caroline Hoxby (Chicago: University of ChicagoPress, 2003): 145–94. On growing de facto segrega-tion, see Kahlenberg, p. 2; and Joe Klein, “The Legacyof Summerton,” Newsweek, May 16, 1994, p. 26:“More black children are in all or virtually all blackschools today than in 1954.”

37. Paul T. Hill, “The Supply-Side of SchoolChoice,” in School Choice and Social Controversy (seenote 26), p. 140.

38. Alan Woodfield and Philip Gunby, “The Mar-ketization of New Zealand Schools: AssessingFiske and Ladd,” Journal of Economic Literature 41,no. 3 (September 2003): 863–84.

39. For the Hoxby/Rothstein disputes, see “NovelWay to Assess School Competition Stirs AcademicRow,” Wall Street Journal, October 24, 2005, A1; JesseRothstein, “Does Competition among PublicSchools Benefit Students and Taxpayers? A Com-ment on Hoxby” (NBER Working Paper 11215,March, 2005, nber15.nber.org/papers/w11215),American Economic Review, forthcoming; andCaroline M. Hoxby, “Competition among PublicSchools: A Reply to Rothstein” (NBER WorkingPaper 11216, March, 2005, nber15.nber.org/papers/w11216), American Economic Review, forthcom-ing. For an analysis of the dispute, see John Merri-field, “Free Market in Public Schools? Not Yet,”Wall Street Journal, November 3, 2005.

40. O’Grady.

41. For published arguments against competition,see Stephen Gorard, School Choice in an EstablishedMarket (Brookfield, VT: Ashgate, 1997). For argu-ments from influential think tank newsletters, seeMichael J. Petrilli, “What If Competition Doesn’tWork?” The Education Gadfly, December 15, 2005,pp. 1–3. Petrilli is a pro-school choice former U.S.assistant secretary of education.

42. Gorard.

43. Martin Carnoy, “Lessons of Chile’s Voucher

Reform Movement,” in Selling Out Our Schools, ed.Robert Lowe and Barbara Miner (Milwaukee, WI:Rethinking Schools, 1996), pp. 26–27; Ladd, p. 14.

44. Varun Gauri, School Choice in Chile (Pitts-burgh: University of Pittsburgh Press, 1998).

45. Carnoy.

46. Jeffrey M. Perloff, Microeconomics, 3rd ed.(Boston, Pearson Education, 2004), p. 228.

47. Mitchell B. Pearlstein, Achievement Gaps andVouchers (Minneapolis, MN: Center of the Ameri-can Experiment, 2007), http://www.americanexperiment.org/uploaded/files/achievement_gaps__vouchers_012507.pdf; Stern.

48. John F. Witte, The Market Approach to Education:An Analysis of America’s First Voucher Program(Princeton, N.J.: Princeton University Press, 2000).For the “designed to fail” evaluation, see Paul E.Peterson and Chad Noyes, “School Choice in Mil-waukee,” in New Schools for a New Century, ed. DianeRavitch and Joseph Viteritti (London: Yale Univer-sity Press, 1997), p 128.

49. Paul E. Peterson, “The Use of Market Incen-tives in Education,” in Choice and Competition inAmerican Education, ed. Paul E. Peterson (Lanham,MD: Rowman and Littlefield, 2006), p. 3–12.

50. Elchanan Cohn, ed., introduction to MarketApproaches to Education (NY: Elsevier, 1997).

51. Thomas S. Dee, “Competition and the Qualityof Public Schools,” Economics of Education Review17, no. 4 (October 1998): 419–27.

52. Ibid.

53. Clive R. Belfield and Henry M. Levin, “TheEffects of Competition between Schools on Edu-cational Outcomes: A Review for the United States,”Review of Educational Research 72, no. 2 (Summer2002), 279–342.

54. Woodfield and Gunby; Edward B. Fiske andHelen F Ladd, When Schools Compete: A CautionaryTale (Washington: Brookings Institution Press,2000). For the claim that “marketization” exists inNew Zealand, see Woodfield and Gunby, p. 863;for the claim of “market competition,” see Fiskeand Ladd, p. 272.

55. See also, Thomas Lasley and William Bainbridge,“Unintended Consequences,” Education Week, May 2,2001, pp. 38, 42; Jennifer Hochschild, review of WhenSchools Compete: A Cautionary Tale, by Edward Fiskeand Helen Ladd, Education Matters, Summer, 2001,http://www.hoover.org/publications/ednext/33901

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56.html; Robert B. Reich, “The Case for ProgressiveVouchers,” Wall Street Journal, September 6, 2000.Two papers presented at a session of the 2005 con-ference of the Southern Economics Associationasserted that New Zealand has a quasi-voucher pro-gram. I mention these papers only to demonstratethat such misperceptions are probably widespread; Ido not cite them because they were unpublisheddrafts.

56. Peter Dolton, review of The Economics of SchoolChoice, ed. Caroline Hoxby, The Economic Journal113, issue 485 (February 2003): F170.

57. For the dissent on test scores, see JohnMerrifield, The School Choice Wars (Lanham, MD:Scarecrow Press, 2001); Caroline M. Hoxby, “SchoolChoice and School Competition: Evidence from theUnited States,” Swedish Economic Policy Review, 10,no. 2 (2003): 11–67. For the reliance on test scores,see William Howell and Paul Peterson, The EducationGap (Washington: Brookings Institution Press,2002); Paul Peterson, William Howell, Patrick Wolf,and David E. Campbell, “School Vouchers: Resultsfrom Randomized Experiments,” in The Economics ofSchool Choice (see note 37), pp. 107–44; Jay P. Greene,Greg Forster, and Marcus Winters, Education Myths(Lanham, MD: Rowman and Littlefield Publishers,Inc., 2005); and Walberg.

58. Debra Viadero, “Research at Center of Stormover Vouchers,” Education Week, August 5, 1998, pp.1, 16–17; Bob Davis, “Dueling Professors HaveMilwaukee Dazed over School Vouchers,” WallStreet Journal, October 11, 1996; Diana J. Schemo,“Public School Pupils Do as Well in Math as Thosein Private School, Study Says,” New York Times,January 28, 2006.

59. For Stephen Hegarty, “He Proffers the Proofin Voucher Fights,” St. Petersburg Times, September2, 2003, http://www.sptimes.com/2003/09/02/Worldandnation/He_proffers_the_proof.shtml.

60. Hoxby, “School Choice and School Competi-tion,” p 34.

61. Ibid.; Walberg.

62. Clayton Christensen and Michael Overdorf,“Meeting the Challenge of Disruptive Change.”Harvard Business Review (March-April, 2000), pp.66–76.

63. George A. Akerlof and Rachel E. Kranton,“Identity and Schooling: Some Lessons for theEconomics of Education,” Journal of EconomicLiterature 40, no. 4 (December 2002): 1167–201;Masato Aoki and Susan F. Feiner, “The Economicsof Market Choice and At-Risk Students,” inAssessing Educational Practices: The Contribution of

Economics, ed. William Becker and William Baumol(NY: Russell Sage Foundation, 1996), pp. 75–98;Cohn; Ladd; Dan Goldhaber, “Public and PrivateHigh Schools: Is School Choice an Answer to theProductivity Problem?” Economics of EducationReview 15, no. 2 (April 1996): 93–109; Henry Levin,“Educational Vouchers: Effectiveness, Choice, andCosts,” Journal of Policy Analysis and Management 17,no. 3 (Summer 1998): 373–92.

64. Goldhaber, p. 94.

65. The typical conclusion is that private schoolsare more efficient. See, e.g., Howell and Peterson,pp. 91–93.

66. McEwan; Albert Shanker and Bella Rosenberg,“Private School Choice: An Ineffective Path to Edu-cation Reform,” in Privatizing Education and Edu-cational Choice, ed. Simon Hakim, Paul Seidenstat,and Gary Bowman (Westport, CN: Praeger, 1994),p. 60.

67. Christensen and Overdorf.

68. Aoki and Feiner; Ladd; Levin; McEwan; DerekNeal, “How Vouchers Could Change the Marketfor Education,” Journal of Economic Perspectives 16,no. 4 (Fall 2002): 25–44; Lonnie K. Stevans andDavid N. Sessions, “Private/Public School Choiceand Student Performance Revisited,” EducationEconomics 8, no. 2 (August 2000): 169–84.

69. Kahlenberg, p. 4. Authors cited in the previousnote make the same point, albeit in less explicitterms.

70. William C. Symonds, “For-Profit Schools,” Busi-ness Week, February 7, 2000, pp. 64–76.

71. McEwan.

72. Levin.

73. Adam Smith, An Inquiry into the Nature andCauses of the Wealth of Nations (London: Methuen,1904), http://www.econlib.org/library/Smith/smWN0.html; Reisman; Hayek; Robert L. Shuettingerand Eamonn F. Butler, Forty Centuries of Wage andPrice Controls (Thornwood, NY: Caroline HousePublishers, 1979).

74. Belfield and Levin.

75. Fiske and Ladd, p. 250

76. Aoki and Feiner, p. 75

77. Chubb and Moe, Chap. 6, pp. 215–25.

78. Donald E. Frey, “Can Privatizing Education

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Really Improve Achievement? An Essay Review,”Economics of Education Review 11, no. 4 (December1992): 427–38.

79. Neal; Ladd.

80. Julian Betts, Dan Goldhaber, and Larry Rosen-stock, “Understanding How Families ChooseSchools,” in Getting Choice Right, ed. Julian Betts andTom Loveless (Washington: Brookings Institution,2005), pp. 61–84.

81. Ibid, p. 70.

82. Merrifield, The School Choice Wars.

83. Robert Maranto and Scott Milliman, “InArizona, Charter Schools Work,” Washington Post,October 11, 1999, A25.

84. Statement made by Helen Ladd, February 24,2000, at a Brookings Institution panel discussionbased on Fiske and Ladd; Joseph Viteritti, ChoosingEquality (Washington: Brookings Institution, 2000),p. 221.

85. Koret Task Force on K-12 Education, Reform-ing Education in Arkansas (Stanford, CA: HooverInstitution Press, 2005); Koret Task Force on K-12Education, Reforming Education in Texas (Stan-ford, CA: Hoover Institution Press, 2004).

86. Gill, Timpane, Ross, and Brewer, p. 124.

87. Jim F. Couch, William F. Shugart, and Al L.Williams, “Private School Enrollment and PublicSchool Performance,” Public Choice 76, no. 4 (August1993): 301–12; Peter Dolton, review of The Economicsof School Choice; Lamdin and Mintrom; James E. Ryanand Michael Heise, “The Political Economy ofSchool Choice,” The Yale Law Journal 111, no. 8 (June2002): 2043–2136; Stern.

88. Dee, p. 419.

89. Frederick Hess, Revolution at the Margins (Wash-ington: Brookings Institution Press, 2002), p. 5.

90. McEwan.

91. For skepticism about market forces: seeMichael Petrilli, a pro-choice former assistant sec-retary of education who clearly expressed thatconcern in Petrilli. See also Stern. For the Hoxbyfindings, see Hoxby, “School Choice and SchoolCompetition.” On the alleged competitive pres-sures, see Howell and Peterson; and Hess.

92. Christensen and Overdorf.

93. Ibid.

94. Ibid.

95. Dennis Epple and Richard E. Romano, “Comp-etition between Private and Public Schools, Vouch-ers, and Peer Group Effects,” American EconomicReview 88, no. 1 (March 1998): 33–62; Maria M.Ferreyra, “Estimating the Effects of Private SchoolVouchers in Multi-District Economies,” AmericanEconomic Review 97, no. 3 (June 2007): 789–817;Nechyba.

96. Dolton, p. F173.

97. Ibid.

98. Hill.

99. John Merrifield, “Specialization in a CompetitiveEducation Industry: Areas and Impacts,” Cato Jour-nal 25, no. 2 (Spring/Summer 2005): 317–36.

100. Manski, p. 360.

101. On the inefficiency of schools, see Caroline M.Hoxby, “School Choice and School Productivity:Could School Choice be a Tide that Lifts AllBoats?” in The Economics of School Choice (see note37), pp. 287–341. On the comprehensive nature ofpublic schools, see Brown.

102. June Kronholz, “As Amount of FundingDeclines, Public Universities Trim Ties,” Wall StreetJournal, April 18, 2003, http://online.wsj.com/article/0,,SB105062306588478700,00.html.

103. Myron Lieberman, The Educational Morass(Lanham, MD: Rowman and Littlefield, forthcom-ing), chapters 5, 6.

104. On industry change, see Christensen andOverdorf. For an application to schools, see Clay-ton M. Christensen, “Can Schools Improve?” PhiDelta Kappan 86, no. 7 (March 2005): 545–50.

105. Charles Glenn and Jan de Groof, Finding theRight Balance (Utrecht: Lemma, 2002).

106. Coulson, “How Markets Affect Quality.”

107. Andrew Coulson, “Cato Education MarketIndex Full Technical Report,” Cato InstitutePolicy Analysis no. 585, December 13, 2006.

108. Samuel Blumenfeld, Is Public Education Neces-sary? (Boise, ID: The Paradigm Company, 1981);Coulson, Market Education; E.G. West, Education andthe State, 3rd ed. (Indianapolis, IN: Liberty Fund,1994).

109. Tooley and Dixon, “De Facto Privatization ofEducation and the Poor.”

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110. Aaron Benavot, Julia Resnik, and Javier Corrales,Global Educational Expansion: Historical Legacies and Po-litical Obstacles (American Academy of Arts and Sci-ences, 2006); Ayre L. Hillman and Eva Jenkner, Educat-ing Children in Poor Countries, International MonetaryFund, Economic Issues, no. 33, April 29, 2004.

111. Greene, Forster, and Winters; Howell and Peter-son; Paul E. Peterson, “The Use of Market Incentivesin Education,” Choice and Competition in AmericanEducation, ed. Paul E. Peterson (Lanham, MD: Row-man and Littlefield, 2006), pp. 3–12.

112. Hess, p. 22.

113. Hill.

114. For a scholar’s view, see Gorard; for a propo-

nent’s, Petrilli.

115. Hess, p. 22.

116. Hayek; Reisman.

117. For the declarations of bipartisan commis-sions, see National Commission on Excellence inEducation, A Nation at Risk: The Imperative forEducational Reform (Washington: Department ofEducation, 1983); David Kirkpatrick, School Choice:The Idea That Will Not Die (Mesa, AZ: Bluebird, 1997);United States Commission on National Security/21st Century, Road Map for National Security: Impera-tive for Change–Phase III report (Washington: Com-mission on National Security/21st Century, 2001).For American illiteracy, see http://www.nifl.gov/nifl/facts/IALS.html.

STUDIES IN THE POLICY ANALYSIS SERIES

615. Does Rail Transit Save Energy or Reduce Greenhouse Gas Emissions? by Randal O’Toole (April 14, 2008)

614. Organ Sales and Moral Travails: Lessons from the Living Kidney Vendor Program in Iran by Benjamin E. Hippen (March 20, 2008)

613. The Grass Is Not Always Greener: A Look at National Health Care Systems Around the World by Michael Tanner (March 18, 2008)

612. Electronic Employment Eligibility Verification: Franz Kafka’s Solution to Illegal Immigration by Jim Harper (March 5, 2008)

611. Parting with Illusions: Developing a Realistic Approach to Relations with Russia by Nikolas Gvosdev (February 29, 2008)

610. Learning the Right Lessons from Iraq by Benjamin H. Friedman, Harvey M. Sapolsky, and Christopher Preble (February 13, 2008)

609. What to Do about Climate Change by Indur M. Goklany (February 5, 2008)

608. Cracks in the Foundation: NATO’s New Troubles by Stanley Kober (January 15, 2008)

607. The Connection between Wage Growth and Social Security’s FinancialCondition by Jagadeesh Gokhale (December 10, 2007)

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