The Over-Confidence of Portfolio Management

I’ve been having a debate over the last few weeks with Neerav Kingland and others about the dangers of a high-regulation approach to school choice.  (You can see my posts on this so far here, here, here, here, here, and here).  I know this seems like a lot of posts on a topic, but as one grad student observed, it took more than 100 pieces about the obvious error of government reported high school graduation rates before people fully acknowledged the error and too significant steps to correct it.  Let’s hope convincing ed reform foundations and advocates to scale way back on their infatuation with heavy regulation does not require the same effort as moving more obstinate and dim-witted government officials.

One heavy-handed regulatory approach that is particularly worrisome is the strategy of portfolio management.  Under this strategy, a portfolio manager, harbor master, or some other regulator actively manages the set of school options that are available to families by closing those believed to be sub-par and expanding or replicating those that are thought to be more effective.  This approach is being implemented in New Orleans and the city appears to be experiencing significant gains in achievement tests, so Neerav and others are puzzled as to why I don’t support it.

I’ve tried to express my reasons for opposing portfolio management in several ways.  I tried mocking it: “If education reform could be accomplished simply by identifying and closing bad schools while expanding good ones, everything could be fixed already without any need for school choice.  We would just issue regulations to forbid bad schools and to mandate good ones.  See?  Problem solved.”  That clearly didn’t work because folks like NOLA advocate Josh McCarty replied: “moving the left end of the performance curve to the right through regs has gotten more kids in higher perf schools.”

So, let me try again.  A portfolio manager can only move “the left end of the performance curve” if the regulator can reliably identify which schools are likely to harm students’ long-term outcomes and which ones are likely to improve them.  If you don’t really know whether schools are on the left or right end of some curve of quality, closing schools just limits options without improving long-term outcomes.  But backers of portfolio management are not lacking in confidence.  They have achievement test results, so they think they know which are the good and bad schools.

Unfortunately, they are suffering from over-confidence.  Achievement tests are useful but they are not nearly strong enough predictors of later life outcomes to empower a portfolio manager to close a significant number of schools because he or she “knows” that those schools are “bad.”  In fact, the research I reviewed on rigorous evaluations of long-term outcomes from choice programs suggests that using test scores to decide whether a bunch of schools should be closed or expanded would lead to significant Type 1 and Type 2 errors.  That is, in their effort to close bad schools, portfolio managers may very well close schools with lower test performance that actually improve high school graduation, college-attendance, and lifetime earnings.  And they may expand or replicate schools that have high test performance but do little to improve these later life outcomes.

If there were an active portfolio manager of Florida charter schools, they would have closed a bunch of charter schools that were doing a great job of improving students’ later life outcomes.  As Booker, et al’s research shows, relying solely on test scores to distinguish good from bad schools would lead to serious errors by an active portfolio manager:

The substantial positive impacts of charter high schools on attainment and earnings are especially striking, given that charter schools in the same jurisdictions have not been shown to have large positive impacts on students’ test scores (Sass, 2006; Zimmer et al., 2012)…. Positive impacts on long-term attainment outcomes and earnings are, of course, more consequential than outcomes on test scores in school. It is possible that charter schools’ full long-term impacts on their students have been underestimated by studies that examine only test scores. More broadly, the findings suggest that the research examining the efficacy of educational programs should examine a broader array of outcomes than just student achievement. (pp. 27-8)

Conversely, foundations and portfolio managers are pouring more resources into certain types of schools with strong test performance that are failing to show much benefit for students’ long-term outcomes.  As Angirst, et al, Dobbie and Fryer, and Tuttle, et al show, a bunch of charter schools with large achievement test gains, including Boston “no-excuses” schools, Harlem Promise Academy, and KIPP, have produced little or nothing in terms of high school graduation and college-attendance rates.

Portfolio management guided solely by test scores would seriously harm students by unwittingly closing a bunch of successful schools, like those Booker, et al studied in Florida, while expanding and pouring more resources into ones with less impressive long-term results, like those studied by Angirst, et al, Dobbie and Fryer, and Tuttle, et al.

Matt Barnum challenged me on Twitter to describe what evidence would persuade me to support portfolio management.  At a minimum I would want to see that portfolio managers have reliable tools for predicting long-term outcomes for students so they knew which choice schools should be closed and which should be expanded or replicated.  The evidence I’ve reviewed here and in more detail in this prior post suggests that they do not have a reliable tool and so the entire theory of portfolio management falls apart. I’m not making the strawman argument that test scores are useless or that no school should ever be closed by regulators.  I’m just arguing that portfolio management requires confidence in the predictive power of achievement tests that is not even close to being warranted by the evidence.

But what about the impressive achievement gains that Doug Harris and his colleagues find are being produced in New Orleans?  Let’s keep in mind that many reforms have been implemented in New Orleans at the same time.  Even if we were confident that the test score gains in New Orleans are not being driven by changes in the student population following Katrina (and Doug and his colleagues are doing their best with constrained data and research design to show that), and even if these test score gains translate into higher high school graduation and college attendance rates (which Doug and his colleagues have not yet been able to examine), we still would have no idea whether portfolio management and other high regulations in NOLA helped, hurt, or made no difference in producing these results.  In fact, the evidence from the 7 rigorous studies on school choice programs with long-term outcomes suggests that portfolio management and other heavy regulations are neither necessary nor desirable for producing long-term gains for students.

Neerav, Matt Barnum, and Josh McCarty have suggested that I am making overly-broad claims not consistent with evidence.  I think the opposite is true.  I’ve carefully cited and quoted the relevant research and drawn the obvious conclusion — active portfolio management based on achievement tests is likely to make harmful errors and unnecessarily restrict options.  In fact, it seems to me that the burden is on supporters of portfolio management to demonstrate that they are able to reliably distinguish between schools with good and bad long-term outcomes.  If you are going to go around telling families that they can’t choose a certain school because it is bad for them, you had darn better be confident that it really is bad.

9 Responses to The Over-Confidence of Portfolio Management

  1. George Mitchell says:

    Some (much?) of the push for high regulation is driven by self interest. What would advocates do to justify consultant income if there was not a constant debate about regulatory schemes? It’s too simple and less remunerative to push an agenda of limited regulation and maximum choice.

  2. Greg Forster says:

    Jay, you are definitely right that after you identify an idea that needs implementing it takes hundreds of articles (or today, blog posts – thankfully, it looks like it won’t become “tweets” next) before it actually gets into the heads of the people who have the power to do it. Keep up the good work!

  3. allen says:

    I think the attraction of portfolio districts lies in a reflexive desire to believe that the proper oversight can’t help but result in good outcomes and the lack of proper oversight can’t help but results in chaos.

    It’s just difficult to believe that without someone in charge to ensure that things don’t go from bad to worse they’ll inevitably go from bad to worse. That belief is, of course, enthusiastically supported by those who see themselves as the agents of oversight.

    Whether it’s school superintendent or Bill Gates, they’re both the wise, guiding hand so needed by their inferiors who, left to ourselves, would simply make a mess of things. If that belief isn’t challenged then the only change possible is a change of oversight, i.e. portfolio district versus traditional school district.

  4. Steve says:

    Jay, as I noted before, I don’t always agree with the perspective on this site, but I think you are spot on here. Test scores are a minimal part of the story, not an end-all be-all that determines school quality. I could add further evidence from New York City where Success Academy students kill the state tests but can’t get into magnet schools.

    Plus, I would add that the so-called replication is not possible because they would have to replicate the student body as well. For example, your note about NOLA’s demographic change as a result of Katrina is barely referenced by the RSD’s supporters. Note that they are often reluctant to compare 2010 to 2015. It’s usually comparing everything to pre-Katrina when the population was larger and poorer on average.

    If replication was possible, why don’t amazing results like Success Academy lead to them sharing their methods and innovations? I have a guess and it has to do with mountains of test prep with the express purpose of producing high test scores which are not necessarily of preparing students for long-term positive outcomes. Couldn’t Moskowitz save American education with these original lessons?

    Therefore, to me, oversight leads to the increased fetish for high test scores and more gaming of the system. So I do agree that a portfolio district is a poor idea but not entirely for the same reasons. (By the way, I live in metro Detroit and a portfolio manager is the very thing that Governor Snyder has as a centerpiece for his DPS fix.)

    • George Mitchell says:

      Then of course there is the fact that highly regulated public schools have produced such stellar results.

    • Hi Steve. We appreciate your reading and commenting on the blog. And don’t worry about not always agreeing. I don’t always agree with Matt and Greg and I know they don’t always agree with me. In fact, I think it’s safe to say that no one who writes or comments on this blog agrees entirely with each other, but we can still come together to talk about our areas of agreement and disagreement. That’s the kind of intellectually open and honest forum we are aiming for.

      That being said, Doug Harris’ research ( ) suggests that demographic changes cannot fully account for the large gains made in NOLA. But even if this is true, neither Harris nor anyone else can disentangle what aspects of MOLA’s policy changes contributed to improvement and which had null or negative effects. Many things changed in NOLA at the same time, including a huge expansion in choice, an influx of talented educators from elite universities, a large increase in spending, and a system of portfolio management and heavy regulation. Backers of portfolio management and heavy regulation point to those changes as the key to success but they have no way of knowing that. For all they know, gains were made in NOLA despite PM and regulation. Maybe the influx of money or talent were the key features. Maybe it was the expansion on choice. You can’t just pick the feature you like and claim that it was the important cause of success.

      So, when Detroit imitates the portfolio management and heavy regulation adopted in NOLA my bet is that we will not see anything close to the same success. I base that claim on the evidence from other research that the main tool for portfolio management — test scores — are simply not strong enough predictors of later life outcomes to allow even benevolent managers to accurately identify bad schools for closure and good schools for expansion.

      • Steve says:

        Jay, I appreciate the response. I agree that it’s hard to isolate the effects of any single factor when so much change occurred so quickly.

        I guess, from my point of view, I’ve become increasingly frustrated by the heavy emphasis laid on test scores. As someone who taught AP for years, we were always in the game of “figuring out the test” in order to give our students the best chance at passage.

        I think I see similar trends in schools today. Almost all research is based upon test scores and George Mitchell snarkily proved my point by noting “stellar results of public schools.”

        I have huge questions about standardized tests and their predictive abilities. If they were truly an indicator, the United States would have fallen from its perch of global high status long ago. We did finish in dead last on the first PISA tests nearly half a century ago.

      • George Mitchell says:

        I have followed these issues as a non-scholarly observer for 35 years. The recurring, fundamental tension in K-12 policy and politics revolves around control. Whereas consumers are mainly — not solely — in control of most markets, the opposite is true in K-12 education.

        Those in public education don’t wish to surrender control. Many “reformers” prefer their own versions of control, advocating a variety of regulatory schemes about which Jay offers wise caution.

        The underlying premise, stated or implied, is that consumers simply can’t be expected or relied on to make appropriate choices when it comes to the education of their children. This view is “validated” mainly by anecdotal evidence of poor choices made as part of poorly designed voucher programs.

        Those who don’t want to surrender control, coupled with “reformers” who offer their own versions of control, drive the discussion. Parents largely are relegated to the sideline. What could go wrong?

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