Can a Market in Education Work?


(Guest Post by Jason Bedrick)

At the risk of arousing Greg’s ire, I’d like to talk about the market for education.

In a recent interview, Professor Joshua Goodman of Harvard thoughtfully expressed skepticism that markets could improve quality in education. Whereas I’ve found other attempts to make the “education is different!” argument to be unpersuasive, Goodman makes a few solid points that choice advocates would do well to consider:

I became an economist in part because of Milton Friedman’s argument that vouchers could improve schooling through market forces. At the time, this argument struck me as both revolutionary and obviously right. Competition improves supermarkets, restaurants — why shouldn’t this model apply to schools? It seemed to me that anyone who denied this idea didn’t understand basic economics.

But the more I read, the more I realized that the empirical evidence for choice and market forces improving educational outcomes is thin at best. I found that disappointing and also puzzling, and I have spent some time thinking about why that theory doesn’t match current reality.

Regarding the evidence, it’s certainly true that none of the catastrophes that school choice critics have predicted have come true. But neither have the policies produced the transformative changes that supporters had promised. Instead, we’ve had a consistent batch of random-assignment studies finding positive but relatively small effects (setting aside the high-regulation disaster in Louisiana). The effects tend to be larger for minorities, parents are much happier, and they cost less per pupil, so I think they’re still worth pursuing even on purely consequentialist grounds, but school choice programs have not been transformative. Why not? Goodman continues:

Here’s what I think the biggest problem in thinking of schools as a classical market. Econ 101 models assume consumers observe product quality. But schools are complicated goods, and quality, particularly a school’s long-run quality, is hard to judge for many parents. It takes a lot of time to figure out whether this school and these teachers are serving my child well. Unlike restaurants or supermarkets, where quality can be judged at the moment of the purchase, school quality reveals itself later. […]

Observing school quality is quite costly, and in many settings there is no credible way to inform future students about the quality of education they are getting. The for-profit college sector is a perfect example of this. Market forces fail to discipline for-profit colleges because for an individual student there’s no repeated game here. Students enroll and only much later realize lousy labor market outcomes. In particular, that students must enroll for a while to see long-run outcomes limits the power of the market to provide discipline. The time it takes to learn that a school is low quality damages the student, and that student’s information may not be transmissible to other students in a systematic or credible way.

Goodman concludes that he does believe “schools could use a bit of market pressure to counteract inertia” because district “monopolies clearly allow many schools to coast on their current trajectories without trying new approaches or investing more effort,” but he is “much more skeptical now than I was before that market forces are some sort of panacea, as they appear to be in some industries.” In the end, he thinks there will “always be a need for public accountability, if only to lower information costs to parents and students.”

I agree with much of this analysis. As I wrote at EdNext today:

There is no panacea. There is no perfect information just as there are no perfect bureaucrats or, for that matter, perfect parents. The question before us is how to design a system with imperfect people and imperfect information that will come as close as possible to providing every child with access to a high-quality education.

Getting parents the information they need to make good decisions is indeed a challenge. As Goodman notes, it is harder to identify a quality education than it is to identify a good meal or a good car. There is a great degree of subjectivity and the payoff is usually far in the future.

The question then becomes what sort of institutions are better equipped to address this challenge. As Lindsey Burke and I argue in a new report published by the Heritage Foundation and the Texas Public Policy Foundation, the technocratic approach of holding schools accountable on metrics that are easily observable and standardized creates perverse incentives that narrow the curriculum, stifle innovation, and can drive away quality schools from participating in the choice program. Instead, what we need are a variety of different third-party reviewers and platforms for parents and students to share their personal experiences in order to provide parents with the information they need.

I won’t rehash the entire argument here. You can either read the report on the short version at EdNext. The main point I wanted to highlight here was that the market is more likely than the government to overcome the information challenge — but for that to happen, there needs to be a large enough market. As I noted:

The K-12 education sector has historically lacked high-quality sources of information about school performance, but to a large extent that is because the vast majority of students attend their assigned district school. With little to no other educational options, there has been little parental need for information to compare competing options. And without much in the way of competition, existing private schools don’t feel great pressure to be forthcoming about performance data. However, as states implement educational choice policies, the demand for information will increase and schools that refuse to share their data will be at a competitive disadvantage. We are already seeing parents to turn organizations like and to find information about schools they are considering and we should expect to see more organizations emerge as demand increases.

School choice programs that merely fill empty seats are not enough. They won’t bring the transformative change that Milton Friedman and others predicted. Modest choice programs produce modest results. It’s time to go bold.

12 Responses to Can a Market in Education Work?

  1. pbmeyer2014 says:

    Lots of good points here, Jason. Thank you. My only two observations are 1) there tend to be too many apples and oranges comparisons on these matters and 2) parents know good schools when they see them. On #1 it’s rare that you get a true market in education in the U.S. let alone a free market, so the comparison with supermarkets (as in grocery stores) is unpersuasive. Do we compare d’Agostino’s and Zabars? Education is so regulated in this country (the most kids go to “government schools”) that it is more appropriate to see public schools as a public utility rather than a retail operation. The question we need to ask is the one Ivan Illich raised in his forgotten classic, Deschooling Society, do we need any kind of formal education system? Right now, the only proper comparison is between the state Transportation Department and the state Education Department on the one hand, or between Catholic Schools and Success Academy (or Exeter and Choate) on the other. As to #2, I have worked in and around many “dysfunctional” public schools with parents with modest to no education and I can tell you, the parents know when a school is not working–and they know long before the test results come out. Has anyone done a correlation study comparing hallway cleanliness and test results? How about teacher/administration response time to a parent phone call? Bad schools tend to be bad at all levels, including the nonworking clocks on the walls, the broken toilets and, “Why did my son get suspended for four weeks?” All I know is that after 20 years in the school observation business I know that good curriculum (a la E.D. Hirsch) and good management (a la Eva Moskowitz) will produce good test scores and educated kids. We’ve had a few enlightened dictators in the public sector, but the private sector (with the immediate need to produce results) tends to produce better results. My 2 cents.

  2. On- the-job training is education. Minimum wage laws, child labor laws, and compulsory school attendance laws put this form of education off limits to most children.

    School choice currently produces small gains because current policy confines parents’ options to schools than look like the NEA/AFT/AFSCME cartel’s inefficient-by-design facilities.

    Please read Ted Kolderie, “Does Confining Young People to Adolescence Need Rethinking” (__Minnesota, Journal__, May 18, 1999).

    Please read E. G. West, “Education Without the State”: …
    “What is needed is choice in education. School choice has not and will not lead to more productive education because the obsolete technology called ʺschool” is inherently inelastic. As long as ʺschoolʺ refers to the traditional structure of buildings and grounds with services delivered in boxes called classrooms to which customers must be transported by car or bus, ʺschool choiceʺ will be unable to meaningfully alter the quality or efficiency of education.”

  3. pbmeyer2014 says:

    p.s. good piece by Ashley Berner “re-imagining school choice debates”: can we have a modern e pluribus unum in education?

  4. Concrete suggestions are needed for helping middle-income parents whose kids are trapped in a failing public school system. They aren’t rich enough to afford private schools, and they aren’t poor enough for their kids to get a voucher or a seat at a charter school. What would give these parents some modicum of control over the school curriculum their children receive in a “public school”?

    • Suggestions? Depends on State laws.
      1. Revive dame schools. Nothing in Hawaii Revised Statutes requires homeschooling parents to supply instruction between 0800 1nd 1430. You can legally extend daycare to age 17 and then take the GED. Get six families together and hire a recent Biology or Zoology graduate to take eight children aged 6+ into her home (Science majors can teach English and History, but Humanities majors cannot teach Math or Biology).
      2. Follow Gandhi’s principle of satyagraha. Instruct your children to DROP OUT IN SCHOOL. Tell the teachers and administrators that you have instructed your child to study independently and ignore teachers. If teachers find this disruptive they can give your child a library pass for the entire school year. Accumulate a solid 0.0 GPA from age 6 to 16, then take the GED and apply to a community college for the first two years. Say you were homeschooled. How will anyone know otherwise.

      • harriettubmanagenda says:

        This strategy (#2) requires a strong, independent mind. Upside: three or four such kids in each classroom would destroy any school.

      • Neither is a mechanism for parents of public school kids that gives them some control over the school curriculum given their children. Surely someone can come up with something useful–if most of us want public schools to survive as an institution. Right now they are on their way down and out because there’s little in them for the bulk of the kids in them.

  5. Parry says:

    Very interesting stuff in this post. Three other quick thoughts I would add:

    Picking a school is frequently a long-term commitment. Maybe this point is already implicitly in the post, but it’s logistically easy to say “I don’t like this restaurant, let’s not come here again,” and logistically challenging to say “I don’t like this school, let’s go somewhere else.” And I just don’t mean logistically challenging in the sense that there might not be other options around; I also mean logistically challenging in the sense that it is emotionally and socially hard for kids (and parents) to switch schools. That fact of long-term commitment could also complicate the market nature of schools.

    Most schools are neither “really good” nor “really bad”, they are somewhere in-between and have better and worse aspects on a range of criteria. Maybe the teaching staff is generally pretty strong, but the curricular offerings aren’t that great. Maybe there’s a fantastic principal, but central office bureaucracy stifles the opportunity for her to do much. Maybe the second-grade team of teachers is outstanding, but there are several duds in third and fourth grade. It takes a long time to figure out a school’s strengths and weaknesses, some people may perceive different things as strengths or weaknesses (I don’t care that the sports teams are lousy, you don’t care that the music program is outstanding), and experiences can change from year to year. So unless you are comparing a clearly “great” school to a clearly “bad” school, it will be challenging for parents to have enough of the information that is important to them to know if School X will be a better fit for their child than School Y.

    And finally, so much of a child’s success (defined broadly) in school is based on the quality of the people teaching in classrooms. Sure, curriculum matters to a certain extent and a lot of the peripheral stuff matters to a certain extent, but good teachers REALLY matter. And improving the quality of teachers — i.e., people – is a heck-of-a-lot different than improving the quality of a processing chip. I am no economist, but I would be interested in hearing about other industries that rely almost exclusively on human capital and ingenuity for results that have experienced dramatic improvements in their industries over time. Medicine relies heavily on improvements in technology, so I don’t see that as analogous. Are authors writing better literature? Musicians producing better music? I see this as one of the foundational challenges of education: getting to substantively “better” schools invariably means having “better” teachers, and producing better teachers is a tremendously difficult task.


    • pbmeyer2014 says:

      Good stuff, but I have one comment that needs to be emphasized: to say that “curriculum matters to a certain extent,… but good teachers REALLY matter” offers something of a false choice because I have yet to meet a good teacher, let a lone a really good one, who isn’t good in large part because of WHAT he/she teaches. And what you teach is, essentially curriculum. Yes, one can find bad teachers (trying to) teach good stuff, but it’s rare.

  6. There is no substitute for knowledgeable teachers using good material. Both are needed.

  7. Stephanie Dunn says:

    Of course free market theory won’t work with education! It assumes consumers are buying something they freely decided to consume to fill their own needs. School is compulsory and doesn’t actually serve a consumer need. Only the very top tier of our population are true consumers of education, and most of them pay for elite schools that track into elite colleges. The vast majority of public school students are pursuing someone else’s goals. They are tracked into lives of dependence and often made to feel inferior. For this privilege they are charged an entire childhood (and likewise an entire parenthood) of subservience to a heartless, imaginationless, bureaucracy of obedience and judgement. You can offer the illusion of choice from column A public school or column B charter school, but the chances that all those years of servitude in either will actually bestow something valuable are slim, so it may make more sense to just do as little as possible to serve your time and escape. It isn’t a real marketplace if you are forced into it. It isn’t a real marketplace unless the goals belong to the consumer.

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