DeVos and the Education Wars

November 29, 2016

(Guest Post by Jason Bedrick)

President-Elect Trump’s nomination of school choice champion Betsy DeVos has become the latest battleground in both the war between pro- and anti-school choice forces as well as the internecine battle between technocratic reformers and market-oriented reformers within the school choice camp. Jay’s take today is a must-read piece. I also added my two cents over at Cato-at-Liberty, defending market-oriented school choice policies from what I see as unfair attacks from the technocrat crowd while simultaneously cautioning my compatriots against pushing for a federal school choice program (e.g., Title I portability). Here’s a taste:

At the center of the panic over Trump’s nomination of DeVos is their support for school choice. Although light on details, Trump has pledged to devote $20 billion to a federal voucher program. As is so often the case, the most vocal opponents of federal school choice are right for the wrong reasons. Not only does the federal government lack constitutional jurisdiction (outside of Washington, D.C., military installations, and tribal lands), but a federal voucher program poses a danger to school choice efforts nationwide because a less-friendly future administration could attach regulations that undermine choice policies. Such regulations are always a threat to the effectiveness of school choice policies, but when a particular state adopts harmful regulations, the negative effects are localized. Louisiana’s folly does not affect Florida. Not so with a national voucher program. Moreover, harmful regulations are easier to fight at the state level than at the federal level, where the exercise of “pen and phone” executive authority is increasingly (and unfortunately) the norm.

The technocratic crowd wants to blame the mediocre results in the charter sector in Michigan (DeVos’s home state) on its supposedly “unregulated” and “laissez-faire” environment, which raises the question: Do they do know what those terms mean? As I note:

Charter schools in Michigan and Arizona may be subject to fewer government regulations than in other states, but it’s absurd to describe the sectors as “laissez-faire” or “an unregulated free market.” For example, charter school regulations in both states, as elsewhere, limit the ability of charter schools to set their own mission (e.g., they must be secular), mandate that they administer the state standardized test, forbid them from setting their own admissions standards, forbid them from charging tuition, limit who can teach in the schools, limit the growth of the number of schools, and so on.

“Laissez-faire” indeed!

Moreover, as JayBlogger Matt Ladner has frequently pointed out, in the real “Wild West” of Arizona, charter schools are knocking the socks off their district counterparts and showing greater improvement than any state average on the NAEP.

Anyway, while we’re on the topic of Trump and education reform, I’d like to express full-throated agreement with Greg Forster’s two recent posts on bigotry and the choices before us, particularly this:

Trump will be president. All of us who work on policy issues have to live in a world where Trump is president. It’s not necessarily a good idea for every decent person to shun him; that means government will be run by scoundrels like Trump.

Every movement needs its Vaclav Klauses as well as its Vaclav Havels – people who are willing to hold their noses and work for a corrupt regime. You simply can’t get anything done otherwise, because there are no non-corrupt regimes.

Milton went to Chile and advised Pinochet. When challenged, he said: “I gave him good advice.”

But if they forget to hold their noses, if they think the regime is good, the movement dies. And they will forget if no one plays Vaclav Havel and goes to jail for telling the truth about the regime.

My biggest fear is that the school choice issue will become tied to Trump. It can never be said too many times: Donald Trump is a notorious racist who discriminates against blacks in his businesses, said a judge of Mexican ancestry couldn’t judge him impartially, constantly flirted with the alt-right, and refused, three times, to repudiate the KKK when first asked to do so. (Just in case this is unclear, the KKK is a criminal organization that murders people and exists to make war on the US government in the name of white nationalism. If Trump wants to learn more about it, he can ask his attorney general, who had a Klan leader executed.)

We in the school choice movement have spent a generation building bridges between the conservatives and libertarians traditionally associated with the issue and progressives and ethnic minority communities. We can’t afford to throw all that away.

Israeli Prime Minister Yitzchak Rabin once said that he would “fight terrorism as if there is no peace process and pursue peace as if there is no terrorism.” We need a similar approach. We should pursue education reform regardless of the Trump administration’s positions on other issues — as Derrell Bradford’s moving personal account reminds us, the stakes are just too high not to. That will entail, at times, working with anyone at the Trump administration who is willing to listen, and supporting good and decent people who go to work for the administration. However, it also means calling out Trump and/or his administration when they do wrong (like, say, Tweet that people should go to jail for engaging in constitutionally protected speech, to take just one example from the last 24 hours), no matter what progress they have made on education reform.

Navigating the political waters over the next four years will be difficult. Even Odysseus only had to pass between Scylla and Charybdis once. I suspect education reformers will find themselves in the straits on numerous occasions in these coming days. I pray that we will have the wisdom to know and the fortitude to do the right thing.


Do tax-credit scholarship programs drain money from district schools?

November 15, 2016

(Guest Post by Marty Lueken)

Perhaps the most-cited criticism of educational choice policies is that they “siphon” resources from district schools. High-quality research reveals numerous benefits stemming from educational choice, including benefits for participants, positive competitive effects, and fostering civic values. Policymakers, however, are concerned about the fiscal impact on district schools. A new report, The Tax-Credit Scholarship Audit, finds that such claims about “siphoning” are unfounded.

This report follows up on an earlier report, The School Voucher Audit, which examined the fiscal impact of school voucher programs. In the report, I estimated the fiscal impact of 10 tax-credit scholarship programs in seven states (AZ, FL, GA, IA, IN, PA, and RI) on state governments, state and local taxpayers, and school districts combined. There are currently 21 tax-credit scholarship programs operating in 17 states. Programs with less than three years of data were not included in the analysis. This sample includes the largest tax-credit scholarship programs in the country. These programs accounted for 93 percent of all scholarships awarded in 2013-14, the final year included in the analysis.

Here’s a summary of the results:

Participation

Since the first tax-credit scholarship program was established in 1997, more than 1.2 million scholarships were awarded to students through 2014. Participation in tax-credit scholarship programs has grown every year since 1997. Participation in these programs grew, on average, by 20 percent each year since 2000.

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Tax-credit scholarship programs require time to establish. Looking at the programs by year in operation, the number of scholarships awarded more than tripled after their fifth year in operation, from 28,000 to more than 95,000.

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Educational choice programs are popular and continue to expand, though not to the detriment of the current district school system, as critics argue. Even in states where eligibility for school choice programs is expansive, we haven’t seen a mass exodus of students from district schools. Moreover, the best evidence on the effects of school choice on district schools shows that district schools improve in response to competition.

Fiscal Impact

Depending on assumptions about the number of students switching from district or charter schools to private schools and the share of students who receive multiple scholarships, I estimated that these 10 tax-credit scholarship programs saved taxpayers between $1.7 billion and $3.4 billion since Arizona enacted the first such program in 1997. That equates to between $1,650 and $3,000 in savings for each scholarship recipient.

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This paints a starkly different picture from the “siphoning” argument that school choice critics like to make. Context is useful when discussing the fiscal impacts of these programs. For all the controversy that sometimes surrounds school choice programs, the fact is that these programs make up a very small share of states’ K-12 revenues. The cost of the taxpayer subsidies for the programs covered in the report range from 0.1 percent each for Rhode Island and Indiana’s programs to 1.5 percent for Arizona’s four programs.

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When critics claim these programs are costly or drain funds, they usually focus on just the cost of the taxpayer subsidy without giving any consideration to savings. But that tells only one part of the story. It’s also true that districts are no longer responsible for educating students that leave via these programs. In the short-run, they incur variable cost savings. My analysis accounts for this and even takes a more conservative approach to estimating variable costs than in other work by economists.

These savings don’t usually show up in budget reports, however, though public officials make choices—whether implicitly or explicitly—about what they do with the savings. As I note in the report:

“When school choice programs are enacted, however, it is usually the case that savings do not automatically materialize as reductions in K–12 expenditures because public officials must actively make decisions to reduce such expenditures. When students leave public schools, officials have more room in their budgets to allocate resources for educating students that remain in those schools.” (pp. 15-16)

Government officials have many options regarding what to do with these savings. They can reinvest them in district schools, which means more resources for the fewer number of students who remain in them, or they can also reallocate those savings to other public services. They can also choose to hold all or some of the funds rather than spend them. They can subsequently lower property taxes or save and invest these funds. Typically, however, it’s not clear how these freed-up resources are used.

It is a worthwhile policy goal to provide and expand quality educational options so that parents can match their children to the education provider that works best for them. Tax-credit scholarship programs offer one way to help achieve this goal by providing avenues for states to attract capital and invest in their state’s education system without harming taxpayers or students.

 

Martin F. Lueken, Ph.D. is the Director of Fiscal Policy and Analysis at EdChoice.


The Legal Battle for Choice in Georgia

November 4, 2016

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(Guest Post by Jason Bedrick)

Georgia’s tax-credit scholarship helps more than 12,000 students attend schools of their choice rather than their assigned district school. Predictably, defenders of the government education establishment sued to block parents from exercising educational choice. Thanks to the efforts of the state attorneys and the Institute for Justice, which intervened in the case on behalf of several parents of scholarship students, a lower court ruled against the challengers earlier this year. However, the challengers appealed and the case is now before the state supreme court.

Yesterday, the Cato Institute filed an amicus brief in the case urging the Georgia Supreme Court to uphold the constitutionality of the tax-credit scholarships. Cato’s legal eagle, Ilya Shapiro, has more at the Cato-at-Liberty blog:

We urge the court to affirm the determination that the tax-credit program does not violate the state constitution, focusing on the fact that it does not involve spending public funds for any sectarian purpose. Because the program makes no expenditures from the public fisc, it cannot violate the No-Aid Clause. Taxpayers choose to donate voluntarily using their own private funds and receive a tax credit for the amount of the donation; no money ever enters or leaves the treasury.

The challengers attempt to get around this fact by claiming that the credits constitute anindirect public expenditure, but this argument relies on a budgetary theory known as “tax expenditure analysis” that finds no support as a legitimate means of constitutional interpretation under Georgia (or federal, or any other state) law. Indeed, the U.S. Supreme Court rejected this type of reasoning in Arizona Christian School Tuition Organization v. Winn (2011).

The argument that the program constitutes an unconstitutional gratuity is likewise incorrect because the tax credits are not public funds, and the government cannot give away that which it does not own. Even if Georgia were giving up something of value, it would not be a “gratuity” because the state receives a substantial benefit in return: increased educational attainment, plus the secondary effects that increased competition and a more educated citizenry create.

The Georgia Supreme Court should affirm the lower court’s decision and uphold the state’s Qualified Educational Tax Credit Program—ensuring educational choice for Georgia families, regardless of how much money they make.

 

 

 


Yuval Levin on Combating Cronyism

November 3, 2016

(Guest Post by Jason Bedrick)

The most recent issue of National Review contains an excellent essay by Yuval Levin on why conservatives should get serious about tackling cronyism. Noting that 2016 has exposed the failure of conservatives to “take seriously some key public concerns” and to “articulate some key conservative priorities,” Levin urges conservatives to do more to address voters’ concerns that “the economy is somehow rigged against them… to the benefit of some wealthy and powerful interests.” (This is sage advice not only for conservatives, but also for education reformers of various political stripes.) As it happens, the Left has proven much more adept that tapping into this concern, although as Levin points out, they exploit it to “empower greater government intervention — ironically creating new opportunities for the wealthy and powerful to lobby and to curry favor.”

To a great extent, the failure to address cronyism stems from the fact that too many conservatives–particularly Republican elected officials–have long confused being pro-market with being pro-business. As Levin explains:

Everybody knows that conservatives in America are champions of the market economy as an engine of prosperity. But too many Americans, including too many conservatives, seem to believe that defending the market economy means serving the interests of business. That is certainly how our government has too often approached its role as steward of the economy — advancing the priorities of established, well-connected interests, sometimes at the expense of the needs of individuals, families, communities, and the nation as a whole, and claiming to do so in the name of economic growth and freedom.

But a commitment to the goals and principles of the market economy is by no means the same thing as a commitment to the interests of the businesses that compete in that economy. On the contrary, markets require a government dedicated to open competition for the benefit of consumers and citizens — which very often means subjecting powerful incumbents to competitive pressures they would rather avoid.

Such fair and open competition is precisely what makes markets engines of prosperity and innovation, and what makes the free-enterprise system well suited to helping a free society address some of its biggest problems. Providing business interests (or labor interests, or any other established, well-connected group) with special benefits or shielding established market actors from competition is therefore anathema to the ethic of capitalism and of democracy. That our government now frequently engages in precisely such preferential treatment for the well connected is a grave danger to democratic capitalism in America. And that the public identifies such cronyism with capitalism itself is a failure of the friends of the market system. It is as such a failure of conservatism, and it threatens all that conservatives hope to achieve.

Levin goes on to enumerate many examples of cronyism, highlighting its existence in areas that conservatives should be doing more to expose and correct, including the realm of education:

Self-dealing is, for instance, at the heart of our primary- and secondary-education crisis, as schools and districts are run in the interests of administrators and tenured teachers rather than students. It is a driving force behind our higher-education dilemmas, as the already accredited run the accreditation system and keep out new competitors and new models of schooling and financing. It undermines upward mobility, as established players in one industry after another use licensing and certification requirements to keep out competitors.

The essay is worth reading in its entirety, particularly for Levin’s insightful diagnosis of the origins of the problem and suggested solutions, but JayBlog readers will be particularly interested in Levin’s treatment of education policy.

Noting that “parental choice is restricted by systems that protect incumbent teachers and their unions at the expense of students,” Levin argues that the state must “become a neutral arbiter of competitive marketplaces rather than a manager of inefficient monopolies.

In many large school districts, teachers’ unions use their financial and political muscle to control the election of school-board members and so effectively choose their own negotiating partners, leaving parents and the rest of their communities powerless to change things. Breaking up such monopolies, by allowing some of the public funds that now flow to school systems to be put instead in the hands of parents and by giving those parents a real choice among educational options, can help these public dollars serve the public rather than a particularly powerful pressure group.

As Jay has counseled, education reformers can’t afford to ignore politics. Reformers can’t expect to be effective unless they are speaking to the concerns that voters have. They shouldn’t expect those voters to get excited about policies that are intended to answer questions that voters aren’t asking. Education reformers must seek to understand what voters are concerned about and clearly articulate how our policy proposals would address those concerns. Sizable portions of the electorate, both right and left, are troubled by a system that appears to be rigged against them. Reformers must show them how the government-run education system is rife with cronyism and explain how choice policies will empower them to provide their children with a better education.  As Levin concludes:

The failure to advance this argument is an instance of a larger pattern in which conservatives have become disconnected from public concerns because we have forgotten the foundations of our own view of the world. A complacent repetition of vague slogans about freedom too often turns the Right into a caricature of itself. A concerted reengagement with the actual conservative case for freedom would instead let the Right offer serious answers to today’s most pressing public concerns.

Likewise, education reformers must resist the siren call of technocracy and seriously reengage with the foundational ideas of the ed reform movement in a manner that connects with today’s concerns.


Setting the Record Straight on Florida’s Tax-Credit Scholarships

August 30, 2016

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(Guest Post by Jason Bedrick)

Opponents of school choice spend a great deal of time and energy perpetuating all sorts of easily debunked myths about choice programs. In Florida, the state teachers’ union has worked very hard to spread two such myths about the state’s tax-credit scholarship program, which Mark Pudlow of the Florida Education Association calls a “scheme”:

“It’s a scheme because this tax credit voucher [sic] was enacted by the Legislature to circumvent a previous state Supreme Court ruling saying that public money could not go to fund vouchers,” he said. “So the Legislature set up a scheme that would allow certain types of taxes to be ‘donated’ to the groups administering the voucher program. So instead of paying taxes to the state, they were forgiven their tax obligation if they donated the exact same amount of money to the voucher administrators.”

Fortunately, the Daily Commercial gave Ron Matus of Step Up for Students, Florida’s largest scholarship organization, the opportunity to set the record straight:

“The union kept saying the tax credit scholarships were done to circumvent the ruling,” he said. “Their timeline is off. The fact of the matter is the tax credit scholarship program was passed by the legislature and signed into law in 2001, five years before the Supreme Court ruling. The opponent keeps arguing the program drains money from public schools. Every single study that has been done over many years by multiple different parties that has looked at the fiscal impact says it does not harm public schools or drain money from public schools.”

The Office of Program Policy Analysis and Government Accountability estimated the Florida Tax Credit Scholarship Program saved the state $36.2 million in 2008.

Government Accountability stated that while the program “reduces the amount of tax revenues received by the state, it produces a net fiscal benefit.”

This academic year, Step Up for Students will provide more than 90,000 tax-credit scholarships to students so that they can attend the school of their choice. Additionally, they will administer nearly 6,000 education savings accounts. Florida also has a second scholarship organization, AAA Scholarship Foundation, so it’s likely that more than 100,000 Florida students will receive tax-credit scholarships this year.

As Step Up demonstrates, scholarship organizations do much more than just cut checks. They also can provide parents with vital information about their educational options, help connect parents and schools, and–when necessary–they can organize to defend the scholarships from outside attacks. As Jay noted in a recent post, politically viable policies require “constituents who can then be mobilized to protect and expand” them. School choice policies generate those constituents, and as Step Up has amply demonstrated, scholarship organizations can mobilize them.


American Jewish Committee Endorses Abolishing Public Schools?

July 21, 2016

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(Guest Post by Jason Bedrick)

In response to calls at the Republican National Convention for more school choice, the American Jewish Committee’s spokesperson announced that not only do they oppose the taxpayer subsidy of private schools, but they even oppose public schools. See for yourself:

For more than 50 years, school choice has been a contentious issue for American Jews. Decades ago, mainstream Jewish organizations were vociferous in defending the separation of church-and-state, worried that if the government got involved in funding religious schools in any way, it could lead to infringement on Jewish religious freedom. Those fears, according to American Jewish Committee associate general counsel Marc Stern, remain today.

“The Jewish community has long been concerned that government not be in the business of supporting private education,” Stern said. “Communities that want to maintain religious schools should pay for them on their own without government support. People shouldn’t be taxed to support things they don’t agree with.”

Okay, so he didn’t say it explicitly, but Mr. Stern is intelligent and knowledgeable enough to know that lots of Americans object to what is taught in public schools, so this was a clear endorsement by the AJC for the complete abolition of public schooling.

Heck, this “people shouldn’t be taxed to support things they don’t agree with” principle is something that my colleagues at the Cato Institute could really get behind. I’m sure that by the time the sun sets today, we could assemble a very long list of government programs to which many Americans object and we welcome the AJC’s support in abolishing them as well.

Then again, it’s always possible that the AJC’s attorney misspoke. Perhaps they’re not really in favor of abolishing the public school system and hundreds of other government programs, and the attorney just didn’t think through the logic of what he was saying. But if the AJC isn’t embracing anarcho-capitalism, then their “people shouldn’t be taxed to support things they don’t agree with” objection has no force or consistency. What they really mean is “we don’t think people should be taxed to pay for things we don’t like, but they should be taxed to pay for things that we do like,” which is not really a principle so much as an expression of political will — a political will that is fundamentally anti-pluralist, as I’ve explained previously:

Let’s consider an imaginary “public” school district where there are three groups of people: Hobbits, Ewoks, and Terrans. Each groups has very different and passionately held views about what should be taught in school and how it should be taught. All three groups are required to pay taxes to support the district school, which is ostensibly nonpartisan, nondenominational, and open to all. However, the majority of the district is Terran so the school reflects the Terran preferences. When the Hobbits and Ewoks open their own schools and seek equal per-pupil support from the local government, the indignant Terrans respond that the district school is meant for everyone. “It’s your right to open your own schools,” explain the Terrans, “but it’s your responsibility to pay for them.” Thus the majority brazenly forces minority groups either to abandon their values or to pay for two school systems. And lower-income minorities may have no choice at all.

Fortunately, other Jewish groups understand this and are willing to advocate for the greater freedom and pluralism that school choice programs deliver:

The Orthodox Union and the Orthodox Rabbinical Council of America have both successfully lobbied for New York City and New York State to fund programs like security and special education for private schools. According to Maury Litwack, the OU Advocacy Center’s director of state political affairs, more than 100,000 students attend Jewish day school in New York City.

“For parents who send their kids to Jewish day school, tuition is prohibitively high,” Litwack said. “They pay property taxes and a variety of other taxes. In American education there’s too often a one-size-fits-all approach to education. There should be more options.”

Republicans agree. A section of the party’s 2015 platform, titled “Choice in Education,” says, “Empowering families to access the learning environments that will best help their children to realize their full potential is one of the greatest civil rights challenges of our time. A young person’s ability to succeed in school must be based on his or her God-given talent and motivation, not an address, ZIP code, or economic status.”

The AJC is an organization that claims to be committed to the principle of pluralism. I look forward to a day when they fully embrace the ideal of pluralism in education.

[H/t David Benkof. Cross-posted at Ricochet.]


Regulating School Choice: The Debate Continues

March 9, 2016

Design vs Experience

(Guest Post by Jason Bedrick)

Last week, the Cato Institute held a policy forum on school choice regulations (video here). Two of our panelists, Dr. Patrick Wolf and Dr. Douglas Harris, were part of a team that authored one of the recent studies finding that Louisiana’s voucher program had a negative impact on participating students’ test scores. Why that was the case – especially given the nearly unanimously positive previous findings – was the main topic of our discussion. Wolf and I argued that there is reason to believe that the voucher program’s regulations might have played a role in causing the negative results, while Harris and Michael Petrilli of the Fordham Institute pointed to other factors.

The debate continued after the forum, including a blog post in which Harris raises four “problems” with my arguments. I respond to his criticisms below.

The Infamous Education Productivity Chart

Problem #1: Trying to discredit traditional public schools by placing test score trends and expenditure changes on one graph. These graphs have been floating around for years. They purport to show that spending has increased much faster than expenditures [sic], but it’s obvious that these comparisons make no sense. The two things are on different scales. Bedrick tried to solve this problem by putting everything in percentage terms, but this only gives the appearance of a common scale, not the reality. You simply can’t talk about test scores in terms of percentage changes.

The more reasonable question is this: Have we gotten as much from this spending as we could have? This one we can actually answer and I think libertarians and I would probably agree: No, we could be doing much better than we are with current spending. But let’s be clear about what we can and cannot say with these data.

Harris offers a reasonable objection to the late, great Andrew Coulson’s infamous chart (shown below). Coulson already addressed critics of his chart at length, but Harris is correct that the test scores and expenditures do not really have a common scale. That said, the most important test of a visual representation of data is whether the story it tells is accurate. In this case, it is, as even Harris seems to agree. Adjusted for inflation, spending per pupil in public schools has nearly tripled in the last four decades while the performance of 17-year-olds on the NAEP has been flat.

U.S. Education Spending and Productivity

Producing a similar chart with data from the scores of younger students on the NAEP would be misleading because the scale would mask their improvement. But for 17-year-olds, whose performance has been flat on the NAEP and the SAT, the story the chart tells is accurate.

Voucher Regulations Are Keeping Private Schools Away

Problem #2: Repeating arguments that have already been refuted. Bedrick’s presentation repeated arguments about the Louisiana voucher case that I already refuted in a prior post. Neither the NBER study nor the survey by Pat Wolf and his colleagues provide compelling evidence that existing regulations are driving out potentially more effective private schools in the Louisiana voucher program, which was a big focus of the panel.

Here Harris attacks a claim I did not make. He is correct that there is no compelling evidence that regulations are driving out higher-quality private schools, but no one claimed that there was. Rather, I have repeatedly argued that the evidence was “suggestive but not conclusive” and speculated in my presentation that “if the enrollment trends are a rough proxy [for quality], though we can’t prove this, then it would suggest that the higher-quality schools chose not to participate” while lower-quality schools did.

Moreover, what Harris claims he refuted he actually merely disputed – and not very persuasively. In the previous post he mentions, he minimized the role that regulation played in driving away private schools:

As I wrote previouslythe study he cites, by Patrick Wolf and colleagues, actually says that what private schools nationally most want changed is the voucher’s dollar value. In Louisiana, the authors reported that “the top concern was possible future regulations, followed by concerns about the amount of paperwork and reports. When asked about their concerns relating to student testing requirements, a number of school leaders expressed a strong preference for nationally normed tests” (italics added). These quotes give a very different impression that [sic] Bedrick states. The supposedly burdensome current regulations seem like less of a concern than funding levels and future additional regulations–and no voucher policy can ever insure against future changes in policy.

Actually, the results give a very different impression than Harris states. The quote Harris cites from the report is regarding the concerns of participating schools, but the question at hand is why the nonparticipating schools opted out of the voucher program. Future regulations was still the top concern for nonparticipating schools, but current regulations were also major concerns. Indeed, the study found that 9 of the 11 concerns that a majority of nonparticipating private schools said played a role their decision not to participate in the voucher program related to current regulations, particularly around admissions and the state test.

"Views from Private Schools," by Brian Kisida, Patrick J. Wolf, and Evan Rhinesmith, American Enterprise Institute

Source: ”Views from Private Schools,” by Brian Kisida, Patrick J. Wolf, and Evan Rhinesmith, American Enterprise Institute (page 19)

Nearly all of the nonparticipating schools’ top concerns related to the voucher program’s ban on private schools using their own admissions criteria (concerns 2, 3, 5, 7, 8 and 11) or requiring schools to administer the state test (concerns 6, 9, 10, and possibly 7 again). It is clear that these regulations played a significant role in keeping private schools away from the voucher program. The open question is whether the regulations were more likely to drive away higher-quality private schools. I explained why that might be the case, but I have never once claimed that we know it is the case.

Market vs. Government Regulations in Education

Problem #3: Saying that unregulated free markets are good in education because they have been shown to work in other non-education markets. […] For example, the education market suffers from perhaps the worst information problem of any market–many complex hard-to-measure outcomes most of which consumers (parents) cannot directly observe even after they’ve chosen a school for their child. Also, since students can realistically only attend schools near their homes, and there are economies of scale in running schools, that means there will generally be few practical options (unless you happen to live in a large city with great public transportation–very rare in the U.S.). And the transaction costs are very high to switch schools. And there are equity considerations. And … I could go on.

Harris claims that a free market in education wouldn’t work because education is uniquely different from other markets. However, the challenges he lists – information asymmetry, difficulty measuring intangible outcomes, difficulties providing options in rural areas, transaction costs for switching schools – aren’t unique to K-12 education at all. Moreover, there is no such thing as an “unregulated” free market because market forces regulate. As I describe below, while not perfect, these market forces are better suited than the government to address the challenges Harris raises.

Information asymmetry and hard-to-measure/intangible outcomes:

Parents need information in order to select quality education providers for their children. But are government regulations necessary to provide that information? Harris has provided zero evidence that it is, but there is much evidence to the contrary. Here the disparity between K-12 and higher education is instructive. Compared to K-12, colleges and universities operate in a relatively free market. Certainly, there are massive public subsidies, but they are mostly attached to students, and colleges have maintained meaningful independence. Even Pell vouchers do not require colleges to administer particular tests or set a single standard that all colleges must follow.

So how do families determine if a college is a good fit or not? There are three primary mechanisms they use: expert reviews, user reviews, and private certification.

The first category includes the numerous organizations that rate colleges, including U.S. News & World Report, the Princeton Review, Forbes, the Economist, and numerous others like them. These are similar to sorts of expert reviews, like Consumer Reports, that consumers regularly consult when buying cars, computers, electronics, or even hiring lawyers – all industries where the non-expert consumer faces a significant information asymmetry problem.

The second category includes the dozens of websites that allow current students and alumni to rate and review their schools. These are similar to Yelp, Amazon.com, Urban Spoon and numerous other platforms for end-users to describe their personal experience with a given product or service.

Finally, there are numerous national and regional accreditation agencies that certify that colleges meet a certain standard, similar to Underwriters Laboratories for consumer goods. This last category used to be private and voluntary, although now it is de factomandatory because accreditation is needed to get access to federal funds.

None of these are perfect, but then again, neither are government regulations. Moreover, the market-based regulators have at least four major advantages over the government. First, they provide more comprehensive information about all those hard-to-measure and intangible outcomes that Harris was concerned about. State regulators tend to measure only narrow and more objective outcomes, like standardized test scores in math and English or graduation rates. By contrast, the expert and user reviews consider return-on-investment, campus life, how much time students spend studying, teaching quality, professor accessibility, career services assistance, financial aid, science lab facilities, study abroad options, and much more.

Second, the diversity of options means parents and students can better identify the best fit for them. As Malcolm Gladwell observed, different people give different weights to different criteria. A family’s preferences might align better with the Forbes rankings than the U.S. News rankings, for example. Alternatively, perhaps no single expert reviewer captures a particular family’s preferences, in which case they’re still better off consulting several different reviews and then coming to their own conclusion. A single government-imposed standard would only make sense if there was a single best way to provide (or at least measure) education, we knew what it was, and there was a high degree of certainty that the government would actually implement it well. However, that is not the case.

Third, a plethora of private certifiers and expert and user reviews are less likely to create systemic perverse incentives than a single, government standard. As it is, the hegemony of U.S. News & World Report’s rankings created perverse incentives for colleges to focus on inputs rather than outputs, monkey around with class sizes, send applications to students who didn’t qualify to increase their “selectivity” rating, etc. If the government imposed a single standard and then rewarded or punished schools based on their performance according to that standard, the perverse incentives would be exponentially worse. The solution here is more competing standards, not a single standard.

Fourth, as Dr. Howard Baetjer Jr. describes in a recent edition of Cato Journal, whereas “government regulations have to be designed based on the limited, centralized knowledge of legislators and bureaucrats, the standards imposed by market forces are free to evolve through a constant process of evaluation and adjustment based on the dispersed knowledge, values, and judgment of everyone operating in the marketplace.” As Baetjer describes, the incentives to provide superior standards are better aligned in the market than for the government:

Incentives and accountability also play a central role in the superiority of regulation by market forces. First, government regulatory agencies face no competition from alternative suppliers of quality and safety assurance, because the regulated have no right of exit from government regulation: they cannot choose a better supplier of regulation, even if they want to. Second, government regulators are paid out of tax revenue, so their budget, job security, and status have little to do with the quality of the “service” they provide. Third, the public can only hold regulators to account indirectly, via the votes they cast in legislative elections, and such accountability is so distant as to be almost entirely ineffectual. These factors add up to a very weak set of incentives for government regulators to do a good job. Where market forces regulate, by contrast, both goods and service providers and quality-assurance enterprises must continuously prove their value to consumers if they are to be successful. In this way, regulation by market forces is itself regulated by market forces; it is spontaneously self-improving, without the need for a central, organizing authority.

In K-12, there are many fewer private certifiers, expert reviewers, or websites for user reviews, despite a significantly larger number of students and schools. Why? Well, first of all, the vast majority of students attend their assigned district school. To the extent that those schools’ outcomes are measured, it’s by the state. In other words, the government is crowding out private regulators. Even still, there is a small but growing number of organizations like GreatSchools, Private School Review, School Digger, andNiche that are providing parents with the information they desire.

Options in rural areas:

First, it should be noted that, as James Tooley has amply documented, private schools regularly operate – and outperform their government-run counterparts – even in the most remote and impoverished areas in the world, including those areas that lack basic sanitation or electricity, let alone public transportation. (For that matter, even the numerous urban slums where Tooley found a plethora of private schools for the poor lack the “great public transportation” that Harris claims is necessary for a vibrant education market.) Moreover, to the extent rural areas do, indeed, present challenges to providing education, such challenges are far from unique. Providers of other goods and services also must contend with reduced economies of scale, transportation issues, etc.

That said, innovations in communication and transportation mean these obstacles are less difficult to overcome than ever before. Blended learning and course access are already expanding educational opportunities for students in rural areas, and the rise of “tiny schools” and emerging ride-sharing operations like Shuddle (“Uber for kids”) may soon expand those opportunities even further. These innovations are more likely to be adopted in a free-market system than a highly government-regulated one.

Test Scores Matter But Parents Should Decide 

Problem #4: Using all this evidence in support of the free market argument, but then concluding that the evidence is irrelevant. For libertarians, free market economics is mainly a matter of philosophy. They believe individuals should be free to make choices almost regardless of the consequences. In that case, it’s true, as Bedrick acknowledged, that the evidence is irrelevant. But in that case, you can’t then proceed to argue that we should avoid regulation because it hasn’t worked in other sectors, especially when those sectors have greater prospects for free market benefits (see problem #3 above). And it’s not clear why we should spend a whole panel talking about evidence if, in the end, you are going to conclude that the evidence doesn’t matter.

Once again, Harris misconstrues what I actually said. In response to a question from Petrilli regarding whether I would support “kicking schools out of the [voucher] program” if they performed badly on the state test, I answered:

No, because I don’t think it’s a wise move to eliminate a school that parents chose, which may be their least bad option. We don’t know why a parent chose that school. Maybe their kid was being bullied at their local public school. Maybe their local public school that they were assigned to was not as good. Maybe there was a crime problem or a drug problem.

We’re never going to have a perfect system. Libertarians are not under the illusion that all private schools are good and all public schools are bad… Given the fact that we’ll never have a perfect system, what sort of mechanism is more likely to produce a wide diversity of options, and foster quality and innovation? We believe that the market – free choice among parents and schools having the ability to operate as they see best – has proven over and over again in a variety of industries to have better outcomes than Mike Petrilli sitting in an office deciding what quality is… as opposed to what individual parents think [quality] is.

Harris then responded by claiming that I was saying the evidence was “irrelevant,” to which I replied:

It’s irrelevent in terms of how we should design the policy, in terms of whether we should kick [schools] out or not, but I think it’s very important that we know how well these programs are working. Test scores do measure something. They are important. They’re not everything, but I think they’re a pretty decent proxy for quality…

In other words, yes, test scores matter. But they are far from the only things that matter. Test scores should be one of many factors that inform parents so that they can make the final decision about what’s best for their children, rather than having the government eliminate what might well be their least bad option based on a single performance measure.

I am grateful that Dr. Harris took the time both to attend our policy forum and to continue the debate on his blog afterward. I look forward to continued dialogue regarding our shared goal of expanding educational opportunity for all children.

(Cross-posted at Cato-at-Liberty.)