School Choice – Should Markets Know Better?

Robert Heilbroner, the distinguished economist, had in an early section of his classic primer on economics, The Making of Economic Society, a thought experiment where he asked readers to imagine the improbability of the power of the market. He points out that if we were to imagine setting up our own society, a command economy would seem far more useful than a market. A king ordering around his subjects and directing their efforts with care and precision would seem to be the best way to ensure everyone had enough food to eat and a house to live in and clothes to wear.

Letting a market, where no one explicitly directs the efforts of any individuals, provide for the needs of the community seems absurd. Imagine: no one tells anyone how much food to grow, or what kinds; how many houses to build; the clothes to make. And yet, this is exactly how our markets work. No one dictates production, and yet there is enough for all. (The distribution of goods is another matter, of course.) More than that, the products from a market system are better than if they had been directed by a king. The market, for all its ills, has been the most powerful mechanism for increased production of higher-quality, cost-effective goods.

If education is a good, then why not apply market principles to it? Why not allow the market to change schools for the better? We could banish the king and letting the consumers drive changes. Let consumers choose schools, and the market will build better schools.

Except that, in places where school choice has been used, the results are mixed and modest at best. Steven Levitt, of Freakonomics fame, points out that “The theory sounds great, but evidence confirming it has been hard to find. Julie Cullen and Brian Jacob, my good friends and co-authors, haven’t done school choice proponents any favors with their latest paper (the full version of which can be found here). Using kindergarten lottery outcomes that determine which kids get into the most sought-after schools, they are able to compare the outcomes of those who win the lottery versus those who lose. The students who win the lotteries go to “better” schools and have “better” peers, but they don’t have better outcomes.”

In a more recent article in National Affairs, Frederick M. Hess sums it up nicely: “It would seem, then, that school choice “works” in some respects and in some instances — but that choice alone could never work as well as many of its champions have expected, and promised. It is time for those who would like to transform America’s schools to let go of the dream that choice by itself is any kind of ‘solution.’”

Still, part of me does have a fondness for the market solution. Of course, not all goods are sensitive to market pressures – at least not in the right way. Medicine, for example, appears to work better for most with a partially-command approach. But I still wonder: if all parents could choose freely, even across class lines, wouldn’t schools adopt better practices? And where better practices were unclear, wouldn’t choice allow for greater clarity? Don’t markets sometimes show us what we don’t know?

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