Can Charter Schools Yield Market-Like Results?

That’s a question I was asked over at EdSpresso.com, to which I’ve just fired of the following answer:

Alas, no. In the short term, the charter schooling model lacks some of the essential characteristics of effective markets. I stressed competition in the cited op-ed [about Warren Buffett’s gift to the Gates Foundation], but there are others I couldn’t mention for lack of space. Free-floating prices and at least some direct payment of tuition by parents are two other crucial ingredients. Charters have neither.

Prices are the mechanism by which markets signal quality and encourage providers to offer the services most in demand. Without the ability to set high initial prices for effective innovations, innovation cannot be financed. Hence, the whole process by which markets drive improvements in quality is crippled. If there had never been $1,000 DVD players and cell phones, there would not now be $39 DVD players and “free” cell phones (when purchased with a service plan). On the flip side, when providers do not set their own prices there is no incentive for them to find ways of undercutting their competitors by offering similar quality services at a lower cost, eliminating a key incentive for efficiency. There are still other problems with charter schooling that I haven’t listed here (e.g. the likelihood of re-regulation over time, if history is any guide) so that they do not represent a promising path to market education.

I’d be happy to be proven wrong by the march of events, but that’s the way it looks to me now.