Is The Economist Right about Vouchers?

The latest issue of The Economist notes that a mounting body of empirical evidence now favors school voucher programs over government school monopolies. This is eminently true, and it’s delightful to see some of the existing school choice evidence getting a hearing in a mainstream publication. So: jolly good show, wot.

That said, a magazine called The Economist should be held to a very high standard for accuracy, incisiveness, and perspective when it weighs in on the subject of market effects in education – to a higher standard than if the subject were taken up by, say, Vogue, Cat Fancy, or the New York Times.

With that in mind, a few corrections and clarifications are in order. Though Milton Friedman can justly be credited with kindling the modern, U.S. interest in vouchers, the idea was not “first suggested” by him in the mid 1950s. Perhaps the earliest explicit description of the idea is in Adam Smith’s Wealth of Nations, and it figured in the writings of other notable economists and liberal (in the classical sense) philosophers in the 18th and 19th centuries. Vouchers have, in fact, been in nationwide use in the Netherlands since 1917. This is a useful point to note because it shows that vouchers are not a recent concoction, or exclusively the brainchild of a libertarian economist.

Next, the Economist states that voucher programs “are running in several different countries without ill-effects for social cohesion.” It does seem that vouchers are more conducive to social cohesion than state monopoly schooling. Under vouchers, families can pursue both their common educational goals and their unique cultural and religious traditions, all without having to foist their preferences on their neighbors. This is quite different from the endless “school wars” that result whenever there is only one official school system (viz., U.S. battles over sex ed., school prayer, the teaching of history or reading or math, and the current favorite of pedagogical pugilists: the teaching of evolution vs. “intelligent design”).

But to say that voucher programs have no social ill-effects whatsoever is, perhaps, an overstatement. After the murder of Dutch filmmaker Theo Van Gogh in the fall of 2004 at the hands of a militant Islamist, one Dutch Muslim voucher school was bombed and another set ablaze. This is only the most violent and extreme manifestation of a broader unease among some Dutch citizens with the government funding of conservative Islamic schools. Over the past decade, there have been periodic efforts to either cap the number of such schools that can be opened, or to craft regulations so as to make their creation unlikely. This, of course, is a zero-sum game. Either law abiding Dutch Muslims can enjoy the benefits of their country’s voucher program, or they cannot. If they can, taxpayers who object to their teachings but are forced to pay for them anyway become frustrated and social tension results. If they cannot, the Muslim minority suffers second-class status and social tension results.

The reason for this lose-lose situation is that while vouchers lessen the amount of compulsion in education (as compared to government monopoly school systems) they do not eliminate compulsion altogether. Taxpayers can still be compelled to support schooling that violates their convictions. It is possible to promote universal access to the education marketplace with even less compulsion than is associated with vouchers, by means of a universal education tax credit program. I describe such a system here.

The Economist’s portrayal of the Swedish voucher program is also overly kind. “The only real restrictions imposed on private schools,” the magazine claims, “were that they must run their admissions on a first-come-first-served basis and promise not to charge top-up fees.” In reality, the regulations are much more onerous. Most notably, voucher schools must follow a state curriculum and are forbidden to charge tuition fees larger than the voucher amount (this is also true of the Dutch program). These restrictions all but destroy the prospects for specialization and the division of labor, and prevent free floating, market-determined prices from arising. These, as The Economist’s editors must well know, are essential components of free markets. Without them, no genuine market can exist.

Late last year, the Cato Institute published an Education Market Index, which measures roughly 100 characteristics of education systems (or education policies) and rates them on the extent to which a free market currently exists (or on the compatibility of a policy with the rise of a free education market). While the Swedish voucher policy does indeed outscore the Dutch one on this metric, as The Economist’s editors would have predicted, it does so by scoring 40 out of 100 as compared to the Netherlands’ score of 31 out of 100. As currently designed, neither program is conducive to the rise of a genuine education market.

Popularizing the theory and evidence on education markets is an area in which The Economist could well lead the way. If true to its name, the magazine could hold scholars’ and pundits’ feet to the fire when they mischaracterize existing weak school choice programs as markets. The magazine could also continue to draw attention to regions and niches where true free markets in education already thrive – India’s private schools serving the poor, for instance, or the growing worldwide, for-profit, largely unregulated market for after-school tutoring services. Such a rigorous approach to the subject in a mainstream magazine would be a unique and welcome contribution to the debate, and no-one is better equipped to tackle it.