Topic: General

Attention Students: Choose a Charter, Receive $5,700 Less Per Year

Traditional educators frequently claim that public charter schools are failing, even when evidence indicates that they perform no worse than traditional institutions on student test scores. This logic fails to recognize costs, which are paramount to educational success, primarily because wasted funds could otherwise be efficiently allocated towards further academic achievement. If students are receiving less public funding in charters, then choice schools are significantly outperforming residentially assigned institutions.

I just released a study with Patrick Wolf, Larry Maloney, and Jay May examining disparities in funding between students in charters and traditional public schools in 15 metropolitan areas in the 2013–14 school year. As shown in figure 1 from the report, students enrolled in a public charter school receive substantially less funding than those in traditional public schools in all but one location. In fact, we find that students in charter schools receive about $5,721 less in total annual funding than their peers in district schools.

Source: Wolf, Maloney, May, and DeAngelis (2017). “Charter School Funding: Inequity in the City.” School Choice Demonstration Project, Department of Education Reform, University of Arkansas.

Critics of this type of evaluation often argue that funding disparities are due to differences in types of students. After all, traditional public schools (TPS) may have a larger proportion of students requiring additional educational resources. While the TPS in our study do enroll more special needs children, we find that these differences do not fully explain the funding gap between traditional public schools and public charter schools.

Funding inequity across the two sectors has only gotten worse over time. Eleven years after the research team first revealed that public charter schools receive less funding than their traditional public schools peers, the funding disparity had grown by about 79% in eight cities.

Should these results surprise us? If you could force your customers to buy your product at a high price, would you need to reduce expenses? Perhaps more importantly, if your customers could not leave, how would you know which costs to cut? The traditional system of schooling makes it impossible to allocate resources efficiently, even if local public school leaders are highly competent and benevolent.

Nonetheless, these findings are important for decision-makers to consider, especially if they care about improving student outcomes through efficiently allocating educational funding. Just imagine what would happen to the education sector if families could choose which institution to send their funds to. Schools would be rewarded for quality and efficiency, freeing up the resources necessary to improve the lives of millions of children around the nation.

China’s War on Free Speech

China’s market economy with socialist characteristics rose from the ashes of Mao Zedong’s failed experiments with central planning. Under that repressive regime, private enterprise was outlawed and individuals become wards of the state. When Deng Xiaoping became China’s paramount leader, he abandoned Mao’s class struggle as the centerpiece of the Chinese Communist Party (CCP) and embarked on economic liberalization. There was hope that greater freedom in trading goods and services would also lead to a freer market in ideas.

That hope was dashed when troops cracked down on protesters in Tiananmen Square on June 4, 1989. Deng’s famous “Southern Tour” in 1992 resumed economic reform—and China has become the world’s largest trading nation—but protectionism in the market for ideas remains intact. Under President Xi Jinping, who advocates globalization but has cracked down on the free flow of information, China has become less free. 

In the just released World Press Freedom Index, published by Paris-based Reporters sans Frontières (RSF), China is ranked 176 out of 180 countries, just a few notches above North Korea—and President Xi is referred to as “the planet’s leading censor and press freedom predator.” In preparation for the 19th CCP Congress later this year, there has been an uptick in the war on free speech. 

The Problems with Centrally Planning School Choice

Even strong proponents of private school choice programs often disagree on who ought to have access. Many people that view private school choice as a means for social justice argue that programs should be targeted to the least-advantaged members of society. Alternatively, I have claimed that a universally accessible program could benefit the least-advantaged in society more than anyone because of amplified market entry. Other education scholars argue that program access should be determined based on the empirical evidence on student test scores. While we gain important information from scientific experiments, we should not make program access decisions based on them.

Experiments Can Only Tell Us about Groups

As a social scientist performing quantitative analyses on school choice programs across the United States, I have realized one thing that is particularly frustrating. Even the strongest quantitative scientific experiments do not tell us much about the individual children that we are studying. Since our statistical results rely on the law of large numbers, there is no way around this issue. We must group the people we are studying together in order to calculate a statistically significant treatment effect.

Sure, we can perform subgroup analyses to determine if there are heterogeneous effects for different types of individuals. Nevertheless, these subgroup analyses suffer from the same systemic flaw; they rely on grouping people to calculate average effects. While subgroup analyses give us important information about groups of people, they are often erroneously used by decision-makers to determine which specific children in society ought to have access to school choice programs. A large positive result for advantaged members of society and an insignificant result for the disadvantaged may lead one to solely support access for the advantaged.

The problem with this decision is that it assumes all members within the subgroup will respond to the treatment in the same way. This is far from true. An average overall result of “zero” for disadvantaged children likely means that the program worked for some of them and did not work for others. Why prevent disadvantaged students from accessing a program simply because they looked like those that did not benefit previously?

Misconceptions of the Efficiency Wage Hypothesis

In an otherwise largely fair write-up of the disagreements and controversies surrounding the economics of minimum wage laws, a blog I was cited in yesterday made a common error in discussing the so-called “efficiency wage hypothesis.” Here’s the extract (my emphasis):

But if employers have monopsony power (they have enough market power to influence the wage rate in their industry) then the impact of a minimum wage is to raise employment (up to a point). Furthermore, the efficiency wage theory suggests that a minimum wage could help raise employment by increasing productivity and lowering turnover.

This last sentence is a misreading of economic theory.

Many do claim that higher minimum wages can lead firms and workers to improve productivity in ways that avoid job losses, whether that be through more worker effort, less staff turnover or whatever. And there’s no doubt that in some cases, firms and workers adjust in this way.

But the efficiency wage theory itself is actually a market failure theory of unemployment. It does not suggest that raising the minimum wage could increase employment. It suggests that in certain sectors where the costs of replacing labor are high, firms pay above market wages out of fear that lowering them would reduce their workers’ productivity substantially. The consequence is that the specific sectoral labor market does not clear, resulting in at best excess supply of workers in that sector (who subsequently have to find employment in other sectors at lower wages) or at worst more unemployment in the economy as a whole.

Want to Regulate Schools? Use Parents

Results of last week’s DC voucher study, showing some significant negative effects on standardized math tests, has school choice opponents in overdrive writing voucher obituaries. But at least some commentators, like the New York Times’ David Leonhardt, concede that choice works, but only if it is shackled to regulations they like. That choice works if carefully managed is perhaps an inevitable concession with the broad notion of school choice clearly in ascendance. However, the idea that regulated choice produces better outcomes flies in the face of basic economic theory and choice research.

Negative Impacts of Regulation

State requirements often come in the form of standardized test scores or restrictions on the types of teachers that may be employed. These regulations force schools to focus narrowly on state tests, which do not appear to matter in the long-run, and limit the supply of teachers, lowering educational quality while increasing costs.

As I illustrate below, programs with less restrictive voucher laws lead to more impressive experimental evaluations of student math achievement, perhaps because the costs of regulation ward off high quality private institutions:

Trump’s First 100 Days and the Deepening Militarization of U.S. Foreign Policy

Donald Trump’s first 100 days in office have set U.S. foreign policy on a dangerous course. Trump’s actions and rhetoric have raised the profile of America’s military power while weakening other sources of U.S. influence. Such an approach is in line with the “peace through strength” formula Trump espouses. However, the deepening militarization of U.S. foreign policy carries a host of risks and costs that may cause more headaches than victories.

The growing role of the military in U.S. foreign policy is not a new phenomenon. Barack Obama’s presidency was hardly peaceful. This was especially true in the Middle East, where the “light footprint” approach reduced the on-the-ground U.S. military presence but made extensive use of air power to conduct foreign policy by precision strike. However, Obama also spearheaded multilateral initiatives that relied on other sources of American power and influence, such as the Iran nuclear deal and the Trans Pacific Partnership (TPP). Not all of these initiatives were successful, but they demonstrate a foreign policy approach that places value on non-military tools.

Don’t Compel Doctors to Promote State-Favored Programs

Like all states, California has licensed medical centers of every kind. One particular type, often known as a “crisis pregnancy center,” provides pregnancy-related services with the goal of helping women to make choices other than abortion. Based on opposition to these centers, the California legislature enacted a law requiring licensed clinics “whose primary purpose is providing family planning or pregnancy-related services” to deliver to each of their clients the following message: “California has public programs that provide immediate free or low-cost access to comprehensive family planning services (including all FDA-approved methods of contraception), prenatal care, and abortion for eligible women.” But the law also creates an exception for clinics that actually enroll clients in these programs—so, in effect, it applies only to clinics that oppose the very program they must advertise.

Several of these crisis pregnancy centers sued to block the law, arguing that it violated their First Amendment rights by forcing them to express a message to which they are opposed. But the U.S. Court of Appeals for the Ninth Circuit upheld the law, holding that it regulates only “professional speech” and therefore should be reviewed under a more deferential standard, rather than the normal strict judicial scrutiny that applies to laws compelling speech. The centers have petitioned the Supreme Court to review their case; Cato has filed a brief supporting that petition.