No Longer Choosing Choice

He’s not alone.

Conservatives have long championed central planning in addition to parental choice, but in recent years centralization has been ascendant. Department of Education alumni William Bennett, Chester Finn, and Diane Ravitch, all appointed under Republican administrations, now place greater emphasis on national standards than on choice. Last month, Mr. Finn faulted Ohio’s charter school system for placing “too much trust in market forces.”

Their faltering support stems from disappointment with the impact of existing U.S. charter school and voucher programs, and what they think it says about market reform in general. Stern, for instance, laments that while Milwaukee’s voucher program has benefitted the low income students who gained access to private schools, it has not dramatically improved the city’s public schools.

But criticisms such as those of Finn and Stern don’t reveal any failure of market education, because existing U.S. “school choice” programs do not constitute, or even closely approximate, free markets. That anyone imagines otherwise shows how poorly markets are understood, even among conservative education reformers.

Do charter schools really rely too heavily on “market forces”? Consider some key elements of free markets: prices determined by supply and demand, private ownership of businesses, low or no barriers to the creation of new businesses, few or no barriers to workers entering the profession, minimal regulation, the ability of owners and investors to profit from their efforts, and payment by consumers rather than a third party. With charter schools, these features are either grossly hobbled or absent. Yes, charter schools produce some attenuated competition and parental choice, but to imagine that those two diluted ingredients are sufficient by themselves (or even excessive!) suggests a badly mistaken notion of what a market is.

Milwaukee’s voucher program has indeed helped many children, but it also falls far short of a market. First, it is capped at 22,500 students. That’s too little to justify large‐​scale R&D investment by education entrepreneurs. If the market for computers were limited to 22,500 customers, Microsoft, Apple, and Dell would cease to exist. Private schools must also accept the voucher as full payment, but such price controls are almost universally derided by economists as counterproductive. If it were not for the fact that electronics manufacturers could once charge $1,000 for a DVD player, it would never have become possible for the units to sell for $30 today.

The initially high prices of innovative new products and services are what encourage the R&D that eventually brings down their cost.

Even if Milwaukee’s voucher program were big enough and free enough to create a vigorous marketplace, the public schools still might not improve dramatically. The most significant advances in market economies generally occur when better products or methods replace old ones. The loom did not improve hand‐​weaving, it supplanted it. Even in the highly regulated and not especially market‐​like school choice programs of Chile and the Netherlands, private schools already enroll most students.

Though markets have been marginalized by “free” public schooling, they still thrive in niches such as tutoring, where programs like Kumon and Sylvan Learning show their effectiveness and responsiveness to consumer demands.

In many slums and villages across the developing world, where state‐​run school systems are particularly dysfunctional, majorities of poor parents are currently paying for their children to attend ultra‐​low‐​cost private schools — though free government schools are available. These education markets, as researchers such as Orient Global Education Fund president James Tooley and Oxford professor Geeta Gandhi Kingdon have shown, outperform state‐​run schools at a fraction of the cost, and they teach what families want. The vast international research literature on school governance and funding systems strongly favors competition, minimal regulation, private ownership of schools, parental choice, and some level of direct payment of tuition by parents.

It is possible to give all families access to a free education marketplace — by dramatically expanding and liberalizing existing choice programs, or adopting new ones, like Cato’s public education tax credit proposal. But you can’t expect current programs to produce free‐​market results in the absence of free markets.