School Freedom and Competition

Parental choice only has meaning when there is a real variety of options from which to choose. The education system that provides the widest possible array of quality options is a free market in education in which schools have the discretion to determine their own curriculum and pedagogy, to tailor their services to specific groups of children, to set their own prices, and to earn a profit if they are successful.

Diversity of Options

Different children have different aptitudes and interests and learn materials at different rates. Whereas state-controlled education systems tend toward homogenization, a free market in education allows providers the freedom to meet the diverse needs of students and their parents.

Some education reformers support parental choice in theory but — purportedly in the name of quality — want to limit the options available to parents. These reformers advocate measures such as government-imposed testing, content standards, curriculum, scheduling, teacher certification, etc. These measures shape or even explicitly determine what is taught, when it’s taught, who can teach it, how it’s tested, and how it’s taught — thereby greatly limiting the choices available to parents.

An effective market in education grants schools the freedom to target particular student audiences. Some students may thrive in a traditional classroom setting, while others might be more successful in a more student-directed learning environment, like Montessori or Waldorf. Some students might want to pursue their interests in math, science, technology, or economics while others might want a stronger emphasis on literature, drama, art, and music. Accordingly, some schools will specialize while others will appeal to a wider audience, but no school can successfully be all things to all students.

For a market in education to flourish, policymakers must eschew bureaucratic control schemes in favor of real and direct accountability to parents. Parents have the strongest incentives to determine what is in the best interest of their children and — with the aid of private certifiers, reviewers, and the personal experience of trusted friends and family — they are in the best position to choose the school that best meets those interests. History shows that, when left to themselves, parents make better decisions for their own children than state officials make on their behalf.

Quality and Innovation

Free markets not only foster diversity, they raise quality and spur innovation.

Parents nearly universally desire the best quality education for their children, and a market in education makes schools directly accountable to parents. Schools that provide better quality will attract more parents, which creates an incentive for such schools to expand their operations and spurs other schools to imitate them. As the schools compete, the market rewards success and weeds out failure. Since the benefits of competition are proportional to the quantity and variety of competing schools, policymakers should avoid imposing regulations that artificially reduce the number of schools or narrow their variety.

Improved quality often requires innovation, and markets do a better job than government-directed systems of spreading the benefits of innovation while mitigating its dangers. In a market, parents who prefer time-tested pedagogic methods can choose schools that employ them. When a particular student is ill-suited to such a learning environment, her parents can opt for a more innovative school. As with quality generally, innovations that prove successful will then be replicated, while failures are eventually abandoned.

Government-directed education systems are more prone to adopting whatever fads catch the fancy of bureaucrats and politicians. Sometimes these innovations can prove disastrous, like the infamous “New Math” debacle during the post-Sputnik era. Worse, when the government adopts an ill-considered reform, it negatively affects far more students than when a single private school or group of schools adopts it. Moreover, it’s much more difficult and time-consuming to change a government policy.

Unfortunately, since the vast majority of American students attend government schools, the government crowds out innovation in the tiny remaining private sector. The small number of private schools does not suffice to support a great diversity of content providers, so even most private schools use textbooks and other materials designed to meet some state’s specifications (usually California, New York, or Texas). Significantly expanding the market by enacting educational choice laws would demand for alternatives to government-designed curricula.

Prices and Profit

Prices are necessary for the proper functioning of a market. Prices guide providers to areas where there is the greatest unmet demand and promote the most efficient use of scarce resources. Flexibility in pricing is necessary to the cycle of innovation — items that are mass commodities like air conditioners, DVRs, and smart phones were all considered luxury goods at one time. Not only are these goods less expensive than when they were first introduced to the market, but they are also technologically superior. Yet it is unlikely that the average citizen would be able to enjoy these products had their manufacturers been prohibited from charging a high enough price initially to recoup their investment in expensive research and development.

Out of a concern for equity, some policymakers seek to impose price controls on educational choice programs — e.g. forbidding schools from charging more than the amount of a student’s voucher or tax-credit scholarship. Such a policy is misguided. Eliminating the price mechanism deprives the education system of the crucial information prices provide and deprives schools of the additional funding they could receive from families that can afford to pay more. Price controls also tend to create shortages and reduce quality, harming the very students they are intended to help. So long as every child has access to a quality basic education, parents should not be deprived of the freedom to pay for more and better schooling.

Nor should schools be deprived of the ability to profit. In a competitive market, profits signal value creation. They also provide an incentive for existing providers to grow to meet demand, and for other providers to enter the field and emulate its leaders.

By contrast, non-profit firms are often content even when facing excess demand. Highly regarded nonprofit schools like Harvard University or the Sidwell Friends School have not expanded significantly over many decades despite very high demand for the education they offer. Instead, they prefer to be seen as “exclusive” and “selective.” Scaling-up access to quality education will require a robust for-profit presence in the marketplace.

Next up, read about Choice and Accountability.


Additional Resources