Schools & Competition

Matthew Yglesias:

Daniel Mitchell at Cato says school choice "is better than government-imposed monopolies" and also that "[t]he evidence about the school-choice systems in Sweden, Chile, and the Netherlands is particularly impressive."

I think the buyer needs to beware when he hears libertarian touting school choice concepts. Choice can add a lot of value to education, or it can be destructive. The details actually matter a great deal. Bentley MacLeod and Miguel Urquiola did a paper, "Anti-Lemons: School Reputation and Educational Quality" which sheds important light on this issue:

Friedman (1962) argued that a free market in which schools compete based upon their reputation would lead to an efficient supply of educational services. This paper explores this issue by building a tractable model in which rational individuals go to school and accumulate skill valued in a perfectly competitive labor market. To this it adds one ingredient: school reputation in the spirit of Holmstrom (1982). The first result is that if schools cannot select students based upon their ability, then a free market is indeed efficient and encourages entry by high productivity schools. However, if schools are allowed to select on ability, then competition leads to stratification by parental income, increased transmission of income inequality, and reduced student effort--in some cases lowering the accumulation of skill. The model accounts for several (sometimes puzzling) findings in the educational literature, and implies that national standardized testing can play a key role in enhancing learning.

Posted by Jim Zellmer at February 18, 2010 1:01 AM
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