Why school choice has failed to improve schools.

Why has school choice failed to improve the schools? The concept, argued by Chubb and Moe in their influential book Politics, Markets, and America's Schools was that competition would improve quality in the same way that it has for say, cell phones. This led to a proliferation of Charter schools—paid out of public funds, but independently run—which parents can choose among.

But as Diane Ravitch is documenting extensively in her blog, with the help of a torrent of information from outraged teachers around the country, this effort has failed. There are a few charter schools which are outstanding, but many are worse than the regular public schools, and most are no better.

In spite of the evidence, today the idea that making schools more like businesses would improve their quality has such an appeal that the majority of politicians, including both Democrats and Republicans, are still backing the current trend of school reform, in spite of its demonstrable failure.

Economists have pointed out that many conditions are necessary for a market to work in a way that improves the quality of products and services. When these conditions are absent it is called market failure. If we are going to stop the misguided juggernaut of school choice, we need a good theory of why exactly school choice is an example of market failure.

Paul Krugman I think gave us good clue about educational market failure in his discussion of prison privatization, which has had similar arguments and similar popularity and failure. He argued is that the companies competing for prison building and management are "definitely not ...competing in a free market. They are, instead, living off government contracts."

You don't have a competitive market when there is only one buyer, namely the government. In education we do have more competitive markets, namely in private schools. The buyers of private school education are many parents spending their own money for their own children.

When the government is the only buyer you have what is called a Principle-Agent Problem. The 'principle', in this case parents are having their agent, namely the government, doing the buying of charter school organizations to run schools. The problem is that the agent starts acting on its own behalf, not on behalf of the principles, the parents and their children.

What happens is that government officials get bought off, and give phony arguments to try to get re-elected. Now there are always problems with government contracts, as well as with private ones, and there are many efforts to try to remedy this problem. But the difficulty is that the advocates of privatization pretend that they are free marketeers, and there is a smoke screen over everything. Thus democratic processes, which might counteract the principle-agent problems, are stymied.

Krugman vividly argues this for the case of prison privatization:

"As more and more government functions get privatized, states become pay-to-play paradises, in which both political contributions and contracts for friends and relatives become a quid pro quo for getting government business. Are the corporations capturing the politicians, or the politicians capturing the corporations? Does it matter?

"Now, someone will surely point out that nonprivatized government has its own problems of undue influence, that prison guards and teachers’ unions also have political clout, and this clout sometimes distorts public policy. Fair enough. But such influence tends to be relatively transparent. Everyone knows about those arguably excessive public pensions; it took an investigation by The Times over several months to bring the account of New Jersey’s halfway-house-hell to light.

"The point, then, is that you shouldn’t imagine that what The Times discovered about prison privatization in New Jersey is an isolated instance of bad behavior. It is, instead, almost surely a glimpse of a pervasive and growing reality, of a corrupt nexus of privatization and patronage that is undermining government across much of our nation."

The principle-agent problems are by no means the only market failure at work. As Ravitch points out in a recent blog post, the parents making the choice are usually the poorest and least educated, so that the 'perfect information' that is necessary for the ideal competitive market is absent. But the information problem, I would argue, goes far deeper than that. You can only judge an education system long term. It is much more difficult to assess than a consumer good like a cell phone. In fact it is one of the most difficult things to assess, period. For this reason, the government relying on good research and decades of experience by educators is the only hope, not school choice.