School Choice:

Can It Improve the Quality

of Education in America?
Full Length Text — Part: 6 Special Topic: 10
Micro Only Text — Part: 4 Special Topic: 8

To Accompany “Economics: Private and Public Choice 13th ed.”

James Gwartney, Richard Stroup, Russell Sobel, & David Macpherson
Slides authored and animated by:
Joseph Connors, James Gwartney, & Charles Skipton

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Educational Spending
and Student Performance

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Educational Spending
and Student Performance
• In recent decades, Americans have been
concerned about the poor performance of
students and rising costs of education. The
numbers tell the story.

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Average SAT Test Scores
Combined SAT
Test Score
1060

1040

1020

1000

980

1967 1970 1975 1980 1985 1990 1995 1999 2005 2007

• The achievement scores of U.S. students dropped in the ‘70s,

changed little in the ‘80s, and have risen modestly since.

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A Cross-Country Comparison
of Average 8th Grade Math Scores
Average 8th Grade Mathematics Achievement Score: 2006
Canada 534
Japan 531
Australia 527
Germany 516
U.K. 515
Austria 511
Belgium 510
Hungary 504
Country average 500
Poland 498
France 495
U.S. 489
Italy 475
• The mathematics achievement scores of eighth grade
American students lag behind those of many other countries.
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Real Spending Per Pupil
Real Spending per Elementary & Secondary Pupil
(in 2005 dollars)
$ 10,000

$ 8,000

$ 6,000

$ 4,000

1970 1975 1980 1985 1990 1995 2000 2005

• Real spending per pupil on public elementary and secondary

schools more than doubled during the 1970-2005 period.

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 A Cross-country Comparison
of Spending Per Primary Pupil, 2005
Hungary $ 4,438
Korea $ 4,691
Germany $ 5,014
France $ 5,365
Australia $ 5,992
OECD Average $ 6,252
U.K. $ 6,361
Belgium $ 6,648
Japan $ 6,744
Italy $ 6,835
Sweden $ 7,532
U.S. $ 9,156
Source: OECD, Education at a Glance, 2001.

• Spending per primary student in the United States is among

the highest in the world.
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Economics and the Structure
of the Educational System

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Economics of the Educational System
• Economic analysis indicates the structure
of the educational system may well be a
contributing factor to its high cost and poor
student performance of recent decades.
• Education is largely provided by
government-operated firms with substantial
monopoly power.
• Competition is largely absent; educational
consumers have limited choice among
schools.
• Because it is costly for parents and students
to shift away from low-quality schools, they
are in a weak position to discipline and
direct schools.

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Economics of the Educational System
• Public school administrators have a strong
incentive to expand their budgets by seeking
additional funding from budgetary agencies,
but have a weak incentive to cater to the
views of parents and students.
• This structure is likely to result in higher
schooling costs and a disconnect between
the quality (and structure) of schools and the
preferences of educational consumers.

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Questions for Thought:
1. “The best strategy to reverse the decline in
student performance in recent decades is to
increase spending on education.”
-- Evaluate this statement.
2. “Public school administrators have strong
economic incentives to operate efficiently.”
-- Evaluate this statement.

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Alternative Ways of
Increasing Competition and
Expanding Consumer Options

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School Vouchers
• Under a pure voucher plan, rather than
financing schools directly, the government
would provide students with a certificate
equal to the current expenditure per pupil.

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School Vouchers
• Advantages:
• A voucher plan would put competition to
work to improve our schools.
• A voucher system would also encourage
diversity, which would allow a larger number
of Americans to choose a type of schooling
that is more consistent with their preferences.
• Objections:
• Beneficiaries would be high income families.
• Racial imbalance might increase.
• Funds would be drained away from public
schools, causing them to further deteriorate.
• A voucher plan targeted towards low- and
middle-income families would eliminate
these objections.
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Charter Schools
• Charter schools are publicly funded but
are run independently from the traditional
public school system.
• Charter schools operate under a contract
(“charter”) with a government agency.
• Charter schools differ from voucher programs
in some dimensions.
• Religious schools are not permitted to be
charter schools, while vouchers are sometimes
permitted to be used at such schools.
• Charter schools are not permitted to charge
tuition as all of their students are subsidized
by public funds.
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Choice for Students
of Failing Schools
• Alternatively, parents with children in failing
schools could be provided with vouchers.
• Students would get a voucher to cover the
cost of education at an alternative private
school or let parents choose another public
school if their public school fails.

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The Effect of
Structural Change

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Impact of Structural Change
• Thus far, movement towards school choice
has been modest. Preliminary findings
indicate:
• The achievement scores of African-American
students tend to be higher after one to two
years in voucher programs.
• The impact of charter schools on student
achievement is inconclusive.
• Most parents of students in charter schools
and voucher programs indicate they are
highly satisfied with their children’s schools.
• Targeted voucher programs tend to increase
racial integration in schools in highly
segregated communities.

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Questions for Thought:
1. Should parents have the right to choose which
school their children attend? Discuss.
2. Suppose that statistical studies indicated that
additional choice did not change student
performance, but that it did improve student
and parental satisfaction with schools. Would
these findings strengthen the case for school
choice?

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 End
Special Topic 10

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