From The Bluegrass Institute
By John Garen
Gov. Steve Beshear outlined in his inaugural address a sampling of Kentucky’s economic problems. He urged leaders to “take bold steps” to resolve them.
By John Garen
Gov. Steve Beshear outlined in his inaugural address a sampling of Kentucky’s economic problems. He urged leaders to “take bold steps” to resolve them. I agree with the governor. Kentucky faces serious issues that require bold action. And I’m going to suggest a bold step for our state that I hope lawmakers take seriously.
I am not alone, and I think the time is right: Let’s have serious education reform that brings market-based incentives into the province of primary and secondary education by creating charter schools and voucher systems.
Before you say they won’t work, remember that these kind of free-market ideas work everywhere else.
We rely heavily on market incentives for so many goods and services. Yet, we rely so little on them in education. We utilize the free market with everything from food, housing and clothing to the frivolous Magic 8-Ball and Whoopee Cushion.
Market incentives drive the mundane – paper towels and flashlight batteries – and the intangible – music, art and film, which touch deep emotional chords. Market-driven goods range from the simple to the sophisticated, such as automobiles, jet engines, digital cameras and complex legal cases.
The free-market system works pretty well. But somehow lawmakers resist using it in primary and secondary education policies. Given the considerable dissatisfaction with public schools, it’s high time to consider alternatives.
First, free and competitive markets create a great incentive system. An important basis for markets involves voluntary exchange. In order to profit, the seller must provide something that someone else wants. This forces the seller to provide something valuable.
Second, the free market creates competition. Not only must sellers provide something
valuable, its quality must match or exceed the competition. Sellers that provide better products draw customers. Sellers that improve efficiency increase profits.
These mechanisms disappear when government provides goods and services – the case with public education. Public schools get customers “assigned” to them based on a neighborhood. As a result, competition disappears. Yes, a family can choose schools by moving to a different neighborhood – a cumbersome and expensive way to create competition, thus limiting it.
Also, public schools automatically get money they need to operate from state and local governments. This eliminates the need to satisfy the customers – parents with students in a school. And it adds more reasons to please the political “masters” who control the money. All of this reduces the need for efficient spending, since the same number of students attend the school, regardless of the school’s policies or performance.
Bringing market-type incentives into public education does not necessarily translate into a lack of government support for schools. For example, government gives money to families to buy food in a foo-stamp program, even though they shop exclusively at privately operated stores.
One way to do this in education is by creating a charter-school policy. Here’s how charter schools can improve public education:
• Charter schools are privately run schools “chartered” by school districts and can enroll any student who wants to attend. The public’s money for the student gets credited to the school. So, parents dissatisfied with their child’s school can apply for a student’s admission to a charter school.
• The public schools must compete with the charter schools, and incentives to satisfy families and students enrolled in the public schools emerge – more bang for the buck.
A full-fledged voucher system represents an even bigger step toward market-based education incentives. Vouchers work this way:
A full-fledged voucher system represents an even bigger step toward market-based education incentives. Vouchers work this way:
• Parents get money, a “voucher,” for each of their children, and parents can spend the voucher at a school they choose. Parents can use the voucher at public or private schools.
• Parents can “top off” a voucher, meaning they can add their money to the voucher if they want to send a student to a more expensive school. For example, a school that charges tuition of $10,000 per year becomes affordable even to families of modest means with an $8,000 voucher.
• This education system operates no differently than the aforementioned food-stamps program.
Do not equate charters and vouchers with wild, untried schemes dreamt up by cranks.
They work in many places throughout the United States. Nationwide, charter schools have become increasingly common and now account for 1.8 percent of enrollment – but not in Kentucky.
The state tried to move to the forefront of education reform with the passage of Kentucky Education Reform Act 1990. But 18 years later, you cannot find Kentucky on the education-reform radar.
Moving to a system with market incentives ingrained in our educational system presents significant challenges, including implementation and transition issues, along with considerable political resistance and others. But overcoming these hurdles offers the best chance for an effective primary and secondary schooling system.
Let’s take this bold step.
John Garen is department chair and Gatton Endowed Professor of Economics at the University of Kentucky, and an adjunct scholar with the Bluegrass Institute, Kentucky’s free-market think tank. A version of this article appeared in Business Lexington.
