- Email: [email protected]
Views on the economics of educational choice: A reply to West
Economrcs of Educahon Review. Vol. IO, No. 2, pp. 171-175, 1991. Printed in Great Britain.
U272-7757/91 $3.00 + 0.00 @ 1991 Pergamon Press plc
Views on the Economics of Educational A Reply to West HENRY
M.
Choice:
LEVIN
School of Education, Stanford University, Stanford, CA 94305, U.S.A
He continues:
INTRODUCTION PROFESSOR WEST has written an elegant and substantive critique of my essay on “The Economics of Educational Choice”. A major portion of his essay is devoted to an issue that I did not address, that of public finance of schools. West questions the wisdom of public support not only at the outset of his essay, but as a recurring theme throughout. To some degree it obscures points of agreement and disagreement between us because it is a challenge that is interwoven throughout his presentation, even though I do not address it. The purpose of this response is to clarify why I do not see this issue as central to an analysis of public and private choice in education as well as to address some of the other points on which he comments.
PUBLIC SUPPORT
FOR SCHOOLS
Virtually all debate over market or public choice approaches in education has assumed public finance of schools. Even Milton Friedman calls for public finance on the basis of neighborhood effects or social externalities. Friedman states: The education of my child contributes to your welfare by promoting a stable and democratic society. It is not feasible to identify the particular individuals (or families) benefited and so to charge for the services rendered (Friedman, 1962, p. 86).
there can be much honest difference of judgement about how extensive a subsidy is justified. Most of us, however, would probably conclude that the gains are sufficiently important to justify some government subsidy (Friedman, 1962, p. 88). On this basis he argues that basic schooling presumably elementary and secondary, but definitely not higher education -should be publicly subsidized. However, he believes that the state should not operate schools, but leave that to the private sector. Friedman separates the financing of education from its production and provision. This separation is precisely the reason that he calls for government financed vouchers to be given to parents to use at schools in an educational marketplace. My purpose was to compare market approaches financed by public funding in the form of vouchers with public choice approaches among and within government schools. West premises his critique on an appeal for a market approach based upon private support for schooling. Unlike Friedman, West argues for both private funding and private production of schooling. His principal objection to using public funds to support schooling is the high cost of such funding as reflected in the excess burden that it places on the economy in the form of administrative costs, economic distortions, and tax evasion. Although I think the estimates of excess
[Manuscript received 22 May 1990; accepted for publication 18 June 1990.1 171
172
Economics of Education Review
burden are on the high side, I will not use this space to question them. In his earlier and highly provocative work, West (1965) asserted that the putative external benefits of publicly-funded schooling in the U.K. were either highly exaggerated or non-existent. In this critique, West takes the more moderate position that the welfare costs of providing public support for schools are considerably higher than the value of any social benefits that are generated. Clearly, this is an issue that cannot be resolved in the absence of commensurate measures of the monetary values for assessing the far-reaching social consequences of schools. Haveman and Wolfe (1984) suggest that even limited attempts to document them show impressive economic returns. In similar fashion, recent benefitcost estimates of educational investment for disadvantaged students estimate social returns far in excess of anyone’s estimate of excess burden of taxation (Levin, 1989). The pioneering work of Weisbrod (1964) also demonstrates the potential for large social externalities of schooling. I have assumed along with Friedman and other economists that schools are foundational for an effectively functioning society and that society should provide a substantial share of their funding to cover the social benefits that democraticallyoriented schools confer. In my analysis of market and public choice approaches, I assume public support for either system. The question that West raises on who should pay for schooling is certainly an important one. However, he provides no empirical evidence on cost-benefit comparisons to support his contention that the social benefits of public financing for schools are less than the social costs. In contrast, there are a number of challenges that West poses that are central to my article and that merit a response. These include his assertions that: (1) government-funded institutions and non-profits cannot be as efficient as private market competitors; (2) existing comparisons understate costs of public schools relative to private ones; and (3) the poor have the most to gain from a market system in Each of these challenges deserves education. comment. CAN GOVERNMENT-FUNDED AND NONPROFIT INSTITUTIONS BE EFFICIENT? West
suggests
that,
by definition,
government-
sponsored and non-profit institutions cannot be as efficient in producing education as proprietary institutions devoted to profit. The importance of this assertion is that because almost all existing independent schools are non-profit, their performance is not indicative of the educational performance that could be attained from profit-making schools. His argument is derived largely from the standard analysis of property rights which suggests that proprietary firms have greater incentives to reduce shirking than do non-profit firms or government agencies. But, these distinctions are theoretical. West tries to demonstrate their validity by arguing that public funds used for private (presumably proprietary) high schools in Japan are heavily responsible for the heralded educational success of the Japanese. But, almost all elementary schooling is publicly provided in Japan, and the Japanese students excel at that level as well. Clearly, it cannot be private market efficiency that explains these differences at the primary level, and it is doubtful that this explanation is important at the secondary level. A far more important difference between the U.S. and Japan is that the Japanese home is an “education factory” with educational support considered to be a full-time job for the mother. Japanese children do not hold part-time jobs nor do they undertake household chores for fear that these will cut into homework. Furthermore, the achievement scores on university entrance exams are inextricably linked to both university selection, and, in turn, the individual’s future occupational status. A shift to an exam-based system of occupational assignment and to Japanese educational values and household production of education would reduce the achievement gap between the U.S. and Japan far more than a system of market choice. But, even Asians do not believe that it is private finance that determines educational quality. A recent survey of Asian businessmen by the Asian Wall Street Journal asked them to name the top universities in the world. Seven of the top 10 universities nominated in the survey were situated in the U.S., a group that included both non-profit and public institutions. Not a single one of the top 10 universities was a proprietary institution. As Henry Rosovsky (1987) wrote in an article in The New Republic, is there any other industry in which the U.S. ranks so highly? Does the U.S. have seven of the top 10 steel, auto, banking, construction, or electronics firms? The fact of the matter is that we
Views on the Economics of Educational Choice compete on a world scale much more successfully in higher education than we do in any industry with the possible exceptions of agriculture and airframes, two industries that have benefited from extraordinary public subsidies. Somehow this success has been achieved among non-profit and public universities exclusively, the very forms of educational sponsorship that West argues must lead to mediocrity and inefficiency. In this respect, West is preoccupied with the assumption that only in proprietary and for-profit institutions will the incentives be present for efficient monitoring of workers to reduce their shirking. Teachers are viewed as reluctant to put effort into their teaching unless monitored closely and disciplined; and, since private school teachers will have fewer opportunities to shirk, they will produce more private benefits. Finally, since public benefits are produced jointly with private benefits, the private school will still be producing considerable public benefits. But, this view is purely theoretical and ignores the fact that some public outputs such as exposure to competing points of view must necessarily be proscribed in private schools that seek to attract their clients on the basis of religious, philosophical or political values. The advantage of a market approach in producing greater private benefits is that a market promotes institutional missions or objective functions which stress the production of private benefits. It is precisely this differentiated competition for families with different religious, philosophical, political or educational values that is the strength of a private educational market for producing private benefits to families. Schools recruit teachers who are compatible with their missions or objective functions. That is both the strength of the market approach, but also its weakness in producing public goods. If we want to promote private schools competing strictly on the basis of parent choice, it is inconsistent to suggest that teachers will concern themselves with public benefits. Nor is it a matter of shirking. It would be absurd to suggest that teachers in religious schools should be evaluated to see if they are presenting an ecumenical approach to religion. In contrast, teachers recruited into public schools are more likely to be attracted to the combination of public and private goals that are reflected in the missions of those schools. Not surprisingly, Lortie (1975) has found that attitudes of public school
173
teachers are deeply rooted in these public values. Since we have no documented differences in teacher shirking between public and private schools, it seems more reasonable to believe that differences in public goods production are attributable to straightforward differences in curriculum and teacher selection,
ARE COST COMPARISONS
VALID?
In my article I stated that simple comparisons of costs of public with private schools tend to be biased because they use different accounting systems and do not adjust for the different output mixes. Tuition charges are typically used to indicate private school costs, while public school costs are based upon budgetary expenditures. Of particular concern are the omission of non-tuition sources of income and expenditure, the lack of accounting for churchprovided facilities, and non-market salaries of teachers from religious orders in Catholic schools. Furthermore, the private school output mix does not include the high cost programs in special education and vocational education that are required of public schools. West suggests that the reverse is true in that it is the costs of public schools that are underestimated relative to private school costs. As evidence, he suggests that the value of public school lands and property are not inlcuded in the calculations, nor are unfunded pension obligations. With respect to the value of public school lands and property, exactly the opposite is true. School districts must sell bonds in order to acquire new sites and buildings, and these debts must be serviced until the bonds are paid off. In some periods the annual costs will be overstated because of amortization of the debt over a shorter period than building life; in other periods the annual costs will be understated because the building has been paid for. But, over time all of the costs are captured in school expenditures. Costs of renovations and rehabilitation are generally included in the operating budget. In contrast, the 80% of students in Church-sponsored schools are often housed in Church-owned facilities that are provided to the schools and not reflected in school expenditures at all. With respect to unfunded pension obligations, the situation differs from state to state. But, costs in a pay-as-you-go pension plan are only understated in
174
Economics of Education Review
periods when benefit obligations are accruing at a faster rate than payments; they are overstated when the benefits that are accruing are less than those presently due. At any one time, a state can be either spending more or less than the true accrual costs for pensions, and in the long run the two must balance out. Public teacher employment was stable between 1976-1986, but the median age of teachers rose from 33 to 41 (U.S. Department of Education, 1989, pp. 68 and 72), a situation that does not suggest rising numbers of new teachers accumulating unfunded retirement debts. As any reader can verify, West does not undertake a systematic cost-analysis of public and private schools in the publication that he cites. His only direct reference to cost comparisons states: “One recent study shows that in the late 1970s in Manhattan the annual per pupil cost was $2647 in public schools but only $462 in Catholic schools” (West, 1981, p. 19). That is precisely the type of inappropriate comparison that is often made by private school advocates and that I was referring to in my cost analysis. Although West later acknowledges the low salaries of teachers from Catholic religious orders (West, 1981, p. 31), he suggests that there is no evidence that they are not receiving true market wages. In contrast, he argues that public school teachers are receiving wages that exceed their market value and productivity because of unionization. But, the leading work on this subject by Freeman and Medoff (1984) shows that, in general, the higher salaries of unionized workers attract more productive workers. Murnane and Olsen (Murnane, 1984, 1987; Murnane and Olsen, 1989a, 1989b, 1990) and Rumberger (1987) have found that the higher the salary of teachers relative to salaries in alternative occupations, the lower is teacher turnover and the higher is teacher quality. The costs of reduced turnover and the productivity impact of higher quality can easily compensate for or exceed the unionization premium. There can be little doubt that comparisons of tuition in private schools with total expenditures (even under present accounting systems) in public schools tend to understate private school costs relative to public school ones. It should also be noted that public subsidies to private schools in the form of public services and grants have been found to exceed a quarter of their total costs according to the only comprehensive study on this subject
(Sullivan, 1974, p. 93). In this respect, any argument of excess burden must also apply to existing private schools in some measure. As West states correctly, there are always transaction costs involved in state administration of public policy. Even when California monitors 1000 school districts to make sure that they are following state policy, there are transaction costs. But, consider the explosive growth of transaction costs in a shift to a voucher plan where the State of California would need to extend its oversight and compliance activities to the families of 5,000,OOO children and to 25,000 schools rather than letting local school districts make these decisions. Each of the 5,000,OOO children would need to be evaluated by a state agency independent of the schools to diagnose the child’s needs and ensure that the child was given a voucher of the appropriate size to address those needs and that the child was meeting compulsory attendance requirements in some approved school. This, alone, is a formidable challenge, given the high mobility of the parent population, and especially that of the poor. But, in addition, each school would have to be monitored by a state regulatory agency to establish eligibility to redeem vouchers under compulsory attendance laws. It is difficult for me to follow West’s assertion that transaction costs would be lower in a voucher system where the state ensured that even minimal educational policies were being followed.
WILL THE POOR BENEFIT FROM AN EDUCATIONAL MARKET? West argues that the poor would benefit most from an educational market. In support of this contention, he offers the usual logic of the competitive market as does Friedman. But, surely the poor will not benefit much if all school support is derived from private sources rather than public funding as he recommends. Surely there must be some public provision for supporting the education of poor families if they are to receive educational benefits. How the poor will fare depends upon the specific approach to choice. Fortunately, we do have empirical evidence on school choice among the poor in several contexts as I state in my article. Evidence from cities with magnet schools and from the Alum Rock choice experiment found consistently that
Views on the Economics persons from lower income backgrounds were least likely to know about the existence of choices or to exercise choice. One major obstacle is that schooling must be consumed at the site of purchase, and both information and transportation seem to be more difficult to cope with among persons with less education and lower incomes. The federal program of guaranteed student loans has been one in which the poor have been especially expoited by proprietary institutions. Recent exposes have shown that many of these proprietary institutions were established, not for the purpose of education, but to get poor and illiterate persons to sign up for courses of training by signing the loan forms. Prospective students were adults who were typically unemployed and on public assistance who were told that if they signed the appropriate forms they would be trained for available jobs in high-
of Educational
Choice
175
paying occupations at government expense. In fact, the schools relied heavily on salespersons who would stake out unemployment service lines and receive bounties for each signed form. A combination of poor educational preparation of the enrollees and inadequate equipment and staffing led to high dropout rates and high default rates on the loans. Many of these inner-city proprietary schools received virtually all of their incomes from government loans of which 70-80% were in default. I appreciate the very thoughtful response of E.G. West to my article and the provocative challenges that he raised. But, as in many areas of academic discourse, much of the disagreement remains. Acknowledgement-The
Author appreciates the thoughtful critique of E.G. West in stimulating his own thinking on these topics.
REFERENCES FREEMAN,R.B. and MEDOFF,J.L. (1984) What Do Unions Do? New York: Basic Books. FRIEDMAN,M. (1962) Capitalism and Freedom. Chicago: University of Chicago Press. HAVEMAN,R.H. and WOLFE, B.L. (1984) Schooling and economic well-being: the role of nonmarket effects. J. Hum. Resour. XIX, 377-407. LEVIN, H.M. (1989) Economics of investment in educationally disadvantaged students. Am. Econ. Rev. 79, 52-56. LORTIE, D.C. (1975) Schoolteacher: A Sociological Study. Chicago: University of Chicago Press. MURNANE,R.J. (1984) Selection and survival in the teacher labor market. Rev. Econ. Statist. 515-518. MURNANE,R.J. (1987) Understanding teacher attrition. Harvard Educ. Rev. 177-182. MURNANE,R.J. and OLSEN, R.J. (1989a) The effects of salaries and opportunity costs on duration in teaching: evidence from Michigan. Rev. Econ. Statist. 347-352. MURNANE,R.J. and OLSEN, R.J. (1989b) Will there be enough teachers? Am. Econ. Rev. 79.242-246. MURNANE,R.J. and OLSEN, R.J. (1990) The effects of salaries and opportunity costs on length of stay in teaching: evidence from North Carolina. J. Hum. Resour. 25, 106-124. ROSOVSKY,H. (1987) Highest education. New Repub. 29-30. RUMBERGER,R.W. (1987) The impact of salary differentials on teacher shortages and turnover: the case of mathematics and science teachers. Econ. Educ. Rev. 6, 389-400. SULLIVAN,D.J. (1974) Public Aid to Nonpublic Schools. Lexington, MA: Lexington Books. US. DEPARTMENT OF EDUCATION(1989) Digest of Education Stutistics, 1989, 25th edn. Washington, DC: Government Printing Office. WEISBROD,B.A. (1964) External Benefits of Public Education. Princeton: Industrial Relations Section, Princeton University. WEST, E.G. (1965) Education and the State. London: The Institute of Economic Affairs. WEST, E.G. (1981) The Economics of Education Tax Credits. Washington, DC: The Heritage Foundation.
U272-7757/91 $3.00 + 0.00 @ 1991 Pergamon Press plc
Views on the Economics of Educational A Reply to West HENRY
M.
Choice:
LEVIN
School of Education, Stanford University, Stanford, CA 94305, U.S.A
He continues:
INTRODUCTION PROFESSOR WEST has written an elegant and substantive critique of my essay on “The Economics of Educational Choice”. A major portion of his essay is devoted to an issue that I did not address, that of public finance of schools. West questions the wisdom of public support not only at the outset of his essay, but as a recurring theme throughout. To some degree it obscures points of agreement and disagreement between us because it is a challenge that is interwoven throughout his presentation, even though I do not address it. The purpose of this response is to clarify why I do not see this issue as central to an analysis of public and private choice in education as well as to address some of the other points on which he comments.
PUBLIC SUPPORT
FOR SCHOOLS
Virtually all debate over market or public choice approaches in education has assumed public finance of schools. Even Milton Friedman calls for public finance on the basis of neighborhood effects or social externalities. Friedman states: The education of my child contributes to your welfare by promoting a stable and democratic society. It is not feasible to identify the particular individuals (or families) benefited and so to charge for the services rendered (Friedman, 1962, p. 86).
there can be much honest difference of judgement about how extensive a subsidy is justified. Most of us, however, would probably conclude that the gains are sufficiently important to justify some government subsidy (Friedman, 1962, p. 88). On this basis he argues that basic schooling presumably elementary and secondary, but definitely not higher education -should be publicly subsidized. However, he believes that the state should not operate schools, but leave that to the private sector. Friedman separates the financing of education from its production and provision. This separation is precisely the reason that he calls for government financed vouchers to be given to parents to use at schools in an educational marketplace. My purpose was to compare market approaches financed by public funding in the form of vouchers with public choice approaches among and within government schools. West premises his critique on an appeal for a market approach based upon private support for schooling. Unlike Friedman, West argues for both private funding and private production of schooling. His principal objection to using public funds to support schooling is the high cost of such funding as reflected in the excess burden that it places on the economy in the form of administrative costs, economic distortions, and tax evasion. Although I think the estimates of excess
[Manuscript received 22 May 1990; accepted for publication 18 June 1990.1 171
172
Economics of Education Review
burden are on the high side, I will not use this space to question them. In his earlier and highly provocative work, West (1965) asserted that the putative external benefits of publicly-funded schooling in the U.K. were either highly exaggerated or non-existent. In this critique, West takes the more moderate position that the welfare costs of providing public support for schools are considerably higher than the value of any social benefits that are generated. Clearly, this is an issue that cannot be resolved in the absence of commensurate measures of the monetary values for assessing the far-reaching social consequences of schools. Haveman and Wolfe (1984) suggest that even limited attempts to document them show impressive economic returns. In similar fashion, recent benefitcost estimates of educational investment for disadvantaged students estimate social returns far in excess of anyone’s estimate of excess burden of taxation (Levin, 1989). The pioneering work of Weisbrod (1964) also demonstrates the potential for large social externalities of schooling. I have assumed along with Friedman and other economists that schools are foundational for an effectively functioning society and that society should provide a substantial share of their funding to cover the social benefits that democraticallyoriented schools confer. In my analysis of market and public choice approaches, I assume public support for either system. The question that West raises on who should pay for schooling is certainly an important one. However, he provides no empirical evidence on cost-benefit comparisons to support his contention that the social benefits of public financing for schools are less than the social costs. In contrast, there are a number of challenges that West poses that are central to my article and that merit a response. These include his assertions that: (1) government-funded institutions and non-profits cannot be as efficient as private market competitors; (2) existing comparisons understate costs of public schools relative to private ones; and (3) the poor have the most to gain from a market system in Each of these challenges deserves education. comment. CAN GOVERNMENT-FUNDED AND NONPROFIT INSTITUTIONS BE EFFICIENT? West
suggests
that,
by definition,
government-
sponsored and non-profit institutions cannot be as efficient in producing education as proprietary institutions devoted to profit. The importance of this assertion is that because almost all existing independent schools are non-profit, their performance is not indicative of the educational performance that could be attained from profit-making schools. His argument is derived largely from the standard analysis of property rights which suggests that proprietary firms have greater incentives to reduce shirking than do non-profit firms or government agencies. But, these distinctions are theoretical. West tries to demonstrate their validity by arguing that public funds used for private (presumably proprietary) high schools in Japan are heavily responsible for the heralded educational success of the Japanese. But, almost all elementary schooling is publicly provided in Japan, and the Japanese students excel at that level as well. Clearly, it cannot be private market efficiency that explains these differences at the primary level, and it is doubtful that this explanation is important at the secondary level. A far more important difference between the U.S. and Japan is that the Japanese home is an “education factory” with educational support considered to be a full-time job for the mother. Japanese children do not hold part-time jobs nor do they undertake household chores for fear that these will cut into homework. Furthermore, the achievement scores on university entrance exams are inextricably linked to both university selection, and, in turn, the individual’s future occupational status. A shift to an exam-based system of occupational assignment and to Japanese educational values and household production of education would reduce the achievement gap between the U.S. and Japan far more than a system of market choice. But, even Asians do not believe that it is private finance that determines educational quality. A recent survey of Asian businessmen by the Asian Wall Street Journal asked them to name the top universities in the world. Seven of the top 10 universities nominated in the survey were situated in the U.S., a group that included both non-profit and public institutions. Not a single one of the top 10 universities was a proprietary institution. As Henry Rosovsky (1987) wrote in an article in The New Republic, is there any other industry in which the U.S. ranks so highly? Does the U.S. have seven of the top 10 steel, auto, banking, construction, or electronics firms? The fact of the matter is that we
Views on the Economics of Educational Choice compete on a world scale much more successfully in higher education than we do in any industry with the possible exceptions of agriculture and airframes, two industries that have benefited from extraordinary public subsidies. Somehow this success has been achieved among non-profit and public universities exclusively, the very forms of educational sponsorship that West argues must lead to mediocrity and inefficiency. In this respect, West is preoccupied with the assumption that only in proprietary and for-profit institutions will the incentives be present for efficient monitoring of workers to reduce their shirking. Teachers are viewed as reluctant to put effort into their teaching unless monitored closely and disciplined; and, since private school teachers will have fewer opportunities to shirk, they will produce more private benefits. Finally, since public benefits are produced jointly with private benefits, the private school will still be producing considerable public benefits. But, this view is purely theoretical and ignores the fact that some public outputs such as exposure to competing points of view must necessarily be proscribed in private schools that seek to attract their clients on the basis of religious, philosophical or political values. The advantage of a market approach in producing greater private benefits is that a market promotes institutional missions or objective functions which stress the production of private benefits. It is precisely this differentiated competition for families with different religious, philosophical, political or educational values that is the strength of a private educational market for producing private benefits to families. Schools recruit teachers who are compatible with their missions or objective functions. That is both the strength of the market approach, but also its weakness in producing public goods. If we want to promote private schools competing strictly on the basis of parent choice, it is inconsistent to suggest that teachers will concern themselves with public benefits. Nor is it a matter of shirking. It would be absurd to suggest that teachers in religious schools should be evaluated to see if they are presenting an ecumenical approach to religion. In contrast, teachers recruited into public schools are more likely to be attracted to the combination of public and private goals that are reflected in the missions of those schools. Not surprisingly, Lortie (1975) has found that attitudes of public school
173
teachers are deeply rooted in these public values. Since we have no documented differences in teacher shirking between public and private schools, it seems more reasonable to believe that differences in public goods production are attributable to straightforward differences in curriculum and teacher selection,
ARE COST COMPARISONS
VALID?
In my article I stated that simple comparisons of costs of public with private schools tend to be biased because they use different accounting systems and do not adjust for the different output mixes. Tuition charges are typically used to indicate private school costs, while public school costs are based upon budgetary expenditures. Of particular concern are the omission of non-tuition sources of income and expenditure, the lack of accounting for churchprovided facilities, and non-market salaries of teachers from religious orders in Catholic schools. Furthermore, the private school output mix does not include the high cost programs in special education and vocational education that are required of public schools. West suggests that the reverse is true in that it is the costs of public schools that are underestimated relative to private school costs. As evidence, he suggests that the value of public school lands and property are not inlcuded in the calculations, nor are unfunded pension obligations. With respect to the value of public school lands and property, exactly the opposite is true. School districts must sell bonds in order to acquire new sites and buildings, and these debts must be serviced until the bonds are paid off. In some periods the annual costs will be overstated because of amortization of the debt over a shorter period than building life; in other periods the annual costs will be understated because the building has been paid for. But, over time all of the costs are captured in school expenditures. Costs of renovations and rehabilitation are generally included in the operating budget. In contrast, the 80% of students in Church-sponsored schools are often housed in Church-owned facilities that are provided to the schools and not reflected in school expenditures at all. With respect to unfunded pension obligations, the situation differs from state to state. But, costs in a pay-as-you-go pension plan are only understated in
174
Economics of Education Review
periods when benefit obligations are accruing at a faster rate than payments; they are overstated when the benefits that are accruing are less than those presently due. At any one time, a state can be either spending more or less than the true accrual costs for pensions, and in the long run the two must balance out. Public teacher employment was stable between 1976-1986, but the median age of teachers rose from 33 to 41 (U.S. Department of Education, 1989, pp. 68 and 72), a situation that does not suggest rising numbers of new teachers accumulating unfunded retirement debts. As any reader can verify, West does not undertake a systematic cost-analysis of public and private schools in the publication that he cites. His only direct reference to cost comparisons states: “One recent study shows that in the late 1970s in Manhattan the annual per pupil cost was $2647 in public schools but only $462 in Catholic schools” (West, 1981, p. 19). That is precisely the type of inappropriate comparison that is often made by private school advocates and that I was referring to in my cost analysis. Although West later acknowledges the low salaries of teachers from Catholic religious orders (West, 1981, p. 31), he suggests that there is no evidence that they are not receiving true market wages. In contrast, he argues that public school teachers are receiving wages that exceed their market value and productivity because of unionization. But, the leading work on this subject by Freeman and Medoff (1984) shows that, in general, the higher salaries of unionized workers attract more productive workers. Murnane and Olsen (Murnane, 1984, 1987; Murnane and Olsen, 1989a, 1989b, 1990) and Rumberger (1987) have found that the higher the salary of teachers relative to salaries in alternative occupations, the lower is teacher turnover and the higher is teacher quality. The costs of reduced turnover and the productivity impact of higher quality can easily compensate for or exceed the unionization premium. There can be little doubt that comparisons of tuition in private schools with total expenditures (even under present accounting systems) in public schools tend to understate private school costs relative to public school ones. It should also be noted that public subsidies to private schools in the form of public services and grants have been found to exceed a quarter of their total costs according to the only comprehensive study on this subject
(Sullivan, 1974, p. 93). In this respect, any argument of excess burden must also apply to existing private schools in some measure. As West states correctly, there are always transaction costs involved in state administration of public policy. Even when California monitors 1000 school districts to make sure that they are following state policy, there are transaction costs. But, consider the explosive growth of transaction costs in a shift to a voucher plan where the State of California would need to extend its oversight and compliance activities to the families of 5,000,OOO children and to 25,000 schools rather than letting local school districts make these decisions. Each of the 5,000,OOO children would need to be evaluated by a state agency independent of the schools to diagnose the child’s needs and ensure that the child was given a voucher of the appropriate size to address those needs and that the child was meeting compulsory attendance requirements in some approved school. This, alone, is a formidable challenge, given the high mobility of the parent population, and especially that of the poor. But, in addition, each school would have to be monitored by a state regulatory agency to establish eligibility to redeem vouchers under compulsory attendance laws. It is difficult for me to follow West’s assertion that transaction costs would be lower in a voucher system where the state ensured that even minimal educational policies were being followed.
WILL THE POOR BENEFIT FROM AN EDUCATIONAL MARKET? West argues that the poor would benefit most from an educational market. In support of this contention, he offers the usual logic of the competitive market as does Friedman. But, surely the poor will not benefit much if all school support is derived from private sources rather than public funding as he recommends. Surely there must be some public provision for supporting the education of poor families if they are to receive educational benefits. How the poor will fare depends upon the specific approach to choice. Fortunately, we do have empirical evidence on school choice among the poor in several contexts as I state in my article. Evidence from cities with magnet schools and from the Alum Rock choice experiment found consistently that
Views on the Economics persons from lower income backgrounds were least likely to know about the existence of choices or to exercise choice. One major obstacle is that schooling must be consumed at the site of purchase, and both information and transportation seem to be more difficult to cope with among persons with less education and lower incomes. The federal program of guaranteed student loans has been one in which the poor have been especially expoited by proprietary institutions. Recent exposes have shown that many of these proprietary institutions were established, not for the purpose of education, but to get poor and illiterate persons to sign up for courses of training by signing the loan forms. Prospective students were adults who were typically unemployed and on public assistance who were told that if they signed the appropriate forms they would be trained for available jobs in high-
of Educational
Choice
175
paying occupations at government expense. In fact, the schools relied heavily on salespersons who would stake out unemployment service lines and receive bounties for each signed form. A combination of poor educational preparation of the enrollees and inadequate equipment and staffing led to high dropout rates and high default rates on the loans. Many of these inner-city proprietary schools received virtually all of their incomes from government loans of which 70-80% were in default. I appreciate the very thoughtful response of E.G. West to my article and the provocative challenges that he raised. But, as in many areas of academic discourse, much of the disagreement remains. Acknowledgement-The
Author appreciates the thoughtful critique of E.G. West in stimulating his own thinking on these topics.
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