- Email: [email protected]
Vouchers and the Provision of Public Services
606
Book reviews / Economics of Education Review 20 (2001) 603–614
Vouchers and the Provision of Public Services C.E. Steuerle, Van Doorn Ooms, George Peterson, and R.D. Reischauer (Eds), Brookings Institution Press, Washington D.C., 2000, pp. viii+552, Price $22.95 paperback While educators and educational policymakers argue vehemently over the merits of vouchers relative to the provision of educational services, the role of vouchers in the provision of housing, food stamps, medical care, transportation, employment training, and child care has grown enormously and largely uncontested during the last 20 years. The editors of Vouchers and the Provision of Public Services (2000), C. Eugene Steurerle, Van Doorn Ooms, George Peterson, and Robert D. Reischauer, provide an excellent overview of these practices, one that includes three very useful introductory chapters addressing general issues associated with vouchers, as well as their economics and politics. Additionally, the book advances a proposal for bundling vouchers in what is called “Structured Choice.” This idea addresses some of the regulatory problems associated with the increased number of vouchers administered to clients with multiple needs. One relatively straightforward but valuable feature of the book is that it provides a clear definition of vouchers. The authors suggest that the use of vouchers, while frequently discussed in terms of ideological rhetoric, can be more simply understood as a policy-neutral strategy for subsidizing support for social goods and services. In this respect, vouchers are simply defined as “a subsidy that grants limited purchasing power to an individual to choose among a restricted set of goods and services” (p. 4). But the simplicity ends after this brief introduction, and so does, I believe, the idea that vouchers are a neutral tool available to policymakers. A cornerstone of voucher-oriented social policies is the promotion of choice and competition in order to foster a responsive government, or, in the terms of one author, to overcome the “dead hand of bureaucracy.” I do not want to be overly critical of the proposition of policy neutrality and scientific objectivity claimed by many of the authors (e.g. Bishop) in their discussion of vouchers. It is not that they fail to see the politics inherent in voucher implementation, rather that what appears to be an editorial goal of policy neutrality tends to confuse the point of discussion. By contrast, Loomis’ chapter entitled, The Politics of Vouchers, notes that “There has been, to date, no attempt to describe…vouchers from a political perspective” (p. 95). He goes on to argue that there is no single “politics of vouchers,” which helps us understand why, in his illustration of the point, a $10 billion job * Tel.: +1 801 581 4817; fax: +1 801 585 6756.
training voucher program can sail through congress with relatively no controversy, while a $6.4 million dollar school voucher program emerges as a central battle among political leaders from congress, the Eagle Forum, the NEA and so on. The book provides detailed accounts of the history and application of vouchers as policy tools in the areas of housing, child care, and job training, to name a few. Summaries of such accounts allow us to consider what we have learned from these experiences, and apply our findings to, for instance, the issue of school vouchers. For example, the history of child care vouchers has evolved relatively smoothly. Thus, the authors of this chapter, Beshorov & Samari, ask: “Why do [child care] vouchers seem to enjoy much broader support than, say, school vouchers?” (p. 216). The authors argue that the success of child care vouchers can be understood by examining the characteristics of the market itself. Specifically, there is a pre-existing child care market with many willing participant/providers, compared to the relatively small number of nonprofit agencies operating large scale grant-based programs. Moreover, with younger children, the commodity exchanged was largely a service, or basic child care. The authors note, however, that as their children grow, parents seek more “educational” child care centers. Underlying these differences in choice are huge questions about parent involvement and responsibility, institutional structure, and administrative costs. Beshorov and Samari use their discussion of child care vouchers to highlight these issues, and draw for their readers a much larger picture of the issues underlying the use of vouchers as a policy tool. Four of the chapters in the book address the issue of vouchers and education. Hauptman describes the history of vouchers in higher education. Sawhill and Smith survey the experience of voucher/choice programs in elementary and secondary education. Bishop uses the TIMMS data for an international comparison of achievement among countries with varying levels of choice and voucher use. McConnell addresses the potential legal and constitutional issues associated with vouchers and public education. These are worthy chapters, but as is the case with so many voucher-related discussions, they raise questions more often than they provide answers. A key assumption underlying all the chapters, including those on education, is that choice and vouchers will promote efficiency, by creating competition that will drive out poor service providers and leave good ones. Absent from this discussion is adequate consideration of how the costs of obtaining and evaluating the information necessary to make good choices will impact the market in which parents and providers operate. In this respect, I have always been impressed with Akerlof’s (1970) much cited commentary on the “Market of the Lemons.” The general point is that where information asymmetries between provider and consumer exist,
Book reviews / Economics of Education Review 20 (2001) 603–614
which then creates potential moral hazards in the exchange, the costs associated with contracting and monitoring the agreement will discount the overall value of the product or service. Thus, using Akerlof’s logic, top quality educators will be inclined to seek alternative employment that more fully recognizes their value. In such a situation, competition may actually drive out the good providers and leave the mediocre. My desire to join the debate over the virtues and merits of voucher policies signals my interest in the topic and my belief in the importance of issues of choice. The book provides readers with a thorough and authoritative discussion of vouchers. The compendium of chapters offers perspective and, in many cases, much-needed balance to a discussion that too often is heated and emotional. Whatever one’s opinion of vouchers may be, the book’s clearest message is that vouchers are now established tools that can and are effectively used in the pursuit of social policy. However, as is the case with all tools, there are limits to their utility. Thus, their success will depend upon the sophistication of policymakers in matching the proper tool to the task at hand. Patrick Galvin University of Utah, Educational Leadership & Policy, 1705 E Campus Center Dr RM 339, Salt Lake City, UT 84112-9254, USA E-mail address: [email protected]
*
Reference Akerlof, G. A. (1970). The market for “lemons”: Quality, uncertainty, and the market mechanism. Quarterly Journal of Economics, 84, 488–500. PII: S 0 2 7 2 - 7 7 5 7 ( 0 1 ) 0 0 0 1 4 - 0
Needs-Based Resource Allocation in Education: Via Formula Funding of Schools Kenneth N. Ross and Rosalind Levacic (Eds.), UNESCO Publishing, Paris, 1999, pp. xi + 257, Price $80.00 cloth Production processes usually possess well-defined outcome objectives. The classical definition of a production function states that output is maximized given a set of inputs, or conversely, that a specified level of output is produced using a minimum of inputs. In either case, there is an optimization problem to be solved. Key to production is a technical relationship that transforms
* Tel.: +1 864 676 9002; fax: +1 864 676 0601.
607
scarce inputs into desired products. Educational production is no different. The production of educational output requires that resources be directed into a transformation process generating a well-educated citizenry. Scarcity of resources results in a positive price being attached to the acquisition of inputs. Given positive prices and the reality of budget constraints, educational policy makers often face difficult choices in their effort to supply adequate resources to the educational process. Special interest groups often add to the difficulty by being well-organized on singular issues. As editors, Ross and Levacic address many of these dilemmas in their book. In particular, they have assembled a collection of essays addressing a specific methodological approach to resourcing school systems. This approach is identified as needs-based formula funding. Needs-based formula funding of schools is an attempt to supply resources in a fair, yet objective and research-based manner. The essays, or chapters, in this book are organized into the following three distinct sections: conceptual and theoretical considerations, technical and quantifiable considerations, and case studies demonstrating realworld efforts at implementation of the needs-based formula funding criteria. Impressive is the fact that the chapters continually mingle political reality with the theoretical and technical aspects of formula funding. In fact, political developments of the last twenty years have formed the “market-based” environment often associated with needs-based funding. The rise of political conservatism in the 1980s resulted in considerable decentralization of educational decision making. This resulted in local school managers having substantial discretion in the use of a needs-based budget. The chapters contained in this book emphasize the potential benefits of having local managers allocate the lion’s share of the school budget, since they are intimately connected with the individual school’s environment. Fortunately, the authors do not allow the reader the opportunity of naivete´ by ending with this conclusion. Many of the chapters in the book point to the fact that local managers are optimizing agents and thus, are likely to manipulate funding under some formulae regimes. As a result, the central educational authority must build in behavioral incentives that help insure key values are recognized in local decision making. In chapter two, Caldwell, Levacic, and Ross define five conceptual components of needs-based formula funding. The majority of these are unquestionably political in nature. Included in the five values are liberty, equality, fraternity, efficiency, and economic growth. According to the authors of the chapter, these values can conflict with one another and, therefore, reality often dictates that only a subset of values finds its way into the actual funding formula. Very recently, however, political pressures have developed demanding that all five values be addressed in funding efforts. As a result, the case
Book reviews / Economics of Education Review 20 (2001) 603–614
Vouchers and the Provision of Public Services C.E. Steuerle, Van Doorn Ooms, George Peterson, and R.D. Reischauer (Eds), Brookings Institution Press, Washington D.C., 2000, pp. viii+552, Price $22.95 paperback While educators and educational policymakers argue vehemently over the merits of vouchers relative to the provision of educational services, the role of vouchers in the provision of housing, food stamps, medical care, transportation, employment training, and child care has grown enormously and largely uncontested during the last 20 years. The editors of Vouchers and the Provision of Public Services (2000), C. Eugene Steurerle, Van Doorn Ooms, George Peterson, and Robert D. Reischauer, provide an excellent overview of these practices, one that includes three very useful introductory chapters addressing general issues associated with vouchers, as well as their economics and politics. Additionally, the book advances a proposal for bundling vouchers in what is called “Structured Choice.” This idea addresses some of the regulatory problems associated with the increased number of vouchers administered to clients with multiple needs. One relatively straightforward but valuable feature of the book is that it provides a clear definition of vouchers. The authors suggest that the use of vouchers, while frequently discussed in terms of ideological rhetoric, can be more simply understood as a policy-neutral strategy for subsidizing support for social goods and services. In this respect, vouchers are simply defined as “a subsidy that grants limited purchasing power to an individual to choose among a restricted set of goods and services” (p. 4). But the simplicity ends after this brief introduction, and so does, I believe, the idea that vouchers are a neutral tool available to policymakers. A cornerstone of voucher-oriented social policies is the promotion of choice and competition in order to foster a responsive government, or, in the terms of one author, to overcome the “dead hand of bureaucracy.” I do not want to be overly critical of the proposition of policy neutrality and scientific objectivity claimed by many of the authors (e.g. Bishop) in their discussion of vouchers. It is not that they fail to see the politics inherent in voucher implementation, rather that what appears to be an editorial goal of policy neutrality tends to confuse the point of discussion. By contrast, Loomis’ chapter entitled, The Politics of Vouchers, notes that “There has been, to date, no attempt to describe…vouchers from a political perspective” (p. 95). He goes on to argue that there is no single “politics of vouchers,” which helps us understand why, in his illustration of the point, a $10 billion job * Tel.: +1 801 581 4817; fax: +1 801 585 6756.
training voucher program can sail through congress with relatively no controversy, while a $6.4 million dollar school voucher program emerges as a central battle among political leaders from congress, the Eagle Forum, the NEA and so on. The book provides detailed accounts of the history and application of vouchers as policy tools in the areas of housing, child care, and job training, to name a few. Summaries of such accounts allow us to consider what we have learned from these experiences, and apply our findings to, for instance, the issue of school vouchers. For example, the history of child care vouchers has evolved relatively smoothly. Thus, the authors of this chapter, Beshorov & Samari, ask: “Why do [child care] vouchers seem to enjoy much broader support than, say, school vouchers?” (p. 216). The authors argue that the success of child care vouchers can be understood by examining the characteristics of the market itself. Specifically, there is a pre-existing child care market with many willing participant/providers, compared to the relatively small number of nonprofit agencies operating large scale grant-based programs. Moreover, with younger children, the commodity exchanged was largely a service, or basic child care. The authors note, however, that as their children grow, parents seek more “educational” child care centers. Underlying these differences in choice are huge questions about parent involvement and responsibility, institutional structure, and administrative costs. Beshorov and Samari use their discussion of child care vouchers to highlight these issues, and draw for their readers a much larger picture of the issues underlying the use of vouchers as a policy tool. Four of the chapters in the book address the issue of vouchers and education. Hauptman describes the history of vouchers in higher education. Sawhill and Smith survey the experience of voucher/choice programs in elementary and secondary education. Bishop uses the TIMMS data for an international comparison of achievement among countries with varying levels of choice and voucher use. McConnell addresses the potential legal and constitutional issues associated with vouchers and public education. These are worthy chapters, but as is the case with so many voucher-related discussions, they raise questions more often than they provide answers. A key assumption underlying all the chapters, including those on education, is that choice and vouchers will promote efficiency, by creating competition that will drive out poor service providers and leave good ones. Absent from this discussion is adequate consideration of how the costs of obtaining and evaluating the information necessary to make good choices will impact the market in which parents and providers operate. In this respect, I have always been impressed with Akerlof’s (1970) much cited commentary on the “Market of the Lemons.” The general point is that where information asymmetries between provider and consumer exist,
Book reviews / Economics of Education Review 20 (2001) 603–614
which then creates potential moral hazards in the exchange, the costs associated with contracting and monitoring the agreement will discount the overall value of the product or service. Thus, using Akerlof’s logic, top quality educators will be inclined to seek alternative employment that more fully recognizes their value. In such a situation, competition may actually drive out the good providers and leave the mediocre. My desire to join the debate over the virtues and merits of voucher policies signals my interest in the topic and my belief in the importance of issues of choice. The book provides readers with a thorough and authoritative discussion of vouchers. The compendium of chapters offers perspective and, in many cases, much-needed balance to a discussion that too often is heated and emotional. Whatever one’s opinion of vouchers may be, the book’s clearest message is that vouchers are now established tools that can and are effectively used in the pursuit of social policy. However, as is the case with all tools, there are limits to their utility. Thus, their success will depend upon the sophistication of policymakers in matching the proper tool to the task at hand. Patrick Galvin University of Utah, Educational Leadership & Policy, 1705 E Campus Center Dr RM 339, Salt Lake City, UT 84112-9254, USA E-mail address: [email protected]
*
Reference Akerlof, G. A. (1970). The market for “lemons”: Quality, uncertainty, and the market mechanism. Quarterly Journal of Economics, 84, 488–500. PII: S 0 2 7 2 - 7 7 5 7 ( 0 1 ) 0 0 0 1 4 - 0
Needs-Based Resource Allocation in Education: Via Formula Funding of Schools Kenneth N. Ross and Rosalind Levacic (Eds.), UNESCO Publishing, Paris, 1999, pp. xi + 257, Price $80.00 cloth Production processes usually possess well-defined outcome objectives. The classical definition of a production function states that output is maximized given a set of inputs, or conversely, that a specified level of output is produced using a minimum of inputs. In either case, there is an optimization problem to be solved. Key to production is a technical relationship that transforms
* Tel.: +1 864 676 9002; fax: +1 864 676 0601.
607
scarce inputs into desired products. Educational production is no different. The production of educational output requires that resources be directed into a transformation process generating a well-educated citizenry. Scarcity of resources results in a positive price being attached to the acquisition of inputs. Given positive prices and the reality of budget constraints, educational policy makers often face difficult choices in their effort to supply adequate resources to the educational process. Special interest groups often add to the difficulty by being well-organized on singular issues. As editors, Ross and Levacic address many of these dilemmas in their book. In particular, they have assembled a collection of essays addressing a specific methodological approach to resourcing school systems. This approach is identified as needs-based formula funding. Needs-based formula funding of schools is an attempt to supply resources in a fair, yet objective and research-based manner. The essays, or chapters, in this book are organized into the following three distinct sections: conceptual and theoretical considerations, technical and quantifiable considerations, and case studies demonstrating realworld efforts at implementation of the needs-based formula funding criteria. Impressive is the fact that the chapters continually mingle political reality with the theoretical and technical aspects of formula funding. In fact, political developments of the last twenty years have formed the “market-based” environment often associated with needs-based funding. The rise of political conservatism in the 1980s resulted in considerable decentralization of educational decision making. This resulted in local school managers having substantial discretion in the use of a needs-based budget. The chapters contained in this book emphasize the potential benefits of having local managers allocate the lion’s share of the school budget, since they are intimately connected with the individual school’s environment. Fortunately, the authors do not allow the reader the opportunity of naivete´ by ending with this conclusion. Many of the chapters in the book point to the fact that local managers are optimizing agents and thus, are likely to manipulate funding under some formulae regimes. As a result, the central educational authority must build in behavioral incentives that help insure key values are recognized in local decision making. In chapter two, Caldwell, Levacic, and Ross define five conceptual components of needs-based formula funding. The majority of these are unquestionably political in nature. Included in the five values are liberty, equality, fraternity, efficiency, and economic growth. According to the authors of the chapter, these values can conflict with one another and, therefore, reality often dictates that only a subset of values finds its way into the actual funding formula. Very recently, however, political pressures have developed demanding that all five values be addressed in funding efforts. As a result, the case