Essay

Vouchers to Pay Private School Tuition

Two conditions that justify government intervention in a market are the presence of external benefits and equity concerns (Both these issues are present in the case of primary and secondary education in the United States.  We will consider these issues one at a time, but first, think about what education without government education would look like.

In the absence of government intervention, all primary and secondary education in the US would be private.  Public school districts would not exist.  Parents would need to pay private firms (schools) to educate their children. 

External benefits

If all education were private, it's likely that people would buy too little education, from society's point of view.  External benefits are one reason.  When a child is educated, she benefits-and we expect her parents to take those benefits into account when they purchase her education.  But there are additional benefits to society which her parents may ignore.  As people become more educated, they are less likely to be unemployed or be criminals and more likely to volunteer and vote.  The presence of these external benefits argues for government getting involved.

Equity

Equity concerns may also argue for a government role.  Many families in the United States have low incomes.  Among all children in first through twelfth grades in 2001, 46% were from families with incomes below $40,000.  Since the cost of private education would be an important share of these families' incomes, most Americans would be concerned about the fairness of relying on markets to decide how much education children receive.  Current spending by these families on private education provides some support for this concern.  Of all children in private school in 2001, only 25% were from families with incomes below $40,000.

Providing vs. producing education

Most economists think external benefits and equity concerns justify government intervention in education.  But it is important to distinguish between government production of education and other forms of government intervention.  At the level of elementary and secondary education-K-12 education-government intervention today mostly means production of education by local school districts.  To benefit, children must attend public schools.  But this is not the only form intervention could take.  There are other markets where government intervention takes the form of subsidizing people's access to products-think of financial aid to college students, for example.  Many people in the US think that government should move from producing education to subsidizing access. 

One form that subsidy could take is government providing vouchers to parents.  Parents would use the voucher to help pay for, their child's education in a private school.  After it receives the voucher, the school would turn it in and be paid by a local or state government.

Today there is a lively debate between people who think K-12 education should be delivered publicly and people who think quality and efficiency would be higher if government provided vouchers and the education was delivered by private schools.  Some of these quality and efficiency arguments are based on the mechanisms outlined in Chapter 3.  Price competition between private schools will pressure each one to produce efficiently.  Competition for students will lead private schools to offer programs of interest to parents and their children.

Questions

1) Will potential exit by students with vouchers lead to improvement in public schools?

2) Will vouchers lead the best students to leave public schools, worsening the education for the students left behind?

3) Would a universal voucher system-one available to all the children in a city, for example-mostly benefit high income families.