School vouchers at any price?

The IPA’s Julie Novak received good media coverage earlier in the week for her new paper on vouchers.

I’m certainly in favour of school choice. But I’m not convinced that Julie’s proposals – which would cost between $5 billion and $10 billion, depending on various options – represent value for money. Most of it would be spent giving current private school parents the entitlement they would have received had they sent their kids to a government school.

It’s paying people to do what they would do themselves anyway without public assistance. As a classical liberal, I need a lot of convincing that this is a sensible use of taxpayers’ funds (and personally I have difficulty with yet more income redistribution to people with school-age kids).

It is likely to speed up the current trend, by which private schools gain 0.3-0.4% of market share each year. But there are limits on how quickly private schools can expand, and even at triple that rate the majority of kids will still attend government schools for years to come.

So I do not believe that school choice can be achieved through the marginal method of speeding the shift to private schools. We have to tackle the central problem of centralised state education bureaucracies exercising too much control over government schools and over curriculum.

One potential model for government schools is public universities, which retain their public status while enjoying a reasonably high degree of operational autonomy (though they have signed too much of this away to get federal cash). I’d favour creating chains of quasi-government schools; large enough to get some economies of scale and to establish brands in the market, but not big enough to be dominant players. They would then be given substantial control over hiring and firing, curriculum, teaching methods etc.

Ideally, I’d also abolish guaranteed free public education, and fund all schools on a version of the SES model (the principles behind it, not the mess it has become). This means that middle-class parents would pay more, though poorer families in private schools would pay less since free education for the poor would be retained. This is a fair proposal in my view, and one that could lead to a reduction in total government expenditure rather than the increase Julie proposes.

However I would not jeopardise the educational, cultural and political benefits of abolishing centrally-controlled public education to make middle-class parents pay what they should. In that sense, I view a voucher system that treats all families equally as a second priority reform.

24 thoughts on “School vouchers at any price?

  1. “We have to tackle the central problem of centralised state education bureaucracies exercising too much control over government schools and over curriculum”
    I could be wrong about this, but I’m under the impression the state governments don’t generally have control of this latter one. It’s the schools that choose whatever is dished up to them by the government of the day, and they can, for example, choose the IB or other equivalents if they really want (no doubt with many hassles — although I seem to remember a public school here in VIC thinking about it some months ago).
    You can also definitely add lots of weird stuff in primary schools and ignore stuff as you please too — there are Steiner programs running in government schools in Australia, for example, and they teach kids to read one way that is not the recommended method by any government, so they must be ignoring the curricula given to them. No doubt there are religious examples also.
    I imagine what is holding most schools back from worrying about this at all is that you would need teachers available to teach different new curricula, whom I imagine would be hard to find. This is of course the problem of going back to “old-style” literacy teaching, since many teachers simply don’t know enough about language to do it (probably most in younger age groups), or trying to teach Asian languages when there simply arn’t enough teachers that know Asian languages.
    The other problem is that there are going to be no real markets for lesser known curricula unless universities decide to recognize them easily (which seems rather unlikely to me), so you are basically left with a very small number of possibilities in any case.


  2. There are some government schools offering the IB, though I am not sure what hoops they have to jump through to do so. But I’m not talking about niche curricula (important as these are to some students), but large-scale alternatives intended for mass use. Privatising existing state curriculum development would be the start of competitive curricula.


  3. I think the IB offers the best alternative at present, since it’s well respected and is done by an organization that doesn’t have to bow to any particular government, so they can keep decent standards (unlike, for example, A-levels, and what is dished up in Australia). It’s the best private curriculum intended for mass use that I can think of (there are others). The fact that it isn’t taken up shows you the practical problems of having and using private curricula.
    In this respect, I don’t see how privatizing this at the state level is going to solve many problems, since it is basically a monopoly, which means students would simply be switching from what the government is doing now to what some other group would offer. Since there are huge switch-over costs, no doubt they would just stay with whoever they picked at all possible costs. Also, if schools had to make a choice between many, why wouldn’t they just take the IB if they had infinite resources since it has so many benefits, like world-wide acceptance? It seems to me anything new would need huge marketing.
    I also doubt this would get rid of political corruption (“dumbing down of the curriculum to increase numbers”), since private providers would no doubt try and develop whatever brings the biggest smile to the government’s face to get the contract. It would also absolve the government from essentially any responsibility if something didn’t work or if some school used a curriculum that had a very low standard (“we asked the best people in the field to develop it…”..”let’s try someone else”).
    Perhaps I’m just missing something here. Privatising the curriculum can mean lots of things like:
    1) Government just disappears
    2) Government recommends but doesn’t do
    3) Government contracts _a_ provider
    4) Government contracts multiple providers


  4. Conrad – I’m thinking mainly of (1). The government would have no direct involvement.

    The regular controversies we get over curriculum seem to be symptoms of dissatisfaction that could be exploited in the market. It’s not clear to me either that selling an entire curriculum is needed either – it could be for particular subjects, though I can also see advantages in integrated packages.

    We’ve regularly imposed switch-over costs on schools – we are doing it again with national curriculum – so I don’t think this is an insurmountable obstacle.

    I don’t believe that there would be huge overnight change. Schools are conservative places (in the sense of resisting change, not ideologically), non-profits have weaker incentives to innovate, etc

    But what I am trying to do is set up a market structure that will make this market more like others, with many producers constantly experimenting and improving and fixing to maintain or increase market share.


  5. A lot of schools are quite constrained by the necessity to play the university entrance marks game.

    Universities all develop their own curriculum for each subject. Do we assume that our school teachers in general aren’t competent enough in their areas to do the same?

    Chains of schools could be a successful model as long as they are not geographically grouped. If there is the east-side grouping, west-side grouping, etc… this would not provide choice or differentiation (unless you are prepared to travel across town, which is a major commitment).


  6. I agree, with a bit of reluctance, on vouchers, Andrew.
    The most important problem is how the standard of education at the worst public schools can be lifted.
    I suspect this is a management problem – poor recruiting, motivating and managing teachers. So part of the solution might be to make schools more independent of central control and give principals more responsibility. Perhaps the university governance model would help, though they have become more bureaucratic as they became freer.
    The frustrating thing is that we all know what a good teacher and a bad teacher look like. We want more of them and fewer of those, please.
    And somewhere in there the power of the unions needs to be tackled.


  7. You’re becoming a nay-sayer. This is the second voucher type scheme that you’ve argued against and you are still pro-conscription on student unionism. Fair enough you suggested that the previous voucher scheme would fail and discredit the idea, but if voucher schemes are so fragile in principle can we have confidece that they would ever succeed? On that note, any scheme that is perceived as ripping money out of education is likely to fail in a political sense, so vouchers have to add money to the system not take out money.


  8. Sinc – Vouchers are ‘fragile’. Their purpose is to mimic markets, but if you take out a key element of markets (eg price flexibility, as in higher ed) or exclude new entrants (higher ed) or leave the dominant providers with very little capacity to respond to demand signals (Julie’s voucher scheme) they are not going to work as hoped.

    As my post says, I think shrinking government, though an important goal, is not as important as improving schools. That’s why I suggest supply-side reforms in the public sector, which I think would deliver educational improvements at probably less than 10% of the cost of Julie’s scheme.


  9. “which I think would deliver educational improvements at probably less than 10% of the cost of Julie’s scheme”
    I really doubt this. It seems me to the big long term problem is lots of academically poor people become teachers (was the average ENTER score 62 last time I checked? I know the average was still declining). The only way to fix this is going to be to increase wages, which I presume make up the large percentage of school costs. The average person also has a poor understanding of child development. This is why people only care about high schools and not primary schools, and why there is such a discrepancy between parents paying for high school versus primary school education. My bet is the biggest gains could probably be made from fixing primary schools, but they’re much harder to measure, and the teachers are even worse than the high school ones academically (there are essentially no entry standards at some places).


  10. I agree that there is a long-term problem with teacher quality, which is why fee deregulation is also need to push up average salaries. But I don’t think this is the only problem – curriculum, school management, etc can also make a difference.


  11. “which is why fee deregulation is also need to push up average salaries”
    Unfortunately, this is based on the assumption that parents are going to pay enough for public education so that the quality increases such that the average student standard reaches some government target, presumably higher than now. I doubt that many more parents would be willing to pay the excess, which you can already see from the private/public division. Indeed, if parents want to pay for a better education, they can do it now — and many do by sending their kids to private schools. This leaves the “unclaimed” market between the fees that private schools already charge and those that public schools charge. In the best case, some proportion of the public schools will be able to increase their fees. However, I doubt that the overall income generated from that will be great — many people simply don’t care and won’t pay, and would rather live in big houses, have big cars etc. than give their kids a good education, and a smaller amount simply may not have the money. If that wasn’t the case, they would already be sending their kids to private schools.
    To me this is a cultural problem that’s hard to fix — even with private schools massively outperforming public schools, many parents still won’t pay for their kids education. As long as that remains, I can’t see how deregulation is going to get enough money into the system without really unpopular measures (like means testing including private assets like homes).


  12. Conrad – Or are they prepared to spend less than the current cost of going private? For many parents, school education is either free or $10-20K a year. With more say $1k-5K extra options we may see different behaviour.


  13. The trouble with schools often come down to the Oompa Loompa Song

    Oompa Loompa doom-pa-dee-do
    I have another puzzle for you
    Oompa Loompa doom-pa-da-dee
    If you are wise, you’ll listen to me
    Who do you blame when your kid is a brat?
    Pampered and spoiled like a Siamese cat
    Blaming the kids is a lie and a shame
    You know exactly who’s to blame

    The mother and the father

    Oompa Loompa doom-pa-dee-da
    If you’re not spoiled, then you will go far
    You will live in happiness too
    Like the Oompa Loompa doom-pa-dee-do

    A big part of the reason to “go private” is because that way your in a system where a much higher proportion of the parents value education, discipline, etc… and act on those values. The selective government schools gain from that same effect, since it is not the path of least effort to go there.

    The choice should be available to parents who care about education, but don’t have the cash for a private school, to send them somewhere with like-minded values.


  14. Andrew – I think you’re under-estimating the potential for creative destruction that vouchers can introduce. I am sympathetic to the notion that vouchers are substitutes for markets and can only mimic at best. But the point is that there are no close substitutes for markets and if introducing a second best solution there will always be some element of markets missing. By your (implicit) criteria no voucher scheme would (could?) get up.


  15. Sinc – What I am trying to avoid is uncreative destruction of the schools most kids rely on. Effectively, my compromise model would create two markets one private, the other public, which have a reasonable degree of competition within them and some competition between them.

    I don’t think Julie would object to my argument that supply-side reforms in the public sector are important (indeed, she has made similar arguments herself).

    Our disagreement is over whether the benefits of transferring a probably modest number of kids in the medium term from public to private would generate benefits worth at least $5 billion and up to $10 billion.

    I’m not convinced that the benefits are there.


  16. I wrote a piece in the Australian in January this year that in message if not form was the same as Julie Novak’s.

    I do however note that the price of the policy is enough to make us sit up and consider it more closely.

    I think Sinclair Davidson is being unfair to you, it would appear that it is prudent to have principle and cost considered together even if they might pull in different directions.

    My view of vouchers is from a social advancement and equity point of view as I think if designed well they would make great Labor policy as opposed to Liberal or Conservative politics.

    For me, a ‘weighted’ but more deregulated market economy is the future of centre-left politics – even if Rudd and Co are currently regulating too heavily.

    By weighted market economy I mean that it accounts for disadvantage by providing some more resources and choice to those doing it tough to advance but doesn’t dole out large corporate welfare or seek to regulate heavily to advantage of select groups.

    I like the idea of vouchers in principle as parents should engage more with where they can send their kids – and by giving parents more choice – this might instil more pride and possibility in that outcome. Perhaps you could outline how your position might achieve this.

    Anyway – I think this debate is a long way from finished. In my view the problem for proponents of education reform is that they have not described the values that drive the policy – which in truth are more progressive than they are conservative. The public love that whole ‘ladder of opportunity’ stuff … that every kid deserves more choice and better tailoring of education service etc etc.

    It would make a great speech one day – perfect for rhetorical flourishes. May be one for Malcolm Turnbull – he needs some backbone and he is a ‘cross-over politician’ – well at least in theory.


  17. The fact that a simple universal voucher system without any bells and whistles costs so much ($5b for every child to get $12,000 pa) highlights the sheer amount of redistribution that is going on even outside the tax and transfer system. It’s a real eye-opener and I can’t help feeling that school-age children from poor families should be made to spent their holidays as indentured servants to those who the pay taxes that keep them out of their parents’ hair for 40 weeks a year. Anyway, Andrew, while I can see a lot of sense in greater autonomy for schools, how would you ensure a corresponding level of accountability? If a (‘quasi-government’) school can’t fail or be taken over due to lack of patronage, why would a principal bother making tough decisions? Professional pride and ethics would go part of the way perhaps, but corporatisation seldom produces a sustainable state of affairs.


  18. “I like the idea of vouchers in principle as parents should engage more with where they can send their kids – and by giving parents more choice”
    I’m not sure why you believe there would really be much more choice. Most of the top echelon of schools could charge much more if they wanted, but they don’t (they’re obviously not businesses in this respect), and no doubt the same is true of government schools with catchment areas — whether they happen to get their funding from the government or directly from students makes no difference if they are already massively oversupplied and can’t stick their prices up (i.e., become private schools). I’m with Andrew on this — I don’t think it would make much difference (unless it comes with massive amounts of politically impossible reforms — like privatizing essentially all schools, in which case you would then need to work out what to do with parents that arn’t willing to spend more than their voucher for _any_ school).


  19. Conrad, I have a solution for the parents who won’t spend more than their voucher. I’ll give them a cash rebate as well. My school will be bad and I won’t hire many teachers, actually calling it a school is a bit mis-leading.

    Any market system with massive government subsidy is prone to the Eddy Groves syndrome.


  20. The fundamental problem I see with using markets to find successful school curricula is that the feedback time is far too long. If you find out when you’re 19 that the schools you went to were crap and haven’t prepared you adequately, it’s not like you can just change provider and go back to Year 1.

    So there’s got to be at the very least some decent, externally enforced, minimum standards. Perhaps you could conceieve of some private “school ratings agencies” that continuously audit schools and produce reports that consumers can use, but how would you stop these from falling victim to the same capture that happens in other fields where the auditors are chosen and paid by the audited?


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