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ESSA

Are education vouchers truly a free-market solution?


Chandan Hegde

By

April 22nd, 2014


Chandan Hegde offers his take on whether the popular solution to privatising education truly achieves free-market ideals.


During the 1950s, the Nobel prize-winning Chicago economist Milton Friedman popularised the concept of an education voucher, arguing that it isn’t a “public purpose to build brick schools … it is public purpose to provide education”.  So what is this education voucher praised by Friedman? The voucher system refers to the government’s provision of vouchers to parents of schoolchildren to either partially or fully pay for the schooling cost of their child.

This raises the question of what the point of these vouchers is and what they offer beyond our current education system. Friedman began to advocate the education voucher system when he noticed the deterioration of the quality of the American public schooling system. He attributed such failures to the centralisation of public education which he felt had created a monopoly in the market causing there to be a lack of competition. Friedman felt that these conditions allowed for and harboured the complacency prevalent in the education market; without competition the desire to improve and innovate does not exist. This is where the problem lies according to Friedman, leading him to proclaim that governments have no place in running schools but should rather provide education through a private market.

The education voucher system would be the avenue to begin this transition from government to a market system according to Friedman. He believed that such a system would be able to promote rapid privatisation since the vouchers would create large demand for private schools and thereby create a strong incentive for entrepreneurs to enter the industry and create schools. Furthermore, Friedman argued that the costs covered by vouchers would be lower than the current expenditure per pupil on education, yet could still cover private school costs and deliver higher quality education. With a free market there would also be competitiveness between schools meaning that in order to attract students schools would be forced to deliver better and differentiated services as opposed to the current scenario. In this market better schools may emerge and have the ability to charge above the voucher price, requiring parents to supplement the voucher. However as with any free market, the innovations of the better products become universal, thus leading Friedman to believe the average education standard would be higher. Finally, this transformation would produce a new, profitable private industry enticing many teachers who had previously been deterred from the market due to the poor quality of schools.

While this system would appear to be favourable for parents, students, teachers and taxpayers theoretically, we must consider how it operates in real life. One of the earliest implementations of this system was in the Netherlands in 1917 when there was great conflict around the content taught in government schools. To mitigate this scenario the government decided to withdraw from running education but instead provide vouchers which could be used at any school that displayed public demand. Although this was ideal, eventually with government funding came heavy government control. This violated Friedman’s primary condition on education vouchers, namely that “it is essential that no conditions be attached to the acceptance of vouchers that interfere with the freedom of private enterprises to experiment, to explore and to innovate”. Now in the Netherlands, there are regulations on teachers’ salaries, firing laws, expenditure requirements and it is illegal to charge tuition over the voucher amount. This occurred because since the government was funding these schools they were also in charge of holding them accountable and as such enforced these restrictions.

A similar predicament was seen in Florida when the voucher system was introduced in 2002. Again when vouchers were introduced they did not follow Friedman’s vision of the ideal voucher system. The state only equipped under-performing children in public schools with the voucher and also enforced heavy regulation upon the running of the schools, such as the inability to provide single-sex or faith-based schools.

Although I indeed commend the idea of education vouchers, because of their restoration of choice to families and encouragement of competition in the education market, it appears government involvement in such a system inevitably results in heavy regulation. If we truly want to privatise the education market then vouchers are not the answer, for whenever government money is involved, government control comes hand in hand. I believe that the only way to truly create the market envisioned by Friedman is through offering, as phrased by former U.S. Representative Ron Paul, “generous tax credits and tax cuts”. This form of policy would work in two ways. Firstly there would be a tax credit for parents against their own education expenses and secondly a credit for individuals and business who would donate to private scholarships at schools. The first of these policies would assist middle-class families in their education payments and the second would allow for low-income families to also have access to education for their children. Since taxpayer money is not being used in this system the people themselves choose which schools should be funded. This means there will be no need for regulation on how schools are allocating their funds or operating because their actions are being directly held accountable by the people.

 

The views expressed within this article are those of the author and do not represent the views of the ESSA Committee or the Society's sponsors. Use of any content from this article should clearly attribute the work to the author and not to ESSA or its sponsors.

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